

NASDAQ:SKYY



Rapidly changing technology trends are transforming the way individuals and enterprises use the internet. Moreover, reflecting a growing number of high profile breaches of sensitive data, concerns about the privacy and safety of information sent via the internet or saved in the cloud are on the rise, we believe. Internxt is developing a solution. Internxt’s goal is to improve internet security, privacy and efficiency by leveraging the use of decentralized and blockchain technology.



The company has also launched an ICO (initial coin offering) of its cryptocurrency, INXT, which trades on the EtherDelta, CoinExchange, Mercatox, and YoBit exchanges, with the goal to list on other exchanges. Customers using INXT to pay for internxt services will receive a discount and other revenue that Internxt generates will be converted into INXT tokens. The company will also pay its hosts (see below) in INXT tokens. Reflecting the perceived functionality and security of cryptocurrencies, their aggregate valuation has increased dramatically. The first cryptocurrency, Bitcoin, was introduced in 2009 as a decentralized digital currency. Since then, Bitcoin has surged in price and other cryptocurrencies have emerged, including Litecoin, Ethereum and INXT. Despite recent volatility; the aggregate value of all cryptocurrencies combined is over $440 billion, according to Coinmarketcap.com.



Internxt intends to use INXT to reward individuals who contribute computer processing power to its decentralized, cloud-based network. The network will be supported by blockchain technology.



Blockchain is a decentralized and encrypted ledger that offers a secure method to store records and other information in a way that can be verified. Each block in the blockchain contains a hash – a digital fingerprint or unique identifier – and timestamped batches of prior transactions, as well as the hash of the previous block. The hash connects the blocks and prevents any block from being altered or inserted between two existing blocks. Each new block reinforces the verification of the previous block and therefore the overall blockchain. This characteristic is also believed to make it transparent if an attempted hacking tries to alter any part of the blockchain. According to IBM, blockchain architecture gives participants the ability to share a ledger that is updated, through peer-to-peer replication, every time a transaction occurs. Peer-to-peer replication means that each participant (node) in the network acts as both a publisher and a subscriber. Each node can receive or send transactions to other nodes, and the data is synchronized across the network as it is transferred.



Blockchain is viewed as a secure option for financial transactions that also provides flexibility and scalability. Blockchain technology also has broader applications beyond cryptocurrencies. Among other features, it can be used to process transactions, manage medical records, and verify and confirm proof of ownership. Blockchain can also record and track intangible assets such as intellectual property, patents, copyrights, or branding. In discussing blockchain, an article in the Harvard Business Review notes that, “Contracts, transactions, and the records of them are among the defining structures in our economic, legal, and political systems. They protect assets and set organizational boundaries…. With blockchain, we can imagine a world in which contracts are embedded in digital code and stored in transparent, shared databases, where they are protected from deletion, tampering, and revision.”



“Blockchain is a public ledger technology that uses digital signatures and cryptographic hashing to provide a record of secure transactions that cannot be altered,” according to TechRepublic. Specifically, blockchain is thought to be safe, immutable and transparent because no single person or party within the chain can alter the record without the agreement of all parties in the chain. Leading companies such as IBM and Mastercard have already adopted blockchain technology to protect transactions and American Express has launched instant blockchain payments for cross-border business-to-business payments.



Ensuring online security is crucial for enterprise, as well as personal users, particularly with the rising use of mobile technology. Mobile technology penetration has grown dramatically over the past decade. Adoption rates of mobile devices such as smartphones and tablets have tracked significantly ahead of that of other technology platforms such as PCs or broadband. Smartphones took only eight years to reach 20+% penetration globally and, according to comScore, exceeded 80% of the U.S. mobile subscriber market by 2016.



With increased mobile penetration, there has also been a growing trend towards BYOD (bring your own device), whereby employees bring their personal devices into the work environment for business and personal applications. Mobile apps have become an important way that users conduct commerce and access content both personally and professionally. The United Nations information and communication technologies agency, ITU, notes that over the last five years, mobile-broadband subscriptions have grown more than 20% per annum and reached an estimated 4.3 billion worldwide by 2017.



Control over companies’ wired networks has become much more difficult in a BYOD work environment and with the many technology changes, creating challenges to maintain the benefits of mobility while concurrently monitoring security needs. In turn, this has driven demand for security to monitor mobile devices. At the same time, the volume of data has increased dramatically as individuals, corporations and government organizations access content from multiple connected devices. IDC forecasts that by 2020 the volume of digital information will have grown 300-fold when compared to 2005, boosting the need for storage and content management solutions.



The dramatic increase in content and data being transmitted over the internet and stored in the cloud is also placing burdens on enterprises and increasing concerns about security. Moreover, as more data storage and IP traffic moves to the cloud, cloud-based business analytics and business intelligence is also expected to grow, increasing the need for greater security, we believe. Gartner expects strong demand for all types of cloud services offerings. Market research firm Markets and Markets predicts that the cloud analytics market could reach $16.52 billion this year, which represents a 25.8% 2013-2018 CAGR. Overall, these changes have also made it that much more difficult to ensure internet privacy.



X Core: Foundation for X Cloud



Internxt has created X Core to provide decentralized internet services. X Core is a Peer-To-Peer (P2P) cloud computing network that enables contributors globally to cooperate in the creation of a decentralized internet. In a decentralized architecture, the computing processing power and required storage comes from multiple contributors that combine their processing power and storage capacity. That way, no centralized server or processor is responsible for maintaining or processing the data and there are no questions about which individual entity owns the infrastructure, as it is created and distributed over a wide network and not stored in a central base of servers.



X Core is designed so that all files will be encrypted before transmission. Individual X Core contributors can sell the resources of their computers to third parties seeking a more private, secure and efficient way to process and store their files and data. In fact, Internxt expects X Cloud to be more secure and efficient compared to traditional cloud services, yet still remain competitively priced with an easy-to-understand user interface. Contributors can select how much computing resources to allocate to the network. In return for providing their computing power, they will receive INXT cryptocurrency. The X Core system is designed to encourage a significant number of participants in order to create a robust decentralized network.



Moreover, the Internxt system will also be designed to detect failing nodes and adjust and correct any impaired blocks and nodes. X Cloud will enable the storage of encrypted files and data across multiple machines globally. Internxt believes its network – comprised of myriad contributors creating a vast, decentralized cloud based platform – will compete effectively with file sharing services such as Dropbox, Box.com and other cloud providers.



According to Box.com, the market for cloud content management services is highly fragmented and includes high-profile competitors such as Microsoft, Google, Dropbox, and Open Text, among others. Wired magazine notes that “Amazon dominates the primary cloud computing market. And its primary competitors are Google and Microsoft.” Forbes, citing data from market research firms including IDC and Gartner, notes that “Worldwide spending on public cloud services will grow at a 19.4% compound annual growth rate (CAGR) from nearly $70B in 2015 to more than $141B in 2019.”



Internxt’s timeline is planned to progress dramatically in 2018. The company released the first generation of X Cloud in December of 2017. This month, it intends to introduce a beta test version of X Core and launch a more stable version in May 2018, after which it will analyze and evaluate X Cloud and X Core with an eye to eliminating potential problems to maximize their efficiency as a distributed cloud-based network.



As the use of cloud computing grows, we believe investor interest also increases. The First Trust Cloud Computing ETF provides investment exposure to cloud computing. The ETF was first launched in 2011 under the symbol SKYY ( SKYY). SKYY shares trade at a slight premium to the net asset value of the trust, most likely reflecting the scarcity value of vehicles providing passive investment exposure to cloud computing.



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