Substratum is an ambitious Cryptocurrency attempting to lay the foundation for the decentralised internet.
If successful, they could overcome many of the current issues that the internet suffers – censorship and many others – and provide an incredible opportunity for investors looking for the next big Cryptocurrency.
YOU WILL LEARN:
Substratum – What Is The Project About?
Are They Solving Real Market Problems?
Will The Token Price Increase?
Is Substratum A Good Investment?
- What Is Substratum?
- How Does Substratum Work?
- What Problems Are Substratum Solving?
- Will Substratum Tokens Increase In Price?
- The Team
- The Roadmap
- Since The ICO
- Our Conclusion
- Follow Future Posts
1. WHAT IS SUBSTRATUM?
In their words:
Substratum are “an open-source network that allows anyone to rent their computer as a hosting server”. The Substratum Network is a worldwide collection of nodes that uses industry-leading cryptography to deliver secure content anywhere, all without the need for VPNs or Tor.
In Our Words:
Substratum are attempting to create the foundation of the decentralised internet through the introduction of decentralised servers.
2. HOW DOES SUBSTRATUM WORK?
The Current System
Before we talk about Substratum, it is important to comment on how web hosting works on the current centralized web (this a very oversimplified overview);
- Websites are essentially a group of files that need to be stored on a computer connected to the internet
- These computers are known as “servers” as they serve up a websites files when a person visits a particular domain name e.g. CryptoGurus.com
- Currently, companies such as GoDaddy and Blue Host operate within those role as web hosts
- Customers pay these companies to put their files on the GoDaddy (or other company) web server and this is known as buying hosting
For a slightly more advanced yet still concise description, check out the video below:
This is a video from Bluehost above. We have zero affiliation to them – their video has only been included as this is one of the best, simple explainer videos.
Look around you right now and you’ll probably see of a few of your devices (mobile phone, computer, tablet etc.). These devices are most likely only using a small overall percentage of their processing power.
Substratum works by storing website securely files on your phone. Then, your phone will transmit these files to the network, using a small amount of processing power from your phone. Your phone effectively becomes one of the servers on the network.
The idea is that regular servers are producing lots of processing power in order to connect to the internet and host websites. Why not use the extra processing power from everyday devices instead of a single central server?
As many devices around the world are all contributing to the network, Substratum are providing a decentralised system which has many benefits but we’ll get into that in a bit.
First, we’ll talk about why anyone would choose to let Substratum use their devices’ operation power.
Why Let Substratum Use Your Device?
When you opt in to your device becoming a node within the network, you are paid a micro-transaction in SUB (Substratum’s currency) for each and every time that your device carries out an action to help run one of the hosted websites to run efficiently.
Users can then cash out their SUB for fiat currency (USD, GBP etc.) on exchanges.
In other words, there is a financial incentive to help contribute to the network and users won’t have to do anything other than switch their device on.
Won’t This Slow My Device Down?
When discussing the Substratum project with people, their immediate reaction is usually concern as they believe that it will cause their phone/computer etc. to overheat or use too much processing power and slow the device down.
This is where Substratum becomes very clever – your device contributes a varying amount of processing power based on its current usage.
Therefore, during the day while your using your phone, it will contribute a minimal amount or, perhaps even nothing. During the night, however, while your device is using virtually no processing power for itself, it is able to provide a greater contribution to the network.
As a result, your devices will earn you more money while you sleep.
Here at CryptoGurus, we’re very keen on sources of passive income so this is a huge selling point for us.
We’ve talked about why people would want to become a host on the network. In the section titled ‘What Problems Are Substratum Solving?’, we’ll discuss why websites would benefit from choosing Substratum as their host but, first, let’s run through the process that a website goes through to use Substratum.
How Do Websites Get Hosted?
The process is very simple – website owners will sign their website up to the hosting service via the Substratum website/app in the future in order to begin the hosting service.
They will then pay via the CryptoPay system which is a simple API – similar to Paypal – that allows easy checkout and purchases for website owners.
They will have the option to pay in a variety of Cryptocurrencies which will then be automatically converted to SUB and distributed to the network contributors.
