Cloud Computing Overview

The creation of the internet has had a significant impact on how enterprises are run and managed. Prior to the internet, companies were required to invest in on-premises infrastructure such as physical hardware, servers, networking equipment, and software applications.

The internet has enabled the creation of cloud computing, or the ability for businesses to access traditional infrastructure via the internet. There are three main segments of cloud computing:

• Infrastructure-as-a-service (IaaS) – Rent hardware like virtual machines, CPUs, GPUs, datacenters, and servers on an as-needed basis.
• Platform-as-a-service (PaaS) – Develop, run, and manage applications without investing in any underlying infrastructure.
• Software-as-a-service – Build applications via the cloud and make them accessible to users over the internet (any application built via a cloud provider).

SaaS solutions have become the most prevalent of the three categories as they remove many overhead costs of physical infrastructure, but IaaS is becoming more prevalent due to new use cases like artificial intelligence and machine learning.

The Opportunity

The cloud computing market was worth over $500 billion in 2023 and is expected to grow to approximately $2.3 trillion by 2032, which includes IaaS, PaaS, and SaaS.

More and more businesses are moving to the cloud with cloud workloads making up 75% of workloads in 1 out of every 5 organizations, and 39% already run over 50% of their workloads in the cloud. These numbers are expected to continue rising.

One of the fastest growing segments is infrastructure as a service, as many companies are in need of computing resources such as CPUs, GPUs, and servers to fuel artificial intelligence and machine learning applications.

There has been a shortage of necessary hardware initially started by COVID supply-chain issues and difficulty of manufacturers to keep pace with demand as technology evolves.

Additionally, current resources aren’t being used efficiently, with companies’ actual server usage sometimes representing approximately 40% of peak capacity, and resources sitting idle a third of the time. The inefficient use of resources has compounded the effects of inadequate hardware supply and has helped fuel market concentration among the largest companies who can afford to spend more.

The cloud infrastructure services market is dominated by the “big three,” Amazon, Microsoft, and Google. Q1 saw approximately $76 billion in cloud infrastructure revenues, and together the big three made up approximately two-thirds of the market.

Due to their market dominance, they are able to charge customers much higher prices as they gate keep resources. According to a 2024 Cloud Zero survey, 58% of companies reported that their cloud costs are too high with 14% citing that they are “way too high,” a 27% increase from the 2022 survey.

As a result, companies are beginning to look for other solutions for their cloud resources including exploring decentralized models as a way to cheaply scale.

Nuco.Cloud

Nuco.Cloud is a decentralized cloud solution that taps into enterprise data centers and individual users’ devices to offer scalable and cheap computing power around the globe. Nuco.Cloud was conceptualized in 2017 by Tobias Adler, Dr. Mathias Wilhelm, and Mike Storm.

In 2018 Nuco.Cloud received support from BAFA (Federal Office of Economics and Export Control in Germany), becoming the first blockchain project in Germany to receive public funding. In 2020, Nuco.Cloud completed its ICO where it raised €732k at a €4 million valuation.

Nuco.Cloud has three products that work in conjunction:

• PRO
• GO
• Skynet

PRO / GO

Nuco.Cloud PRO is Nuco’s enterprise solution that taps into premier data centers worldwide. Nuco.Cloud currently has 21 global data centers onboarded, although the exact amount of FLOPS capacity has not been disclosed yet. PRO is currently in its VIP Beta phase, with full launch planned for the end of this month.

PRO offers advanced filtering, dedicated virtual servers, security at the data center level, software to apply for government subsidies, and hosting and storage services.

Nuco.Cloud GO is a decentralized compute network in which individuals can use their personal devices to offer computing services. It is similar to other compute networks, such as Akash and Render. GO’s infrastructure is based on the Berkely Open Infrastructure for Network Computing (BOINC), a high-performance volunteer computing platform developed at the University of California, Berkeley. BOINC is one of the first decentralized compute projects in history (2002), and currently has almost 38,000 participants, averaging 12.85 petaFLOPS of computations every 24 hours.

SKYNET

SKYNET is Nuco.Cloud’s flagship product and claims to be the world’s first decentralized mesh hyperscaler, offering unparalleled compute power at a fraction of the cost of centralized competitors.

By leveraging enterprise data centers from its PRO product and individual compute resources from GO, SKYNET swiftly scales computational resources to meet demand while distributing the workload across various global operations. SKYNET delivers a robust computing solution that can handle the most complex and data-intensive tasks.

SKYNET is a hyperscale cloud solution, which is a specific type of cloud service that contains a large network of datacenters able to provide enterprise-level services to large user bases. Hyperscale clouds dominate market share with large technology companies being the main providers. Hyperscale services have been growing in market share since 2017 and are expected to continue growing in proportion to total cloud loads, with owned and leased hyperscale capacity becoming the largest categories.

SKYNET’s hyperscale mesh network pools vast computing resources, optimizing resource availability, leading to large cost savings for cloud users.

SKYNET is a real differentiator compared to other decentralized compute networks because it’s not solely targeting individuals or enterprise data resources. As an aggregator of compute resources, Nuco.Cloud is less of a bet on a specific decentralized provider, and more of a bet on the overall demand of global compute resources. As one of the only decentralized hyperscale solutions, Nuco.Cloud is well positioned to compete with both centralized and decentralized providers.

