VERDICT | Exciting approach to blockchain privacy. Will decide level of support pending publication of the product roadmap and use of funds.

MARKET | GOOD

If you’ve read my analysis before, you’ll know that I rarely gush over solutions to intractable problems. But @keep_project is worth gushing over.

KEEP’s primary goal is to enable the safe storage and analysis of sensitive data on blockchains. This is a critical technological milestone. Without the guarantee of privacy, blockchain will wither into a sandbox for ideologues, speculators and scammers. Vitalik Buterin puts it far more elegantly:

“As seductive as a blockchain’s other advantages are, neither companies or individuals are particularly keen on publishing all of their information onto a public database that can be arbitrarily read without any restrictions by one’s own government, foreign governments, family members, coworkers and business competitors.”

There are several ways to protect data on blockchains. Permissioned, or private, blockchains do this by limiting access only to trusted parties. Public blockchains like Ethereum are experimenting with access management methods like zero knowledge proofs. With this method, users prove their access eligibility without revealing the conditions that made them eligible for access.

KEEP goes a step beyond access management. KEEP’s protocol and infrastructure would allow data to be stored so securely that it is inaccessible to anyone but its owner, while simultaneously making the data available for analysis by any owner-approved party.

How could this be useful, let alone exciting? Let’s consider a practical example, a manufacturer that’s experiencing volatile demand. The unpredictable demand is frustrating its suppliers, who swing between straining to fill rush orders and sitting on surplus raw material. The suppliers, eager to manage their inventory more effectively, start clamoring for better visibility into the manufacturer’s demand. The manufacturer is sympathetic but wary of sharing customer order data. The data could fall into a competitors’ hands. Or, in the course of revealing it, the manufacturer may accidentally compromise customer privacy or give its vendors’ greater negotiating leverage. The result is that little useful information changes hands and the frustrations continue.

Things play out differently in KEEP’s version of the future. The manufacturer puts its customer order book into a data container that’s linked to, but not on, a blockchain. Smart contracts on the blockchain grant specific vendors the right to run scripts that analyze the data. These contracts can be designed to call only scripts that the manufacturer has approved, providing the control they need to protect their business. The results of the analysis are automatically encrypted and published on the blockchain where they can be decrypted and reviewed by the manufacturer and the supplier.

Convoluted? Yes, but far more effective than how businesses share and manage data today. If successful, KEEP could join relational databases, spreadsheets and cloud computing in the pantheon of innovations that catapult enterprise productivity into its next era.

STRATEGY | AVERAGE

I admit that this level of complexity is still years away. KEEP’s initial focus is on developing the building blocks for its protocol and platform. For all we know, it may retain this focus and cede application development to other companies.

Before we dive further into strategy, let’s talk a little bit about how KEEP actually works. Sensitive data is stored and analyzed in containers called keeps. These containers are located “off-chain” in a way that allows them to read from and write to the Ethereum blockchain. Keeping the keeps running requires storage and computational power. That’s where the KEEP tokens come in. The tokens reward providers who contribute their storage and computing resources to the network while ensuring that the network’s security and uptime aren’t compromised. Providers earn tokens from users who want to keep their data safe.

Keep has provided little insight into how it plans to develop this market. The company’s decision to prioritize features that give providers fair access to prospective consumers suggests that it’s focused on supply growth. Yet it’s not clear where demand will come from. The white paper points to some potential commercial applications without revealing a user prioritization or a sense of who its early adopters might be. This is disappointing, especially since the company is launching with very basic functionality in order to keep its attack surface — the culmination of entry points that can be exploited by a malicious user — small.

PRODUCT | UNKNOWN

There’s very little we can say about KEEP’s product at this point. In theory, it will apply a novel approach to data privacy that was originally outlined by MIT’s Enigma project in 2015. KEEP has also draw insights from Dfinity — a blockchain infrastructure-geared company with a powerhouse team — for the Random Beacon design that helps to coordinate market activity on the KEEP network. It’s a shame that KEEP is not formally collaborating with either project. For now, I will stubbornly cling to the hope that it will see further by standing on the shoulder of giants.

