Sayonara, Substratum

I hinted at the potential for Substratum delistings on exchanges four months ago, and it looks like it finally happened. Following a delisting from Kucoin earlier this year, Binance has announced that will be delisting CLOAK, MOD, SALT, SUB, and WINGS from its trading platform. Over the past few months, I’ve spent a considerable amount of time researching Substratum, so I felt the need to comment on the delisting of the SUB token, and express my thoughts about why it happened and what to expect moving forward. In short, SUB’s delisting from Binance is a black swan event – one that I doubt the project will ever fully recover from. I suspect this will be my second to last post about Substratum if things play out the way I think they will. Let’s get into it.

Binance routinely reviews coins based on the following criteria.

  • Commitment of team to project
  • Level and quality of development activity
  • Network/smart contract stability
  • Level of public communication
  • Responsiveness to our periodic due diligence requests
  • Evidence of unethical / fraudulent conduct
  • Contribution to a healthy and sustainable crypto ecosystem

Here’s how Substratum stacks up.

Commitment to the Project

Despite Substratum CEO Justin Tabb’s constant stream of false promises when it comes to release dates, the development team has been fairly committed to working on SubstratumNode. However, there was a brief period of time when Substratum’s developers and resources were diverted to focus on developing the smart contract for the Amplify ICO. Ironically, Amplify’s public sale was later cancelled due to lack of public interest. Overall, the Substratum team is committed to the project, but have demonstrated a near-zero level of commitment to the concept of promised release dates.

Level & Quality of Development Activity

Substratum’s GitHub repository includes code from dependencies, so “lines of code” is an unsuitable metric. Similarly, “number of commits” is also not a good metric to judge the quality of development. SubstratumNode’s current beta release is buggy and slow, but does technically allow nodes to route traffic across the network. With that said, the team failed to deliver on V1, which was scheduled for an EOY2018 release – something that Justin Tabb promised as late as December 9, 2018. With this in mind, I have to conclude that the quality of development activity by Substratum’s development team is not fulfilling Tabb’s expectations and projections.

Network & Smart Contract Stability

Substratum’s network is not stable, and there are reports of the latest SubstratumNode beta dropping out and failing to route data. On the token side, SUB is an ERC-20 token issued on Ethereum, which is a stable network. However, Exodus Wallet recently removed support for the SUB token citing issues with Substratum’s “smart contract migration”.

Level of Public Communication?

Substratum’s level of public communication is poor. Not only is the community waiting on answers to questions submitted for Substratum’s October 2018 AMA session, Justin Tabb has an established history of PR failures. A few examples include Tabb’s announcement of trading ICO funds, revelation that he used to participate in pump and dumps, and false promises regarding SubstratumNode V1’s release date.

Responsiveness to Due Diligence Requests

I do not work for Binance, so I have no comment.

Evidence of Unethical Behavior

The examples below are just the tip of the iceberg.

  • Substratum advertised Apple, Disney, Facebook, and more as “current and past clients” on its pre-ICO website. Substratum has never had any formal partnerships with these companies. Furthermore, all traces of these “current and past clients” were scrubbed from Substratum’s website and promotional materials following the conclusion of its ICO.
  • Recently, it was discovered that Substratum misreported its ICO funding by a significant margin in its whitepaper. Substratum CMO Christian Pope followed up by saying that this issue would be addressed. Since then, Substratum has released no public statements regarding this matter.
  • In an early promotional video, Substratum stated that they “w[ould] ensure that for each and every one of you that the Substrate you purchased will quickly but steadily increase in value and maintain that value.” Today, the SUB token is trading below its ICO price.
  • In a now deleted but re-uploaded video, Justin Tabb revealed that Substratum had enlisted the services of an on-staff trader to “trade up” with a portion of the project’s ETH holdings (investor funds).

Contribution to a Healthy Crypto Environment

I can’t comment on this either.

Conclusion

A few closing thoughts…

  • Based on the truths above, SUB’s delisting from Binance is warranted.
  • The Amplify ICO killed Substratum. Since the Amplify ICO wasn’t open to unaccredited US citizens, Substratum announced an airdrop for SUB holders, which required SUB tokens to be locked away on non-exchange wallet addresses for a set amount of time. During this time, SUB’s trading volume plummeted and amplified its already low volume status. Worst of all, the public sale portion of the Amplify ICO ended up raising ~$18,000 before it was cancelled due to lack of interest. There’s no other way to look at it. The Amplify ICO resulted in a lose-lose situation for Substratum.
  • Substratum’s community firmly believes the upcoming Amplify Exchange will kill Binance. This is perhaps the most foolish thing I’ve heard this year.
  • Binance was responsible for ~99% of Substratum’s trading volume between its SUB/BTC and SUB/ETH pairs. Over the past few weeks, that 99% figure corresponded to $50,000 to $200,000 of daily trading volume. Following the delisting of SUB on Binance, I expect SUB to drop to sub-$10,000 daily trading volumes.
  • Without Binance’s liquidity, users of SubstratumNode who earn SUB for contributing resources to the Substratum network will be unable to cash out their earning. Furthermore, low liquidity on questionable exchanges makes it difficult for users of SubstratumNode to purchase SUB to use the network. For the time being, the Binance delisting has a profound effect on the SubstratumNetwork. Without Binance, the Substratum network’s entire economic and monetization model is broken. Wait, wasn’t this thing supposed to be decentralized?
  • The optics are terrible. A delisting from Binance is a death blow, and I wouldn’t count on a “re-listing” on the horizon. There’s no reason for Binance to reconsider its position on a token that was bringing in $50,000 per day in volume – especially when the token has a history of bad press. It’s literally not worth the time or effort.
  • SUB is a security, and with this recent delisting, I wouldn’t be surprised to see imminent legal action against Substratum. It would be smart for Substratum to be proactive about this. Justin Tabb should step down as CEO, Substratum should draw up a plan to liquidate assets and refund ICO investors, and the project should be fully open sourced and donated to the community. Let’s see who’s still “in it for the tech” after that.
  • Binance’s latest round of delistings will force other projects to step up their game at the expense of five projects that probably wouldn’t have made it anyway. In a way, Binance is singlehandedly pushing the industry forward. Sacrifices must be made, and this round of delistings is a net positive for the industry as a whole. Crypto is vicious.

If you’re holding SUB on Binance, please note that trading will last until February 22, 2019 and withdrawals will be processed until May 22, 2019.

Sayonara, Substratum.

In Blockchain
#Substratum