In theory, Nuco could onboard Akash or Render into their network, bringing further resources into their mesh network, or on the centralized side, if Amazon or Microsoft had excess capacity, they could offer it up through SKYNET. Nuco.Cloud can enhance its competitors’ business models as a way for them to offload unused capacity while expanding Nuco’s reach. Nuco already has 23 enterprise data centers onboarded to PRO along with customers ready to utilize Nuco’s services.

Tokenomics

Nuco.cloud operates on Ethereum and Telos. NCDT is the ERC20 token and NUCO is the Telos version of the token. They are bridgeable at a 1:1 ratio. In essence, NUCO is just a wrapped version of NCDT on Telos.

NCDT 0.17% has a fixed total supply of 50 million tokens:

• 50% was put in circulation at genesis.
• 25% is earmarked for staking rewards, marketing, and ecosystem development.
• 25% is the company’s reserve which was locked in a vesting contract in January, held with a German Token Custodian with a BaFin Custodian license.

The current circulating supply is 33.51 million, meaning approximately two-thirds of total supply is circulating with 25% locked in the company vesting contract. At a price of $0.36, Nuco has a circulating market cap of $12.2 million and an FDV of $18.2 million. NCDT is listed on Uniswap, MEXC, Digifinex, and Whitebit. Uniswap has $1.6 million in liquidity, representing a 10.4% ratio of liquidity to circ. market cap, which is relatively high compared to most small cap tokens.

NCDT can be used as a gateway to Nuco services with customers who pay for cloud services in NCDT receive a 20% discount compared to fiat payment. When paying in NCDT, 70% goes to the miner (compute provider) and 30% goes to Nuco.Cloud.

Value Potential

Nuco.Cloud operates in an enormous industry and if it can execute on its roadmap, it has massive potential for growth. Since its products are still in development phases, using adoption or usage metrics to form a valuation is not applicable.

Instead, it is more relevant to draw awareness to how big the opportunity ahead of Nuco.Cloud is, and the implications capturing a small sliver of the market can have on NCDT. As mentioned earlier in this report, Q1 cloud infrastructure service revenues were approximately $76 billion, or $304 billion annualized. Below is a visual of varying scenarios of the potential buying pressure of NCDT based on different percentages of cloud market share and assuming 50% of customers choose to pay via NCDT.

Given the global demand for cloud services, Nuco.Cloud’s potential is extremely large. Capturing a 0.10% market share with half of customers choosing to pay with NCDT would result in $121.6 million in buying pressure after accounting for the 20% discount offered to NCDT purchasers, which is equal to approximately 10x Nuco’s current market capitalization.

The above scenario only accounts for 2024 cloud revenues. As initially outlined in this report, the cloud market is expected to grow rapidly over the next decade to a multi trillion-dollar market. As Nuco’s products go live and demand for cloud services continues to grow, Nuco may only need to capture an even smaller percentage of the market to have the same amount of buying pressure.

Additionally, with a 20% discount offered to SKYNET clients choosing to pay in NCDT, it’s likely that more than 50% of customers take advantage of the opportunity for cheaper resources.

By integrating different providers and connecting them via its mesh network, Nuco.Cloud is better positioned to remain relevant in the sector and continually add capacity to its network while also efficiently routing resources. Nuco’s differentiation in diversifying the supply side among enterprises and individuals should lead to lower customer costs and potentially more significant market penetration than simulated above.

Roadmap

Nuco.Cloud has just underwent a rebranding and its PRO product is in its VIP testing phase, accumulating feedback from businesses before launching mainnet. After PRO goes live, Nuco plans to expand its network of data centers before launching GO and SKYNET in Q3-Q4. Nuco also plans to target VC funding to help with its exapansion and pursue listings on top three exchanges.

Looking into 2025, Nuco will be focused on scaling its operations with additional tools, team expansion, and further partnerships.

Risks

There are a lot of decentralized cloud providers that exist already, and everyone is competing for the same piece of the pie. Competitors may execute their business models better or have a superior product. There are also projects that are further along in their roadmap than Nuco.Cloud is. With that said, Nuco already has 23 data centers onboarded to their platform, which is a promising figure. However, the exact amount of computational power they can provide is not yet clear.

Amazon, Microsoft, and Google currently dominate the cloud space, and there is a reason for that. They are all multi-trillion-dollar enterprises with a vast array of resources, capital, and business connections. Due to their current advantages, it is possible that they will continue to eat up market share.

One concern is the concentration of tokens in the top nine wallets (not including the company reserve). Approximately 39% of supply sits in the top nine wallets, but after examining the wallets, two are LP contracts, one is MEXC’s wallet, three (including top two holders) haven’t touched any tokens in approximately three years, and the remaining three have sold a marginal amount in the last few months with no other transactions for 3-4 years. It’s likely the few non-LP ones are team members or long-term holders with a strong belief in the project’s future. If NCDT sees significant appreciation, the risk of these wallets selling increases, but at the current juncture doesn’t present an overwhelmingly large risk.

Conclusion

Nuco.Cloud represents an investment opportunity with asymmetric upside within the burgeoning cloud computing market. With the industry’s projected growth from $500 billion in 2023 to approximately $2.3 trillion by 2032, the demand for scalable and cost-effective cloud solutions is set to rise significantly. Nuco.Cloud’s product suite, including PRO, GO, and the flagship SKYNET, differentiates itself through innovative aggregation of compute networks. This strategy not only enhances scalability and efficiency but also offers potential cost savings compared to traditional competitors, providing a compelling alternative for businesses seeking flexible and economical cloud services. The potential buying pressure on NCDT, driven by even modest market share capture, underscores the substantial growth potential for Nuco.Cloud’s valuation.