SONM — Update I

15.12.2018

TL;DR. Ecology:3 (3). Technology:2 (2). Decentralization:2 (2). Valuation:5 (4). Rating:3/10 (3/10)

Six months have passed since the BD Ratings review of SONM. Here is how that prediction has turned out so far.

2018-06-15: USD 0.139202, Satoshis 2 117.

2018-12-15: USD 0.017547, Satoshis 541.

Let's explore what the project has been up to the last 6 months. Just two weeks after the initial ratings article was released, SONM released its mainnet. Soon thereafter a lengthy June report was published by the team, announcing an expansion of the team among other things. In the July report, a multitude of planned updates and fixes were introduced. The August report revealed a bunch of development as well, including the release of the Connor bot, software that automatically finds the cheapest supply of processing power, rents it and mines cryptocurrencies. Work started on a block explorer for the SONM sidechain as well. In the team's October report, further software updates were detailed. All in all, the team seems to follow its roadmap in a timely fashion.

The main takeaway from these last 6 months is that mainnet launched successfully, and that the SONM team seems to have decided that the network will be an Ethereum sidechain, operated by masternodes. This is the first time BD Ratings has to consider the implications of such a network constellation. Our policy is to only rate cryptocurrencies with their own network - in other words native tokens that can be applied to a valuation framework developed for cryptocurrencies like Bitcoin. But as the SONM network theoretically can survive on its own by doing a bit of tweaking, this still warrants a rating. Should Ethereum fail, or no longer fit the needs of SONM smart contracts, contract logic can be built up on other public blockchains or on a fully sovereign SONM network.

According to a masternode draft document, there will be two types of masternodes maintaining the sidechain. This is a shift from earlier PoA consensus mechanism to a masternode PoS mechanism. Gate masternodes will demand a minimal stake of around 100 000 SNM, while the Block producing masternodes demand a stake of around 500 000 SNM. There is no limit on the number of Gate nodes, but as for the Block producing nodes the maximum limit will probably land on 100. Gate nodes will validate token transfers from one blockchain to the other, while Block producing nodes act in the way the name suggests. This PoS consensus mechanism is planned for 2019.

Ecology

BD Ratings is still not convinced that a decentralized blockchain is the proper infrastructure to use when trying to compete with centralized solutions like AWS. Monetization issues might be considerably easier to handle due to the global nature of cryptocurrencies, but other parts of the whole system is probably cheaper to maintain with a central database. It is not really realistic to talk about the advantages of censorship-resistant computing power in the same sense one would talk about censorship-resistant bitcoin transactions. No one is going to censor CPU/GPU work aggregated with fog-computing. For the Ecology rating to rise, real world economic activity has to migrate to the SONM network as proof that there is market demand for this concept.

In any case, post-production studio Shotty used the SONM software for rendering special effects. This is a good first trial of what the SONM network can offer. BD Ratings look forward to more real-world commercial activity as proof of sound fundamentals.

The official subreddit shows low activity. So does the SNM ERC20 token despite its integral part of the fog computing features that now are live on the network. SONM has a long way to got.

Grade: 3

Reasons: Low community activity. Low use of the network. Not proven business usecase.

Technology

The SONM team paid for two individual code audits in preparation for the mainnet launch. Such audits are often well worth the money and are positive for the security of the project. These in particular seem to have concerned smart contract code, so the code base itself was not audited.

In all of the monthly reports, there is proof of considerable developer activity, with new software versions continuously shipping. This activity is reflected on GitHub as well. Most of this activity concerns the fog computing software and not the sidechain code base itself.

For a higher Technology rating, the SONM sidechain needs to be battle tested while having its masternodes distributed for a true resilience-check. Right now the team controls the blockchain, making it easy to defend against attacks while also making it useless as a blockchain.

Grade: 2

Reasons: Mainnet launched. Masternode setup not yet rolled out. Developer activity for fog computing software.

Decentralization

As of June 2018, the new sidechain was completely centralized, with a long term goal of distributing masternodes to the community.

In the July 2018 report by the SONM team, they announce a change of open source license to GPLv3. The stated plan is to change to an even stricter license in the future that restricts the use of any code unless the SNM token is used as well. Such strict use of licensing might stifle development around the blockchain and also runs counter to permissionless ethos of public blockchains. It might be that the licence only concerns the fog computing software and in that case this point will be reassessed.

It is a bit worrying that critical comments are deleted on the official BCT thread. User panzer88 has had many of his comments deleted while still making good points about the project. Meanwhile, Exereum supporters that might even be bots have been posting continuously on the BCT thread without interference from moderators.

Grade: 2

Reasons: Current sidechain is extremely centralized.

Valuation

At time of writing, SONM is valued to around USD 7M. This is extremely far from the all time high of around USD 300M a year ago, but is still quite much considering the completely centralized network, the current dependence on Ethereum for economic activity, and the low on-chain activity in general.

Grade: 5

Reasons: Slightly more sane valuation for something with weak (blockchain) fundamentals in general.