PolySwarm is developing a decentralized marketplace for cybersecurity services where security experts build competing anti-malware engines. It aims to address the problem of undetected threats by offering additional services beyond major antivirus providers. The $8.7B endpoint security market is the target, and the project has professionals from DHS, DARPA and Fortune 100 on its team. Success depends on attracting enough experts to the platform. The Nectar token will be used to pay fees on the platform and the project raised $26M in its ICO.

2. PolySwarm Token Review
14 May 2018
Sector: Cyber Security

3. Overview
PolySwarm is a decentralized marketplace for cybersecurity services,
where security experts build anti-malware engines that compete to
protect users.
The company deals with the problem of undetected threats,which
account up to 70% of all cyber threats, offering some extra services in
addition to already covered solutions by major anti-virus providers.

4. Market Momentum
The target market for PolySwarm is $8.7bn/year endpoint security
market, which is expected to grow above 8% p.a. for the next 5-7 years.
The key challenge for the project is to bring enough experts on the
platform to create attractive for the users and experts ecosystem.
The core PolySwarm team includes professionals working for the US
Department of Homeland Security (DHS), Defence Advanced Research
Projects Agency (DAPRA) and Fortune 100 companies.
Overview

5. The use cases for Nectar token include bounty placement fees paid by
Ambassadors; b) bounty assertions fees paid by Experts; a fee paid
for Offer channel, and other fees on the platform.
The project raised $26mn during the ICO or c$19mn at current ETH
price.
It plans to deliver in line with the Roadmap to bring up to 300 experts
on the platform by the end 2018.
Overview

6. We believe the solution, once the concept is proven in scale, may
take at least 2-3% of the global market share that provides us with
the token valuation of $0.025-0.043 based on 7-year discounted
token value.
Overview

7. Description
 PolySwarm is a decentralized threat intelligence market powered by
ethereum smart contracts.
 It integrates experts who develop competing micro-engines (“workers”)
that autonomously investigate the latest threats at machine speed.
 The market rewards experts who are the best able to defend enterprises
and end users.
 PolySwarm has some similarities with prediction market, as only actual
data is used to accurately classify whether an artifact is malicious or not;
determining ground truth requires expertise.

8. Concerns
 Our first concern was about the reliability of the business model when most of the cyber
security market operates under long-term trust and relationship between security experts and
corporates/users.
 The PolySwarm team commented that it is “not aiming to replace the cybersecurity tactics that
are currently being used. Instead, the marketplace will serve to augment existing endpoint
security and anti-virus products.
 PolySwarm gives users access to a dynamic and evolving pool of security experts with micro-
engines that are able to detect fringe malware that would fall through the cracks of their current
security strategies. From the buy side of the market, to engage with PolySwarm is to engage
with the entire population of experts and their collective expertise, which will only grow as the
market develops.
 By the end of 2018, we are on track to have over 300 security experts
working in the marketplace through which hundreds of thousands of
artefacts will be flowing each day.”

9. Market Size
 In PolySwarm white paper, it targets to get the share of $8.7bn/year endpoint
security market (Jefferies Cybersecurity Primer 2017), including anti-virus and
automated cyber threat intelligence market concerning the malintent of files,
network traffic, and URLs.
 The alternative market estimate of $10.18bn for 2017 by Mordor Intelligence
assumes 9.88% CAGR during 2018-2023.
 There are some estimates for the threat intelligence market growth, which vary
from 8% to 17% (Grand View Research) per year, as well as a number of estimates
for the value of different segments of the market.
 We roughly assume 8% PolySwarm market segment growth and the development
of the PolySwarm marketplace sufficient to take 3% global market share by 2025.

10. Market Size

11. Problem
 Users rely on anti-virus subscriptions, and assorted dynamics analysis
engines to defend against evolving adversarial cyber activity.
 Comparable anti-virus solutions usually overlap in coverage and do not
provide efficient coverage of all cyber threats.
 The share 70% of threats are undetected, according to Merrill Lynch.
 Defenders cannot mix and match many of today’s solutions, making
combinatorial coverage impossible in many scenarios.
 Cybercrime costs are expected to double from 3 trln in 2015 to 6 trln in
2021, according to Cybersecurity ventures, and the time taken to resolve
attacks increased by 33%, according to Ponemon Institute.

