Can the future of Fog Computing be more unclear?
There was an impressive array of get-rich-quick people in former USSR after Perestroika. When you read about them in historical essays, they are always depicted wearing crimson jackets and thick golden chains. And that’s true indeed.
Within the course of the following years, using a vast range of methods to accumulate wealth, including not quite legal ones or those not meeting someone’s high moral standards, they’ve changed fashion (sometimes jumping from those raunchy jackets to yoga pants), attitude, personality (having travelled to India or Tibet and met a couple of monks) and locations – from dark gateways to murky hookah-bars.
Nowadays, some of those people define Russian blockchain scene. Therefore, hookah-bars (or anything that may look like it) became the place of business when it comes to cryptos.
That’s exactly where we met with Alexei Antonov, co-founder of SONM.
“Sometimes someone can look at me and wonder: “how does this man manage to earn at all?
So far he has smoked 10 hookahs and now is browsing the internet, searching for memes. I don’t know how it happens, but sometimes I have an urge to work and sometimes I don’t. I can’t be super-efficient all the time. Although, at times, I can keep going and work like crazy – a week, two weeks, a month, a year, and then play computer games for the whole month and not care much about anything”, – said Alexei as it came his turn to smoke that evening.
So far he has smoked 10 hookahs and now is browsing the internet, searching for memes
It was exciting to meet him. SONM is one of the largest Russian ICOs. The idea behind it was very lucrative and made a lot of sense at the time. On top of that, the team’s just announced the launch of the product promised to the market and crowd sale. On June the 30th SONM decentralized fog computing platform was launched and ready to use.
And yeah, it would be great to know where the business is moving next – how many customers are there, what are the revenue forecasts and is there any potential for this blockchain startup to start disrupting the market yet?
The Beginning of Everything
Projects like SONM begin with the bunch of genius geeks, differentiated by various levels of cuteness, guided and driven by people like Alexei – full of ideas, bright, entrepreneurial, conventionally handsome and charming. He talks a lot. The answer to the first question (“gives us a 4 minute story of your life, please”) took more than 3 hours and we did skip some parts.
“I was born in Perm, an ordinary city in the middle of Russia, raised in an average family. The fascination with programming (especially everything connected to hacking) began during the last years of high school. That’s why I picked this crazy unheard of subject – cybersecurity – to proceed my education. That was the closest to hacking I could get”.
“Studying was difficult. Mostly because I got excited by entrepreneurship and was looking for the ways to make money. I also realised that hacking wasn’t something I enjoyed, so at some point I turned indifferent to my education”.
I wonder what were the first business efforts and how successful they got. “We started with selling computer accessories, but it didn’t turn out as well as we wanted. We didn’t manage to beat larger competitors: as you may think they had more resources to scale their operations and, surprisingly, they were faster than us. Next business idea we tickled was business software sales.”
I asked if it was a success.
“Not really. Then it was coaching market. We were running various programs – on self-development, family psychology, self-discipline, pick up training, etc. It was the last year of my higher education. I felt comfortable with my new business venture and couldn’t be bothered to better grades for my diploma. Trainings were not extremely profitable, so I also played poker on the side. Started small and ended up setting up and owning the range of backstreet poker clubs. At that point, I forgot about the trainings – poker brought in more money. I got my first car – BMW X6. It was used, but it was mine.”
Started small and ended up setting up and owning the range of backstreet poker clubs
Alexei seems to be enjoying reminiscing about the good old times. I wonder if he ever made some deadly mistakes while gambling.
“Things happened. Well, it wasn’t a matter of life and death, but several times I had lost it all: every single ruble, dollar, pound, whatever I had along with everything I could borrow during the game. Getting up from is tough after such rounds. You keep telling yourself you won’t play anymore, you know. But the next morning I remind myself that there’s another reality – a 9 to 5 with a ridiculous salary as a price tag. And I don’t want to live that reality. So I put myself together and keep playing”.
From metal constructions to chains of blocks
“I built a small fortune in poker and decided to move on to the field of… how do I put it… legal services”, – Alexei keeps going – Suddenly I developed a vast and diverse social circle plus helped some of my new acquaintances build a positive relationship with police and legislation. At the same time, a seemingly great opportunity appeared. I had a chance to get my hands on a share in a production enterprise, working mainly with different metal constructions, plasma cutting, laser cutting, all those things. It wasn’t huge, but it was something: at their biggest there weren’t more than a 100 people employed. I was 26-27 years old, but I was an industrialist, a manager of the factory”.
