Koeler & Galvão Sociedade de Advogados. Logotipo 1 2018.

Análise do ORCHID Protocol (Private Sale ICO), por Bruno Rodrigues

June 2, 2018



Ao contrário do que se apregoa nos meios de comunicação tradicional, o Ecossistema Blockchain é pautado em conhecimento, análises técnicas e muito estudo.

Compartilhamos o estudo do colega Bruno Rodrigues elaborado na Plataforma MEDIUM e que é muito interessante para demonstrar como se realiza a análise de projetos de alta tecnologia.

No original existem gráficos que elucidam pontos expostos e abaixo reproduzidos.

O Estudo foi elaborado em inglês, linguagem nata das Ciências Tecnológicas e Alta Tecnologia contemporânea.




Orchid Protocol — “ICO” Analysis

In this post, I will analyze the Token Sale of Orchid Protocol. They will only make a Private sale, not an ICO. So, if you’re interested you should contact the team directly or join a Crypto Pool (see a list of active Pools here).

1. Project Overview
Orchid Protocol is a surveillance-free layer on top of the internet that enables secure and anonymous communication between users. This protocol is being developed as an open-source project by Orchid Labs.

Problem: users want to access an uncensored and surveillance-free Internet, protecting their privacy and data.

Solution: a structured peer-to-peer (P2P) network, called Orchid Market, that organizes bandwidth sellers and consumers. Customers connect to the Orchid Market and pay bandwidth sellers in order to form a proxy chain to a specific resource on the Internet. The fuel of this market is OCT, a utility token that will be used in payments for bandwidth.

According to Orchid Labs neither the traffic nor the payments can be monitored by central authorities, so both contributors and consumers of bandwidth enjoy a fully anonymous experience. (Orchid Whitepaper, 2018)

If you think it is not a big problem, look at the statistics cited by World Economic Forum that points that just 24% of the internet’s population have completely free access. Of the 65 countries assessed, 34 have been on a negative trajectory since June 2015. (WEF, 2016)

In fact, privacy is a growing concern and it could be expected that in the near future internet users will be more cautious about it. The recent scandal of Cambridge Analytica and Facebook where digital consultants to the Trump campaign misused the data of millions of Facebook users reinforce this trend.

The Graph below shows the level of internet freedom in each country where 0 is the best and 90 the worst.
We can say that Orchid Protocol value proposition is about Privacy, Freedom and Security on the internet.

In the next section, I will show the highlights of this project organized in some topics and give a score for each one where 5 is the best and 1 is the worst.

2. Rating:

2.1 — Team, Advisors and Investors: 5
A strong team with experience in Venture Capital in China, investment in Crypto projects, open-source projects and developing one of the biggest Blockchain Platforms, Ethereum. “Stephen Bell, who spent seven years as a managing director at Trilogy Ventures, shopping for opportunities in China, before returning to the states in 2015. Steve Waterhouse, long an investor with the digital currencies-focused firm Pantera Capital; former Ethereum Foundation developer Gustav Simonsson; software engineer Jay Freeman; and Brian Fox, who is credited with building the first interactive online banking software for Wells Fargo in 1995 and who was the first employee of the legendary programmer Richard Stallman’s Free Software Foundation, among other things.” (Techcrunch, 2018)
Strong Advisors. Gavin Wood, Founder & CTO at Parity Technologies; Ethereum co founder / CTO and Dr. Dan Boneh: Professor and head of Cryptography at Stanford University’s Computer Science Department.(Business Wire , 2017)
Relevant investors. The company has raised 2 funding rounds with SAFT (Simple Agreement for Future Tokens): US$ 4.7 MM in October/2017 and US$ 36.7 MM in April/2018. Some relevant investors participated in these initial rounds as: Sequoia, Andreessen Horowitz, DFJ, Polychain Capital, Metastable, Blockchain Capital, Crunchfund, Struck Capital. (Crunchbase, 2018)
2.2 — Market Opportunity & Competition: 5
A new alternative to existing market. Current alternatives to internet access are: unprotected access, Virtual Private Networks (VPN) services and Tor.
VPNs are popular among consumers for obfuscating their real location, whether to access geo-blocked services or bypass censorship or other restrictions. (Statista, 2018)
VPN companies charge around US$ 5 to 15 monthly to provide safe access to the internet. (Techradar, 2018)
Orchid can take a portion of the huge VPN Market (US$ 18 Billions in 2017). It is a market that has good perspectives of growth (CAGR 2017–2022 = 15%) due to growing concerns about privacy and censorship.
Size of the VPN market worldwide from 2016 to 2022 (in billion U.S. dollars)
“VPN users should not assume that their VPN connection is truly secure or anonymous. Some VPN service providers track their customers’ network activity, then sell the data to third-party commercial entities without the approval, or even the knowledge, of the VPN subscribers. The IP addresses of a VPN provider’s network nodes may also be identifiable. That can enable governmental or commercial entities such as Netflix to block traffic to and from a VPN provider’s servers.” (Orchid Whitepaper, 2018)
The alternative of Tor has remained flat since its creation in the mid-1990’s by the United States Navy. Today, there are approximately 2 million users worldwide, but their community is finding difficulties to “retrofit” the project and include financial incentives to enhance its speed.
Using a decentralized network and relayers, Orchid could provide safer access to the internet than VPNs.
2.3 — Platform & Community: 3
Development and market risk. The platform is still in development and there is no Minimum Viable Product available.
They did not present any roadmap for deliverables.
Almost 4k in Telegram channel, 15k in twitter, 122 in Medium. Telegram channel is just for announcements and community do not have space to give feedback on the project through this channel.
There is almost no communication via blog (eg.: Medium, Reddit).
2.4 — Token Utility and Value: 3
The Token will be used as a mean of payment in Orchid Market. As users need to pay whenever they use the internet, the token usage is expected to be frequent.
The Company will create a total fixed Supply of 1 Billion ERC-20 tokens. The initial price of an OCT token is set to US$ 0.50 and 0.70, depending on the vesting schedule, which can be either one year or 18 months after network launch.
Considering the price of US$ 0.5, Orchid would be valued at US$ 500 MM.
If Orchid represents 20% of this VPN market and has a token velocity of 5, Orchid value would be around US$ 800 MM (20%*20 billions/5). For more information about valuation click here.
2.5 — Token Sale Conditions, Transparency and Governance: 2
An extended period of vesting for investors in the current private sale going from 1 year to 18 months.
No information about vesting for investors of previous rounds and founders.
No information about releasing the funds raised according to milestones achieved (eg.: Blockstack).
According to SEC, this funding round that already raised US$ 36.7 MM is expected to reach the total amount of US$ 125 MM in private sales (SEC, 2018).
Token distribution and usage of funds were not presented to the public.
3. Conclusion:
Final Rating: 3,6

It is a good long-term bet considering the team, advisors and investors involved and the relevant market opportunity they are attacking. Unfortunately, the project lacks transparency and communication with the community until now. The project has high valuation and expectations and has not released any version of the product yet.

Despite these negative points, I think the people involved in this project deserves a vote of confidence. Nevertheless, I hope they can improve their relationship with the community to foster engagement. This is a critical factor when developing an open-source project!

I would like to thank João Perufo for his comments. 

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