12. Solution
 PolySwarm will foster an ecosystem of broad coverage powered by 1000s of
micro-engine workers, authorized geographically diverse security experts.
 The project provides a legitimate revenue stream for security Experts and
developers.
 PolySwarm determines the accuracy of malintent detection (threat intelligence)
via a process called Mediated Consensus, which will involve Experts and
Arbiters.
 There will be two approaches on PolySwarm:
1. Offer – requests made directly to reputable Experts for their malintent
prediction via Raiden-style offer channels,
2. Bounties – a “Wanted” poster with accompanying artifact contents.

13. Organization
Swarm Technologies, the company, domiciled in Puerto Rico will
develop PolySwarm. It will be funded from the sale of ERC20-
compatible Nectar (NCT) utility tokens

14. Team
The team includes professionals working for the US Department of
Homeland Security (DHS), Defence Advanced Research Projects Agency
(DAPRA) and Fortune 100 companies.
We assume the team’s track record is strong enough to execute the project
development.

15. Participants
PolySwarm distributes fees to value-adding, active participants. There are several
participants acting with the PolySwarm system:
1. End users – enterprise and home users with suspect Artifacts (viruses or
other threats);
2. Experts – malware experts and reverse engineers, who will maintain
PolySwarm-connected detection engines that determine malintent;
3. Ambassadors – companies that will make it easy for end users to benefit
from PolySwarm market;
4. Arbiters - top Ambassadors that are responsible for determining malintent
ground truth.

16. Token Economics
The PolySwarm ecosystem will use the native token Nectar (NCT) as a utility
token. It will be used in following cases:
 bounty placement fees paid by Ambassadors;
 bounty assertions fees paid by Experts;
 a fee paid for Offer channel settlement as a percentage of the net NCT
transferred over the channel;
 other fees will be used within the ecosystems to make it efficient for users
and experts

17. Token Economics
Based on the information provided, we assume the marketplace will be able to
develop more use cases and address bigger market (endpoint security market).
Among cases mentioned in the White Paper, we assume the fee paid for the
Offer channel settlement and bounty program fee may represent main cases for
NCT economics. That will generate a commission type fee for the market
achievable by PolySwarm’s experts.

18. Roadmap
The team promises to deliver in line with the following schedule:
 Alpha version on 30 April 2018
 a Beta version on 31 May 2018, and
 Gamma version on 31 July 2018.
The full PolySwarm 1.0 version shall be ready in 4Q2018, with the following
PolySwarm 2.0 in 2Q2019.
PolySwarm 1.0 will focus on Boolean (malicious) determination.

19. Supply System
The Nectar token supply shall be limited. No token will be created after the
close of the token sale period. The number of tokens is assumed to be
capped based on maximum funding $50mn. During the sale started on 20
February 2018 at a fixed $933/ETH price, the company raised $25.94mn.
Our estimated price and supply:

20. According to the company, the number of NCT token via token sale was 1.45bn and the
total supply was limited to 1.85bn.
That provides us the network value of $33mn at ICO. The allocation to Swarm
Technologies was expected at 15%.
The share 15% had to be allocated to enterprises, vendors and security experts.
Assuming 1.85bn token supply, we come up with the discounted 2025 token value as the
follows:
Supply System

21. The distribution of proceeds from sale includes:
 54.51% - protocol and software development
 3% - office expense
 3.06% - operating overheads
 14.49% - legal
 13.62% - marketing
 10.32% - tax.
Supply System

22. Comparables
 PolySwarm has pretty unique niche in the market.
 We took several projects specialized in predictions market, performance
improvement projects, and services on the blockchain, to compare
versus ICO deal of PolySwarm.
 The largest prediction analytics project Augur has currently c $464mn
market capitalisation, almost three years after it raised only $5mn from
the blockchain community.

23. Comparables

24. Conclusions
 The project represents an interesting niche with a growth potential based on
relatively proven by the core team approach.
The team is on track to have 300 experts by the end 2018.
 According to the Roadmap, the first MVP is to be ready by 30 April 2018 and the
company is “running a challenge to let the first few security experts into
PolySwarm ecosystem”.
 There is a relatively short period to see how PolySwarm performs within its
Roadmap, creating an economic value for its token.

25. Conclusions
Our concerns include the following:
 the project comes beyond the actual model of the trust between users
and experts that require some proof-of-concept in scale;
 PolySwarm distributed most of the tokens thus any essential change in
the project ecosystem may bring high token price volatility;
 there is no guidance on the project development plan after 2Q2019.

26. Conclusions
 Given the fixed price for fundraising at $933/ETH, and the current
price of ETH at $679/ETH, the NCT price will likely be strongly
correlated with Ethereum
 at least until the projects starts to prove its business model with
successful deliveries during 2018