Substratum (SUB) Analysis – The Answer Against Internet Censorship
Substratum (SUB) is one of those rather rare projects that we can actually see ourselves using, as it promotes an open Internet, censorship-free, secure and, cheaper to use than current web hosting offers.
The team describes the protocol as “an open source network that allows anyone to rent their computers as a hosting server”. Basically, every computer on the network will host a tiny fragment of what the user prefers; content, websites, and databases.
Due to the website being hosted on many different nodes (computers) within the Substratum network, governments will have no possibility to track the server IP; and thus, block it. This system is secure, as no one has the full access nor control of the data as those are encrypted – leading to privacy and security. Additionally, to become a hoster, one doesn’t need to run the Substratum software all the time – making it an easy way to earn money on the side.
The team is focused on creating an easy-to-use, non-technical platform. The software for those running nodes will have an intuitive UI, and website visitors won’t know that they are using the Substratum network.
The reason is that there is no need for third-party applications (such as Substratum software, a VPN, or ToR) for accessing websites running on the SUB network. To them, using the service will for all intents and purposes seem exactly the same as it has always been – for instance, typing bitshouts.com into their current browser will land them on our very own homepage.
As discussed above, the primary reason you might use SUB is to access websites not available in your country. The pictures above and below (click to enlarge), show the state of the Internet freedom and the demographics of VPN users – a VPN being a virtual private network enabling one to access websites from a different virtual location.
As shown, VPN users are mainly concentrated in emerging markets – where governments are scrutinising their citizens’ behaviour. As Western governments don’t restrict their citizen’s internet, we see Asia, Africa, and the Middle East as the markets that may embrace Substratum first.
Websites and blog owners may decide to run their website on the Substratum network in order to target people from these countries. For instance, activist websites or newspapers such as the BBC.com, currently not available in China, would be able to be visited by people from anywhere with access to the SUB network, freely and easily.
- Cheaper to use than current services due to micro-payments and payment per request system.
- Unrestricted access and censorship free, as no-one can block websites hosted on the SUB network.
- Security and privacy due to the encryption of data.
Team and partnerships
Justin Tabb, the CEO, is the founder of OverridePro, a company in the web design and development sphere. The rest of the team all are experienced (10 to 30 years in their respective fields) and have a similar tech background to Tabb – working in various SaaS companies, mainly in the healthcare industry, and high-tech consulting. The team has recently made new hires; for instance, they just recruited an infrastructure tech lead – with 14 years of experience. The fact that the team hires and expands shows that the team is trying to stay on the cutting edge and up to date with the platform’s needs.
There is nothing much more to say about the team as they are not really famous nor public figures. However, the fact that the CEO has already managed a company (and therefore a team) is a positive, as often, projects fail due to a lack of leadership.
In order to use the Substratum Network, entities will have to pay the network nodes (running the websites) using SUB tokens. Users can also pay in fiat (EUR, USD, etc) using the first DApp on the SUB network: CryptoPay. CryptoPay is a fiat gateway that enables people to pay online in the currency of their choice (ETH, BTC, USD, EUR) and to be paid in the same fashion. Using this application, the fiat currency will be converted into SUB in the background without the need for the user to do anything further. This will enable non-tech minded people, or people that do not want to deal with cryptocurrencies, to use the service.
To open a node, you don’t need any SUB in your wallet. Therefore, there is no incentive to stake Substratum, which can be exchanged for fiat or another cryptocurrency right away. However, the team recently added a feature – rewarding people who hold more Substratum to be compensated at a higher rate for providing power to the network. This is the downside of the protocol for us as we would have loved to see a masternode system. However, this could have jeopardised the system as masternode holders may have been traceable by governments.
The demand for the token will uniquely be driven by the demand for web-hosting, which is a downside for us. However, the fact that behind the scenes there is a system enabled to be used by the masses, without knowing that crypto is in use, is potentially fantastic, as it enables easy access to the platform which could lead to quick mass adoption.
Comparative analysis and potential
Currently valued at $100 million ($0.46 per token) as of the time of writing, SUB offers the same services as GoDaddy, one of the largest web hosting service which is valued at $8.75 billion. The only service that SUB is not offering is domain registration (.com, .org, .fr, etc). According to the investor relations of GoDaddy, the service hosted 73 million websites and generated $226 million from that segment in Q3 2017 (an increase of 30% in comparison with Q3 2016).11. With an increasing YoY growth for that segment.
In a conservative scenario, if the Substratum network grasps 10% of GoDaddy’s market share (meaning 7 million websites) which doesn’t seem too far stretched given the pros of using the SUB network (as reaching new markets and audience for blog owners) and at the current circulating supply of 226,000,000 SUB, the website to price ratio would be at approximately 3 cents which seems low in comparison with other services.
However, regarding the costs of using the service, not much has been said yet. Therefore, deriving a value for the coin is a tedious task, especially with the lack of comparable project in the crypto space.
In an era where net neutrality is jeopardised in the US and potentially other parts of the world, and where China and Russia decide which websites its citizens can visit, we believe that a platform such as Substratum brings value and will attract “customers”, particularly websites desiring to penetrate developing countries. In contrast, for the Western audience, the main reason for utilising the protocol is its cheaper hosting cost. The fact that many different users may find substratum attractive is something we are fond of.
A decentralized web is highly appealing to us. Unlike other projects, we believe that when released, many people will switch to Substratrum due to all the incentives the platform will provide – ease of use, its censorship-free characteristics, and its cheaper costs.
However, Substratum will not be added to our portfolio as no valuation model can be derived at the moment. In the crypto space, it is fundamental to take into account the risk-to-reward ratio (as for all other investments), and at this price, given our analysis and future token price appreciation uncertainty, that ratio is not high enough. However, as said previously, we are more than looking towards using the network as hosters and may reconsider our position once the costs of using the network are known.
Disclaimer: We do not hold SUB at this point.
As always, this is not financial advice. This analysis is based on personal opinion, and we invite everyone to read Substratum’s white paper, available on their official webpage (click here) before investing. Do your own research, contact the team on their telegram channel, and consult a financial advisor if needed.
Jacek graduated with an M.A. in Finance from the Shanghai University of Finance and Economics. He lived in Europe and Asia, and always loved to dig into papers and research projects to really understand the key drivers and trends. He’s passionate about blockchain’s business application, the sharing economy, and FinTech.