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In August of 2019, the Air Force awarded blockchain company Constellation Network Inc. (“Constellation”) a Small Business Innovation Research (SBIR) Phase I grant for the purposes of securely unlocking traditionally siloed and non-accessible data and data sources.

At the time, the decentralized blockchain world was looking for some sign that the federal government recognized its capabilities and potential. Constellation’s pitch to the Air Force was simple:

The Air Force has no solution for interoperating seamless and rapid data integrations between commands and domains. Legacy systems are not designed to optimize C2 across multiple domains. The ability to sort data and make fast decisions across multiple domains will give the Air Force an information advantage over an adversary. This is beyond systems supporting other systems. The goal is aimed at developing high velocity and agile operations that generate offensive and defensive effects. We learned that the Military is collecting a large amount of data with no overarching architecture or policies in place. There is a clear demand for data assurance and data sharing through permissioning and a virtualized structure. In Phase I, Constellation will research & collect data requirements. This will be a full customer discovery to understand the use-case requirements and criteria for MDC2 data collection, notarization and validation. Build a live working demo on controlled Constellation servers and systems to demonstrate a MDC2 solution viability. Illustrate an agreed upon use-case by developing a working demo to get buy-in from the MDC2 program. Secure Authority to Operate in preparation for Phase II and the use of trusted MDC2 servers and systems.

Purposes of the SBIR/STTR Program

 The federal government often lags behind the private sector when it comes to implementing new technologies. The 2016 NDAA, which emphasized acquisition reform, shifted the focus for DoD to rapid acquisition and led to renewed interest in the SBIR/STTR (Small Business Technology Transfer) program. Billed as “America’s Seed Fund”— SBIR/STTR is a federal government program which aims to leverage the research and development conducted by U.S. small businesses in order to advance the federal government’s market needs.

The DoD loves the SBIR/STTR program as it allows for research and development that would be very difficult to rapidly generate in the normal federal procurement process. Essentially, the government gives SBIR/STTR awardees a Proof-of-Concept trial run to see if a given solution will work in the federal workplace.

Two prime examples are the Army Futures Command and the Air Force’s AFWERX Program. As AFWERX posits it: “[AFWERX] is all about tapping both U.S. and global tech ecosystems, using military problems to accelerate commercial technologies. We are transforming the Air and Space Force into an early-stage “investor” that leverages private capital, accelerates commercialization using military missions, and grows the number of companies partnering with us.” For the past few years, the Air Force has regularly put out “open” proposals for SBIR/STTR grants— meaning businesses have the opportunity to pitch their idea to the Air Force. A few other agencies (such as the National Science Foundation) have such open proposals, but usually a business will need to closely monitor the SBIR/STTR website for opportunities that meet their business’s mission.

The federal government often has needs that may be vaguely stated in a SBIR/STTR request for proposals. Generally, this happens when the government itself does not understand what technology it is looking for – it just knows that it has a problem that needs solving. This is where an emerging innovator can prove itself to the federal government and situate itself for a continued relationship.

Crypto SBIR Success Stories

Constellation Network’s success is illustrative of how the SBIR/STTR program can be a springboard for a blockchain innovator. When Constellation was awarded its Phase I SBIR, it met the small business threshold requirements to participate in the SBIR program. Once the news of the SBIR award was made public, Constellation’s cryptocurrency token, $DAG, skyrocketed from an average trading volume of approximately $100k-$150k per day to well over a million dollars per day. Similarly, the market capitalization (“market cap”) of the Constellation DAG token went from approximately $3.7M to a high of $117M.[1] In September 2020, Alpha Sigma Capital purchased a large number of $DAG tokens from Constellation. Write-ups in Forbes magazine followed. All of this stemmed largely from the Air Force’s award of $49,935 to Constellation. The monetary amount of the award was not the point. The Phase I SBIR represented the opportunity to build a relationship between the federal government and an independent blockchain project.

To the extent information about whether the Phase I award was successful, Constellation has received letters of support from the Air Force Air Mobility Command and the Assistant Secretary of Defense in support of a Phase II SBIR Award (See Constellation’s weekly “Hypergraph Hour” at approximately 12:00 minutes in). Endorsements like Constellation’s are absolutely essential to continuing a relationship with the federal government. While hard to obtain, for all intents and purposes these endorsements can only really come out of participation in an SBIR Phase I program. The Constellation case study indicates a real-world adoption of blockchain technologies and an indication that the DoD might be willing to do business with blockchain organizations in the future.

Another company that has been successful in procuring SBIR awards is SIMBA Chain, who was awarded its first SBIR in 2017 from DARPA for $147,602 in order to research secure messaging on the blockchain. In January of 2020, the Navy awarded SIMBA Chain a larger SBIR Phase II award (worth approximately $1M) to track critical military weaponry parts throughout the supply chain. That Phase II SBIR is a pilot project focused primarily on the supply chain of the Navy’s F/A-18 Hornet.

Constellation and SIMBA, while both being blockchain projects, represent the vast diversity that exists within world of blockchain and distributed ledger technology. Constellation is a full crypto network, developed completely by Constellation with its own distributed token that trades on major cryptocurrency exchanges. SIMBA Chain, despite the name, is not actually an independent blockchain. Instead, it is a company that built out an on-chain application to utilize the power of blockchain. As such, its use case will generally be more specific and targeted, whereas Constellation’s project has greater potential capabilities. The blockchain world currently has need for both types of projects, as does the federal government.

Contact Ward & Berry For More Information

Ward & Berry, is a boutique government contracting firm. Ward & Berry has the knowledge and experience to help government contractors, and those looking to work with the government, with their legal needs. With offices in Washington, DC, Tysons, VA, and Austin, TX, Ward & Berry is located where the action is. If you have questions about the SBIR/STTR process, don’t hesitate to contact us.

[1] Statistics taken from www.coinmarketcap.com

Tyson Marx

Author Tyson Marx

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