Why we invested in Spherity: Powering the Future of B2B Interactions in Regulated Industries

Identity management is like the security guard for the digital world. It's a way to make sure only the right people can get into certain online spaces or use certain apps. It's all about creating a digital "ID card" for users, checking to make sure they are who they say they are, and then deciding what doors to open for them on the web. Effective identity management is crucial for securing sensitive information from unauthorized access and for complying with data protection regulations. With advancements in technology, identity management has evolved to include decentralized identity models that give users more control over their data, using blockchain and other distributed ledger technologies to enhance security and privacy

Decentralized identity refers to a digital identity system where individuals or entities have control over their own identity data, rather than relying on centralized authorities or intermediaries. It is like having your own digital ID that you control completely, instead of having it stored and managed by someone else, like a big company or government. This concept is rooted in the broader idea of decentralization, which aims to distribute control and decision-making away from a central point of authority.

Unlike traditional centralized systems, where a single entity verifies and manages identities, decentralized identity offers numerous advantages, including enhanced privacy, improved business confidentiality, reduced fraud, and more efficient processes. This shift towards decentralized identity heralds a significant change in how digital interactions are authenticated and managed, promising a more equitable digital ecosystem where user autonomy and privacy are prioritized.

Here are some key components of a decentralized identity system:

1. Decentralized Identifiers(DIDs): A Decentralized Identifier (DID) is a unique, global identifier that enables control over digital identity without central authorities, using blockchain technology for security and privacy. It's associated with a DID document containing verification methods like cryptographic keys. DIDs allow selective information sharing for verification, enhancing online privacy and reducing identity theft risks
2. Verifiable Credentials: Verifiable Credentials (VCs) are digital equivalents of traditional physical credentials, such as driver's licenses or university degrees, designed for secure and privacy-respecting online verification. They use cryptographic techniques to allow credential holders to prove the authenticity and validity of their credentials without revealing unnecessary personal information.
3. Identity wallet: An identity wallet in the context of decentralized identity is a digital tool that individuals use to store and manage their identity information and credentials securely. Think of it as a digital version of your physical wallet, but instead of holding cash and cards, it holds digital proof of who you are. These could include things like your digital ID, proof of age, qualifications, membership cards, and more.
4. Verifier: A verifier is an entity that assesses and confirms the authenticity of credentials presented to it. This process involves verifying that the credentials shared by a holder (the individual or entity presenting the credentials) were indeed signed by the issuer's Decentralized Identifier (DID) on the blockchain. This verification ensures that the credentials are genuine and haven't been tampered with

Decentralised Identity represents the next evolution in the management and utilization of digital identities. It revolutionizes digital identity management by enabling individuals or entities to control their data through a decentralized model that incorporates issuers, verifiable credentials, and identity wallets. Issuers, such as governments or educational institutions, grant digital verifiable credentials that attest to an individual's identity or qualifications. These credentials are cryptographically secure, facilitating instant verification without central authorities. Individuals store these credentials in identity wallets. This model enhances privacy, security, and user autonomy in digital interactions, enabling users to share only necessary information for transactions or verifications.

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In B2B contexts and specially regulated industries, decentralised identity offers a multitude of benefits, including enhanced data privacy, improved security, and compliance with stringent regulatory requirements like GDPR. For businesses, it can lead to substantial cost savings by reducing fraud, streamlining customer onboarding processes, and enhancing overall operational efficiencies. The adoption of decentralised identity is aligned with the European Union's emphasis on data sovereignty, which is a cornerstone of the EU Data Strategy and initiatives such as Gaia-X and Catena-X. These projects aim to create a secure, federated data infrastructure that respects the privacy and ownership of data, aligning with decentralised identity principles.

In the age of AI, the relevance of decentralised identity is increasingly paramount for establishing data and media authenticity and provenance, especially as we navigate the complexities of digital interactions and the burgeoning metaverse. The Coalition for Content Provenance and Authenticity (C2PA) is at the forefront of establishing trust models that leverage distributed ledger technology (DLT) and decentralised identity to ensure the integrity and authenticity of digital content. This is crucial in a digital ecosystem rife with the potential for misinformation, where verifying the origin and authenticity of content is essential. Additionally, the Metaverse Alliance's efforts towards Identity & Trust model standardization work, further contribute to the development of a cohesive framework for secure and trustworthy digital interactions across the metaverse.

We are delighted to share that Blockwall led the recent investment round of Spherity!

Spherity is a leading enterprise solutions provider in the decentralized digital identity domain, offering secure, blockchain-agnostic identity services for businesses, particularly within regulated industries. Spherity is pioneering with its cutting-edge solutions, tackling both operational hurdles and regulatory compliance demands within specialized sectors. For instance, Spherity's product, CARO, serves as a credentialing service enhancing enterprise identity and supply chain security. Spherity enhances compliance with the Drug Supply Chain Security Act (DSCSA) for Authorized Trading Partners within the U.S. pharmaceutical industry by transforming their operating licenses into a digital format, streamlining regulatory processes. This innovation not only fortifies against bad actors but also conserves time and resources through automated compliance controls and audit trails.

Moreover, Spherity's collaboration with Bundesanzeiger Verlag to credentialize a broad spectrum of compliance control assertions including enterprise registry information, Legal Entity Identifiers (LEIs), Anti-Money Laundering (AML) checks, and sanction list verifications demonstrates its commitment to enhancing security and efficiency across supply chains, traditional financial services, and decentralized finance (DeFi). Spherity is also pioneering a decentralized Digital Product Passport (DPP) solution, providing a digital representation of physical products that ensures a unique verifiable identity and life-cycle audit trails in compliance with regulatory requirements. This solution is designed to increase trustworthy verifiable information about products, their reuse content, and recycling potential, further underlining Spherity's role in promoting compliance, transparency, and process automation within its ecosystems. These examples highlight Spherity's achievements and the operational benefits it delivers to businesses, particularly in regulated industries.

The global identity and access management market size was valued at USD 12.3 billion in 2020 and is projected to grow to USD 34.5 billion by 2028. This represents a compound annual growth rate (CAGR) of 14.5% from 2021 to 2028.  Regulated industries like pharma and banking are required to adhere to various regulations like the Drug Supply Chain Security Act (DSCSA) in the United States and the 6th Anti-Money Laundering Directive (6AMLD) in the European Union. There is a requirement for digital evidence and identity infrastructure to enable efficient, automated, and legally compliant business transactions.

The leadership team at Spherity is led by Dr. Carsten Stöcker, who serves as the CEO. He holds a Ph.D. in Physics and has amassed considerable management and consulting experience through his previous roles at Accenture and RWE. Complementing him is Dr. Michael Rüther, the CFO/COO, who brings a rich background in business computing, also holding a Ph.D., and significant management and consulting experience from his time at RWE and Thyssenkrupp. Together, they form a formidable leadership team with deep insights and a broad range of experiences across various industries.

Blockwall is leading the Seed Extension funding round of Spherity, the total money raised in the round totals €2.5M. With existing partnerships with industry giants like Novartis and AstraZeneca, Spherity is poised for substantial growth in the coming years. The Spherity team, with its bold ambitions, is making strides toward realizing its vision with steadfast dedication. Its pioneering solutions distinguish Spherity in the competitive landscape, positioning it as a strong candidate for market dominance in its field, and showcasing the unique potential that differentiates it from its competitors.

For further reading on megatrends directly impacting B2B use in regulated industries please check out this highly informative article from Spherity.

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