Substratum and it’s new Amplify Exchange is starting to look like a Major Money Grab
From its goal “Earn crypto, change the world” to a 2nd ICO within a year
We’ll discuss what is going on with this company and look at past and present events in an objective manner.
Warning ⚠️: If you are invested in this project and believe in its future success no matter what, this may not be the article for you. Please stop here.
Why a second ICO?
Twitter and social media channels alike have all boasted concerns for the announcement of a 2nd ICO for Substratum. Those who are truly grounded in reality and not living aboard the “Substratum Express” all want to know why?
In this article we will address a few of the potential issues we can find and questions that arise from them.
Recently, Substratum a project whose goal is to decentralize the web through web hosting and running a node on its nonexistent network has came out with with a new ICO. The team will be the same from Substratum with a couple new members joining the Amplify team. The whitepaper and their funding model has been released to the public, through it however we can see several concerns regarding the funding mechanism, tokenomics and the overall shadiness of the original project.
Reading the Amplify whitepaper for the AMPX ICO, we merely see a powerpoint and screenshots for the unbeknownst and uneducated crypto investor. Accredited investors would laugh at this and there are many parallels drawn to the original Substratum whitepaper with it’s lack of clarity and technicality. Lets dig deep into some of the nitty gritty pieces such as the roadmap, token allocation, tokensale timeline, and it’s airdrop program.
Given the team’s past experiences with deadlines and projections for releases it’s interesting to see how they will fulfill Amplify’s roadmap. Their original Substratum full version node was delayed for a full year with minimal justification for the reasoning behind it. How do we expect them to fulfill these promises in Amplify? Can people change overnight?
We see here within the roadmap they have a relatively short plan only stretching for a year. They plan to release Amplify Distributed Exchange v1 by Q2 of 2019 and begin Bridgechain development. The Substratum ecosystem is conversely becoming more convulated and overly ambitious. They plan to deliver now not only their 3 main products of Substratum Node, Host, and Cryptopay but also Amplify development. That’s a lot of work for such a small company and an overly ambitious goal. How are they going to still be able to focus on core product development when half of their dev team has mitigated to work on building a new blockchain?
Per Dan Weibe’s tweet Substratum Host is “really still off for the future”. I think this is just the team realizing their node will be a flop and not get mass adoption as it was intended to obtain. They need something else to move to and make money from, it would appear Amplify offers just that.
II. Token Allocation
Amplify funds will dispersed with 61.66% of the total minted supply going to Private Sale/ Pre Sale/ ICO phases, 33.33% going to “Operational Team” and a small 5% going to the Airdrop.
While I can’t imagine the team has the absolute confidence they will sell all minted tokens for the public, I have to wonder why there is nothing mentioned about what will happen with unsold tokens from the ICO. This also relates to Substratum ICO, where still 89mill unsold ICO tokens are left on the crowdsale address, which were always claimed to have been burned. With the first argument “when Bittrex listing happens”, quickly devolving to “it’s not our focus right now because we are busy”. Even tough a token burn takes 1 minute of your time. These tokens were never released on the market so holding back the token burn for “price effect” has no meaning but remind any intelligent observer that the reason we are using blockchain is because we should not be trusting people. Yet here we are.
More so, there is a high token allocation for “Operational Team” resulting in obtaining 33.33% of the total minted supply. This is very high and it was attempted to be addressed by a telegram user in the main Substratum Network Community with the CEO, Justin Tabb.
In Justin’s response he tried to convey and justify the large percentage by saying Substratum had a similar ratio for “Operations and Team” token allocation. Doing some simple math Substratum had 60 mil SUB for system funds, 15 mil SUB for Founders & Team, and 40 mil for advisor payouts. That’s 115 mil sub dedicated for “Operations and Team”. The total supply of Substratum is 592 million tokens. In what world does 19.42% compare to AMPX’s 33.33%? Only in Substratumland is a 13.92% difference “almost identical”.
The soft cap for Amplify was met mysteriously rather quickly and without any formal announcement prior to obtainment of funds. This is normal but considering current market sentiment and overall performance of ICO’s YTD, very odd it was reached so quickly.
Typically ICO’s reach their minimum soft cap within hours to a few days. But we’re not in a bull market like last year and conversely the trends for investing into ICO’s at this stage of time has been all but promising and welcoming.
There were unusual trading activities on October 5–7th leading up to the announcement of Amplify reaching their soft cap on the native SUB token order books. A whale put up a 13 million SUB sell wall and the wall reached a high of 20 million SUB at one point.
Following this the team released the tweet posted earlier saying their soft cap has been met and their whitepaper alongside new website for Amplify Exchange on October 8th. It’s a theory I won’t go too much in depth on as it cannot be fully proven. But very strange to see their soft cap was met literally right after the 15 and 20 mil sub sell walls disappeared from the order book.