Seems like a new beginning with a huge potential, right? But Alexei always appears to find a way to feel disappointed with every new venture.
“This is the way Russian production works – let’s say we can supply the customer with something he wants and it will cost us 7M of conventional units. But the final buyer will have to pay 100 M just because there’s a whole chain of intermediates between us. So, the production started to upset us, and I moved on to pursue a political and social activist career.”
This is the way Russian production works
The year of 2015 Alexei dedicated to “Financial Literacy”, an organization he created to teach people of all kind (from students to helpless retired people) some basic money management rules, about loans and credits, renting VS buying the real estate, etc., and a huge regional Forum, under the same name “Financial Literacy”. Those activities could hardly be called profitable. Though finally, the next move was into the world of blockchain.
Antonov learned about Bitcoin back in 2013, when he met his future mentor on all things decentralized in Thailand. This new acquaintance shared a story about making some money while investing in that new digital money. “I thought it was really cool, but since that year wasn’t great for the new currency and the exchange rates were dropping I didn’t dig deeper”, – said Alexei, – in 2016 I heard about Ethereum and texted my old friend from Thailand. He shared some links with me and invited to several telegram groups. The tech blew me away.”
At the same time, Alexei started investing in blockchain projects, moved to Moscow and made a bit of a name for himself speaking at various conferences with no actual expertise but with lots of passion.
“At that time conferences were good. I was teaching how to invest in ICOs. Developers and traders were sharing knowledge. Not crooks and thieves like nowadays. Today’s blockchain conferences are total junk. I don’t even attend those as a speaker anymore, because there is nowhere to put a stigma on the most of the participants.”
During one of those golden age conferences, Alexei Antonov met Sergey Ponomarev, CEO of SONM. Sergey was looking for the opportunity to raise money through ICO to back up his idea.
“We were talking, and he said that I look like a person who knows how to identify the legit ICO and I could be helpful for packaging his idea. I also had some money to invest in the project from the very beginning. And I had a feeling that was a great idea, very high tech”.
Where’s the money, man?
The purpose of SONM as explained on the project’s website is to provide “cloud services based on distributed customer level hardware including PCs, mining equipment, and servers.” So you can earn extra cash by renting your hardware or save money on cloud hosting services whose prices bite severely thanks to the recent total market monopolization.
Just imagine the prospect for all SONM marketplace participants…
As stated on the project’s white paper, page 36:
“Imagine if your smart-watches from Apple could earn you money? That’s what we are talking about – When “Time is money!” are not just words.”
And this is how ICO rating website explains the main idea of SONM:
“…Any smart device (CPU, GPU, PlayStation, and even smartphone) located anywhere in the world can take advantage by joining the fog network and selling computing power peer-to-peer via the SONM Application Pool…” and “…Buyers benefit from using SONM fog computing as an alternative to centralized cloud services in terms of cost effectiveness, security, and scalability.”
And, of course, this: “…Fog computing removes all centralized entities, which automatically results in a more secure network for everyone to enjoy and benefit from.”
Sounds like a life changer, right? Not so fast. Even though the description was accurate, reality began changing drastically.
First of all, SONM is a B2B product. Both for those who rent the power and those who want to purchase it.
“Mobile devices can’t complete any task on the platform. Our goal is not to make using SONM valuable for all the anyone owning a device of any computing power, but to redistribute that power among those who need to pay less for it” – upgraded the idea Antonov.
So you more of a B2B rather than B2C?
“Yes. For small businesses and entrepreneurs. And the progress with the product will start as soon as big corporate customers begin using our services”.
The more we spoke the clearer it got that perfect SONM renters are huge miners who have hundreds and thousands of machines at their disposal.
Regarding cost-efficiency, I’ve come across some numbers that compare SONM with AWS.
“For those renting computing resources, using SONM means making savings. The rental of equipment with a hash rate of 94 MH/s will cost $0.918 an hour on an AWS cloud platform. Renting that very same capacity on the SONM platform will cost $0.19 an hour. 4.8 times cheaper.”