TEAM | GOOD

The most promising blockchain projects are usually led by capable and entrepreneurial developers. KEEP is a step ahead. Matt Luongo (Project Lead) and Corbin Pon (Dev & Ops) have applied their CS degrees toward building not one, but two, bitcoin-based businesses. Neither venture survived. My research points to a lack of product-market fit rather than unethical management. That’s a badge of honor in the wild west of ICOs.

The rest of KEEP’s staff reflects a mix of technical and business skills expertly calibrated to meet the company’s challenges. It includes a dedicated Tech Lead, an operations lead with an MBA, two marketing professionals, and a few developers. In March they boosted their investor engagement with two more community managers and a support specialist. Granted, most work remotely and the personnel count is likely inflated by part-time contractors. Those aren’t optimal conditions for building a billion-dollar company but they’re good enough for the first stage of product development.

In keeping with tradition, I only analyze advisors when they outline their reasons for support and the scope of their advisory. (Here’s a great example). KEEP’s advisors have done impressive things but I haven’t found public record of their sharing or explaining their contributions. To me, the independent token buyer, they’re effectively paid spokesmodels. Just as I don’t expect you to buy sneakers or cheeseburgers because celebrities endorse them, I don’t expect you to support startups because people with money to lose are interested in them.

ICO | AMBIGUOUS

As of early March, KEEP is targeting a $30 million USD hard cap in a main sale. The company has delayed its public sale to focus on fundraising from private investors. I’m not privy to the terms offered to private investors for the presale. Because of that, I hesitate to speculate on what this might mean for main sale buyers. I will go so far as to say I expect main sale buyers who intend to flip their tokens to be materially disadvantaged for a couple of reasons.

First, if private investors are purchasing tokens instead of equity, then in all likelihood they received a substantial bonus on those tokens. It’s not uncommon for some large, “strategic” investors to receive bonuses that exceed 100%. Yes, these investors tend to be subject to a short lock up period. But I have no reason to believe that they’re immune to the allure of speculative gains.

Second, the KEEP team has stated several times that it does not plan to pursue exchange listings. Most likely, the token will appear on a few decentralized exchanges like EtherDelta and trade at low volumes. That means few opportunities to make a quick buck.

RISKS | HIGH

Here’s the time to air my grievances. To put it bluntly: KEEP’s risk disclosure hovers somewhere between paranoid and insulting.

For starters, the company will not disclose how it will use the ICO proceeds to grow the business nor has it provided a product roadmap. I’ll concede a lot of scams happily offer both. I’ve seen companies offer 5-year roadmaps that end with worldwide penetration and revenue in the billions of dollars. But just because con men use these tools to exploit people’s gullibility, it doesn’t mean that serious entrepreneurs are off the hook. What KEEP is doing is just plain wrong. Anyone parting with their money to support a pre-revenue product deserves to know how and when the company expects to get from point A to point B.

KEEP has also been coy about who is auditing their smart contracts and providing their legal counsel. Blockchain projects regularly get away with this and they shouldn’t. Especially not projects that have already raised money and can afford to hire reputable partners. How is any outsider supposed to gauge the executives’ capacity for good decision-making if they consistently withhold proof of it?

I commend the team’s commitment to maintain the KEEP token as a utility by refusing to pursue exchange listings. I know this isn’t the message that anarcho-capitalists want to hear, but flouting regulations is bad for a nascent market. Keeping away from listings will endear the company to the SEC. Yet, one instance of regulatory compliance isn’t enough to offset the many other risks that the company will offload to its prospective token buyers.

SOURCES

Privacy on the Blockchain by Vitalik Buterin

Enigma white paper by Guy Zyskind, Oz Nathan, and Alex ’Sandy’ Pentland