3. WHAT PROBLEMS ARE SUBSTRATUM SOLVING?
Substratum vs The Current System
In the following section, we will be outlining a few of the problems currently surrounding the centralized web and detailing Substratum’s solutions to them. After that, we will highlight one of Substratum’s biggest advantages it holds over its main rival – Maidsafe.
Problem # 1 – Digital Censorship
In many countries internet censorship and restriction is rife; government intervention means users are unable to access certain websites. This is a problem all over the world with countries such as Russia and China leading the way. The current way around this for users to use complex and potentially expensive software such as Tor and VPNs.
Both Russia and China have also recently based laws, banning the use of VPNs for the general public, further exacerbating the problem. The beauty of the decentralized web is that censorship cannot exist; governments are unable to get involved due to the lack of a central access point.
Problem # 2 – Ease of Use
As mentioned above, the current solution for the censorship problems is to use software such as Tor or VPNs, these can be notoriously complicated for the average internet user. Substratum have placed a focus on good user experience and created a product that requires no special software; it can all be completed from any browser.
Problem # 3 – Privacy, Security and Encryption
With a single centralised server – i.e. the current system – there is a single point of failure. This means that a hacker only has to gain access to this location or a fault to occur for a catastrophic outcome for all websites hosted on that server.
The beauty of decentralisation is that there are millions of locations all contributing to the network. Therefore, a hacker would either have to hack all of these locations simultaneously – not possible – or hack the underlying technology called the ‘blockchain‘ which is also virtually impossible as it would require a quantum computer and no examples of these currently exist.
Problem # 4 – High Hosting Costs
Hosting fees are currently very high for businesses wishing to get their websites on the internet; centralized web hosts charge a company whether their content is doing anything or not. When you host with Amazon Web Hosting services, for example, you are charged a flat monthly fee regardless of whether your website receives visitors or not. On top of this, you’re also charged a variable fee as visitor numbers increase.
With Substratum, however, you are only charged for each request that is processed. In layman’s terms, you might pay a variable fee but you pay zero flat fee plus the variable fee will be minimal in comparison with traditional web servers.
Problem # 5 – Net Neutrality
This is a large topic at the minute; censoring and content regulation means that people have no control over what they do or do not want on the internet, it is really just a matter of corporate money changing hands. The founder of the worldwide web himself, Tim Berners-Lee, is a big advocate of net neutrality.
Substratum say that “With the Substratum Network, ALL websites and applications will have EQUAL ability to be broadcast in an equal and fair manner”. Also, any member of the network will have the ability to vote content up or down.
This allows people to identify bad players like child pornography or terrorism and get them removed from the network.
Implementing a community-based system for highlighting good content and removing negative content is an idea that we strongly advocate due to much evidence proving the efficacy of this model as Reddit has proven.
Substratum vs Competitors
Now if you know a little about cryptocurrency, you may be thinking
“But Aaron, haven’t other projects already tried to achieve this?”
The answer is yes. The most direct comparison would be Maidsafe, who are also aiming to decentralize the web.
Maidsafe however have seen a few barriers to success; they require users to host their websites through a subdomain. In simple terms this means that rather than listing your website as ‘cryptogurus.com’ for example, Maidsafe would require the domain name to in fact be ‘cryptogurus.maidsafe.com’.
Now this is not an appealing idea for us, so you can only imagine how unappealing it would be to large operators such as Amazon or eBay.
4. WILL THE TOKEN PRICE INCREASE IN VALUE?
This is another incredibly important point that many people overlook when investing in Cryptocurrencies.
When you invest in a company, you are buying shares. As the company makes profits, the shares increase in value. In other words, you are investing in the value of the company rising.
With the majority of Cryptocurrencies, the coins/tokens don’t represent shares. Therefore, the company increase in value – i.e. the CEO and employees make lots of money – while the coin/token price may actually decrease in value.
The ONLY factor determining token price is supply and demand on exchanges.
Obviously, supply and demand are affected by many factors but the price all comes down to the combination of these two. Because of this, it is essential to ask yourself the following question:
Will there be token demand on the exchanges?
If the answer is no, token price will fall. If the answer is yes, the token price COULD rise. This idea is the most important element of any investment and yet so misunderstood with Cryptos.