But at the same time, some digging on Fog Computing proves that it is not as cost-efficient as we would like to think. For instance, the research published in December 2017 issue of International Journal of Electrical and Computer Engineering states that Costs are the problem for the fog – since those environments use a large number of nodes, the computation is distributed and can be less energy-efficient.
I asked for the comparison numbers and how close to reality were they:
“Depends. Some task can be cheaper to implement indeed. If it is not going to be cheaper people won’t buy power from us”.
Security is another massive issue of cloud computing. According to the same research, the main security problem is the authentication of the devices involved in fog computing at different gateways.
“SONM is making R&D towards a hardware-enforced security (Trusted Platform) which will guarantee no intrusions by suppliers to client’s data. At this moment this is in the works. Our current proposed workaround is to maintain the security on the application side with respect to supplier’s reputation and KYC status”.
But as stated in corporate blog it’s not done yet, and there’s no defined deadline for that.
I asked about the product itself and development activities that were supposed to have already resulted in something of value.
As SONM released the testnet in December 2017 and 500 developers working with the platform were sharing the “critical feedback and improvement recommendations” I requested to know what type of valuable information the team received?
“Valuable feedback was that we’d launched it. And some people were using it”.
I am curious what was the logic behind that step? And wonder if there was at least some statistics on the user base?
“Statistics is that people are using it. And if we want them to use it more, we have to finalize the development. The point of software development is not only to create some kind of proof but also to write tons of documentation, various user instructions, different drivers for different hardware. At least, that’s how I see it” – responds Alexei.
“At this point, SONM is transitioning from being labeled as a “wild tech idea” to “a real business” category. We have to build something of a substance, with customers and sales department, just to be fully geared with business development. Looking for new sales and service partners in targeted geographies, make it’s easier for customers to use our product”.
I questioned Antonov about the priorities of the business development he mentioned.
“We have to increase the number of sales, attract more miners to the platform and proceed with development.”
Sounds like the a task for the whole new bunch of people, right? Especially if you check the last product update on the corporate blog. At the time of writing this text, the 7th of August, 2018, the previous monthly report was about June. It was mostly related to ongoing product improvement, but nothing significant or substantial mentioned in the field of actual business development. The only related sentence was “The active phase of expanding the business is beginning! All summer we will be actively attracting suppliers and consumers of computing resources to the platform” showing that the task is essential but has no clear strategy or tactics.
I’m scrolling the job openings section of SONM website. It looks like this:
Mostly marketing and content related job openings. The only relevant position for the priority that claimed to be strategic is “Head of Business Development Department.” Though requirements are ridiculously low: “More than 5 years of relevant experience”, “An understanding of the basics of blockchain technology and the cryptocurrency market, as well as the functioning of cloud services” and “Annual sales indicators of more than $3 million for a new business (IT/cloud services)”.
How on Earth is someone supposed to develop a business from zero to hero with that experience? It’s a highly competitive industry, highly competitive sector monopolized by companies with outstanding resources and all the intention to employ the best people in the world. The industry where one contract can cost up to $10 BN.
All Critics Are Silly
Antonov speaks about criticism: “I read a lot of it on the internet. It bores me by now, I am getting too lazy to respond. Those skeptics should compare us to the rest of ICOs from 2017 and check the results: what have been done, how the money was spent. All their criticism would be gone in an instant. Some may think that $42 M is a lot of money and you can live just fine with that amount for a long time. But just as an example – Consensus participation cost us somewhere between $300 000 and $500 000.”
I read a lot of it on the internet. It bores me by now, I am getting too lazy to respond
Absolutely startled I asked: 300 000 or 500 000? It’s 66% difference… So which one was it?
While Alexei proceeded: “Right now it’s a critical point for SONM – we’ll build our business and grab our market share or we’ll be just barely fighting the competitors (and slowly missing the edge). We want to grow and increase our capitalization. Crypto market says “No” to us, and we can’t do anything about it. At least the price of our tokens is not below the ICO price, and let’s not talk about how many projects token prices there are”.
I love to crunch the numbers myself. So I definitely check how good SONM was for its early contributors.
It’s worth mentioning that it was a bit of a mess with SOMN early investors and hard cap evaluation due to the Ethereum exchange rates jumping between the pre-ICO and ICO dates (from $50 per 1ETH in April 2017 to $350 per 1ETH in June 2017). Therefore, pre-ICO investors got their tokens almost 4 times more expensive than ICO contributors.