Lack of Hard Cap
Per Amplify Whitepaper, the team plans to sell “all 740 million AMPX tokens” in their private, presale, public sale phases. What’s so interesting about this is the team never gave a clear and disclosed USD/ETH value hard cap for Amplify. I’m just going to say this, all ICO’s should have a soft and hard cap. A soft cap adds a layer of investor safety. A hardcap implies the team has some sense of financial planning, budgeting, and ethics. This is a very concerning and unreasonable proposal.
So, we are left to assume that the hard cap is 740 million AMPX. Since the team does not know what the average price of AMPX is going to be it shows they do not have an actual hardcap. Essentially, they are basically saying “We’re done when everything is sold, but we have no clue how much money we’re raising.”
This model is typically fine when the hard cap is much lower, but here they’re trying to raise $50-$90 million, which is very unreasonable. If most people purchase AMPX tokens in the last round the team could raise $100 million, if most people buy in presale they could raise $75 million.
The fact they have no clue and choosing to value their hard cap in AMPX is very odd. Most ICO’s denominate hard caps in liquid value known assets like ETH or USD. Having a hard cap in AMPX implies there’s no underlying budget plan.
III. APMX Tokensale and Airdrop Program
The team expects to sell all 740 million AMPX tokens during their tokensale in their private, pre and public sale phases. As mentioned earlier, this proposal seems rushed and not really figured out in length.
The total supply of AMPX is 1.2 billion tokens. 61.66% of total minted supply is allocated for sale, 33.33% goes to “operational team”, and 5% will be airdropped to SUB token holders. As I stated earlier, I think the team’s 33.33% allocation for “operational team” is unreasonable. Using AMPX’s discounted rate of $0.15/token, 400 million AMPX has a value of $60 million.
Twitter user @krieptaugh prepared an excel spreadsheet dedicated to what their funding model would look like using estimates and USD values pegged for each tokensale phase.
Given this calculation using an estimate, let’s say Amplify raises nearly the same as Substratum ICO around $16 million. This figure is somewhat more reasonable but with public sentiment and market conditions brutally tough and unlikely. That would put the team in control of 45% of Amplify’s total token supply. As noted previously we have no idea what will happen to any unsold tokens, if they keep those.. well it won’t look pretty.
Let’s consider a higher tokensale contribution amount. It should be noted that if Substratum fails to sell all 61.66% of the token allocation for it’s ICO (740 million AMPX), the team would control a higher percentage of the circulating supply. They need to sell 33% of total coins, which is about 50% of the tokens for sale. So, essentially if they sell 400 million tokens they have 50% of the supply (ignoring the 5% airdrop since they have 88 million SUB in their crowdsale wallet and will be airdropping it to themselves).
Regarding the Amplify Airdrop for Substratum token holders, it will compromise a excruciating low amount of the supply, only 5%. For something that will play a vital role in the Substratum ecosystem why is this allocation so low? Essentially, the team does not want people to sell or dump SUB following the Amplify public sale. This is a means to keep hodlers hodling their sub tokens so they can earn a small amount of amplify tokens. The only beneift however of this lies within the team. The team controls 88 million SUB in their crowdsale wallet and unless there is a token burn sometime this century, they will be the main receivers of airdropped AMPX.
IV. Unusual activity in Substratum Crowdsale wallet
On October 11th, 2018 Substratum liquidated a total of 1000 ETH. This set their 3 month total liqudation of ETH around $850,000-$1,000,000. They are burning through their cash like ETH is going to die tomorrow. If this bi weekly pattern of liqudation continues, the team will be completely out of ETH in 4–5 months just in time for conclusion of their 2nd ICO. Coincidence? I don’t think so.
The team appears to be incapable of long term financial planning if they have to resort to liquidating crypto at break even prices of their first ICO. Maybe their CIO is handling funds. Prior to SUB’s first ICO he was bankrupt. Following the success and wide speculative frenzy both the CEO and CIO bought new houses. Is it time to start saving up for a upgrade? Maybe a place in Hollywood Hills?
We are only left with questions. Should this be a tokenomics and funding model we support? Why would Amplify Exchange be a leading cryptocurrency exchange when we do not get the proper information relayed to us to make that descision. Why is the selloff of funds from the first ICO ramping up? Does the current track record of the first ICO give you enough confidence to throw your money at the second ICO? Should we start to question the integrity of it’s founders? I for one, cannot in good conscience recommend anyone investing in this ICO for all the reasons stated. And I do believe it will not be hard for many to share my view.
Disclaimer: Please as always do not take my article as a means to either buy or sell speculative crypto assets. I do not hold any SUB nor have the intention of participating in the Amplify tokensale.