So, let’s look at the demand.
What Are The Sources of Demand?
For anyone to host their website on the Substratum network, they must either buy SUB from the exchanges or they can pay using other Cryptocurrencies. If they are buying SUB on the exchanges, this will increase demand on the exchanges and cause prices to rise – this is great for investors like you or us.
What If They Pay With Other Cryptos?
If website owners pay with other Cryptos than SUB, then surely there will be no demand for SUB, right? Wrong.
The Substratum app/website, will automatically convert whichever Crypto it is into SUB in order to pay the people offering their device operating power to the network. In order for them to be able to do so, the Substratum company must regularly buy back SUB from the exchanges.
This will create buying pressure on exchanges and drive prices up.
In this sense, the usage of the platform is linked very well to the usage of the platform – as the platform grows in popularity, so too should the valuation of their tokens.
Another point to add to this is the comparison with Maidsafe in relation to price. While it is only fair to point out that Maidsafe are a team who have been working on their project for much longer, they have a valuation of 6.5x that of Substratum (at time of writing). This could be seen an indication that Substratum has room for growth in relation to prices.
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5. THE TEAM
One of our mantras here at Crypto Gurus is to “invest in people, not ideas”; you could have the greatest idea in the world but without proper execution, it simply won’t succeed.
The Substratum team consists of 22 developers, designers, architects and project managers, most of whom have been working together for the last 13 years. During this time, they have developed and deployed software solutions for a number Fortune 500 companies including: Apple, Disney and Facebook.
We believe that this is a huge challenge for them to attempt in building such a network and it brings with it many inherent risks but, they are a capable team, and this is a positive indication that they could be the right team for the task.
6. THE ROADMAP
You can see the roadmap image as shown above.
As the famous dictates, it’s likely to see prices rise in the build up to this day and a drop in prices shortly after. This could represent a good buying opportunity that we are considering.
7. SINCE THE ICO
Substratum’s ICO closed on August 14th 2017 with tokens being sold at a value of 3000 SUB per ETH. This would put token price at around $0.09-$0.10 depending on the timing that individuals contributed.
Currently (16.11.17), Substratum tokens are valued at $0.152, resulting in a 50+% gain for ICO contributors.
This price increase has been driven be speculation as progress is currently very limited in terms of producing an actual product as we discussed before in the roadmap.
The Token and ICO Fund
At the close of their ICO sale, Substratum had raised a total of $13.8 million, this including a $5 million investment from US based payment and processing company Render Payment Systems (Who were in turn given 50 million SUB).
How Will They Spend Funds?
- 60% – Product Development
- 30% – Product Awareness
- 10% – Network Infrastructure
An appealing element here is the 30% allocated to product awareness; it is important to remember that cryptocurrency is still in a very early adopter market and Substratum recognise this.
The growth of the token will only come through participation and this is not possible if people do not know about the project.
A decentralized web is viewed as the future by almost everyone and with China and Russia both recently passing laws banning the use of VPNs by the general public, the need for a solution grows even greater.
By ‘short term’, we’re referring to a 3-6 month period – for any time frame less than that, you should consult a trader to study the graphs; an addition we will be making to our team very shortly.
Within this 3-6 month period, we expect prices to rise further due to the overall trends of Cryptocurrencies gaining traction within mainstream media and the introduction of financial institutions to the Cryptocurrency market which we expect will cause a flood of extra investments.
While the team is highly qualified and the idea is incredible, the project is highly ambitious and could struggle to gain mainstream adoption. However, if they are able to do so, the payoff based on current token valuations could be huge.
For any investor, it’s always a question of Risk Vs Reward. In the case of Substratum, the risk and reward are both high but we believe that the reward outweighs the risk and, therefore, we would consider adding SUB to our portfolios.
Due to the risky nature, only a small allocation of our portfolio would be dedicated to this project. Please note that this is our personal plan but we are not making any recommendations for others.
That’s the end of the article! Thanks for stopping by and don’t forget to check out our other articles for regular Crypto/ICO reviews and market updates.
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Disclaimer: None of the above is financial advice. Always do your own research.
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This article has been provided by our business analyst; Aaron Laver.