For those not happy with that the company offered a refund.
But back to numbers:
Pre-ICO rates were 606 SNM per 1 ETH
which equals to 0.00165 per token or $0.67 per token
at today’s ETH – USD rates ($410 per 1 ETH on the 7th of August 2018).
ICO price was 2824 SNM tokens per 1 ETH
which equals to 0.00035411 ETH or $0.145 per token.
Today’s SNM rates are $0.08 per token which is 44,8% decrease for ICO participants and 88,05% decrease for pre-ICO participants.
Is there a light at the end of the tunnel?
I keep insisting on my questions to get more of a brighter perspective. Let’s talk about SONM monetization and platform service fees.
“Yes, we are willing to take a small percentage of the total payment as our service fee. We have some approximate calculations. It would be something around 2-5%. We are going to try various options and then decide. It’s great that we’ve never thought it through, so we don’t have to stick to some numbers that once were promised … “, – he responds.
I pry about project’s white paper. I wanted to check the roadmap and numbers before the interview but couldn’t find that document anywhere. (I did after the meeting though, as you may remember if you carefully read and weren’t too bored or overwhelmed with the flood of words).
“We’ve just deleted it from the website. It was complete nonsense as we now understand. The far too embarrassing wild fantasies”, – he comments. I wonder if Antonov could change anything in the evolution of the project and decisions that were made, what would that be.
“I would have made faster decisions, if I could. Try going global faster. Go and try to pay the international invoice from Russia. We have a bank account, but we can’t pay for the conference participation or salaries to our employees from abroad, because for each single transaction you have to provide a huge stack of paperwork for the monitoring. As a result, we can’t build a business from Russia. We were trying to move to the UK but didn’t get through. Now we are focusing on Asia and the US.”
“Are you registered in Russia?” – I inquire.
“We have some entities here that are used for our operational purposes, but legally we are just a software developer” – he responds.
“But what about tokens”, – I proceed.
He says that it’s not related and if they try to relate it they “won’t get anything but trouble.”
I am still puzzled how would they cash out the funds received during the ICO.
“We don’t need that. We are trying to pay in crypto. We don’t do anything illegal. Trying to register as it required by law in Russian Federation is a suicide. And it’s almost as bad in other countries. Our bank accounts in Singapore have just been shut down with no explanation. The same was in Great Britain. At first, we even rented an office there, we had British employees. Currently, they are working from home, and we pay them in crypto. All our attempts to get investor’s visa were unsuccessful, so now we are looking into the US and Asia.” – he explains.
Our bank accounts in Singapore have just been shut down with no explanation. The same was in Great Britain
I know that European Union has been far more crypto friendly lately, so I keep talking geography.
“Currently, we are working to create a sort of payment gateway in Estonia that is supposed to allow our customers pay for platforms services in fiat. We have the same problem that most of ICOs of that time have. We were selling our tokens without KYC. So currently it’s challenging to get regulated – we don’t know our investors, we can’t get the legal opinion and provide it to exchanges, and we can’t do anything about it. But at least we are a real decentralized project.
The most of the new ICOs sell 80% of their tokens to 10 large funds. And we have 8000 investors from all around the world.”.
It was the time for my last question. Over the course of our conversation, two of Antonov’s next appointments have arrived at the restaurant and one of them was waiting impatiently at the table.
I asked what would be one thing he’d like to share, something of notable importance that people should know about him.
“Over the course of my life, I’ve never stitched anybody up. I always keep all the promises. Since poker times. Experience teaches that it’s just better that way. People may gain short-term, but over time they lose the authority and trust”.
I thanked Alexei and got up to leave the table barely visible behind the sweet clouds of hookah smoke.
Five minutes later, sitting in my Uber, I reflected on the feelings about this young guy, who appears to have it all together.
Do I think he is talented? Yes.
Do I trust he can deliver? Hmm. I need to contemplate more.
SONM in Dates and Numbers:
Fall 2016 – The idea of SONM evolved
January 2017 – First commitment on Github
June 2017 – $42 000 000 raised during SONM token sale
December 2017 – testnet launched and tested by 500 users
June 2018 – the release of the first SONM version