What You Need To Know About The Telegram Open Network
By: Shaun Newsum
Tags: Bitcoin, Blockchain, ICO, Telegram, Insights

By now, if you’ve spent any time researching and investing in ICOs you’ve probably heard of the upcoming Telegram ICO that had plans to raise a colossal amount of money. Referred to as “2018’s biggest token sale” by Coindesk, the ICO has gained a significant amount of attention from cryptocurrency media for several reasons:

Telegram already has existing network effects (e.g. they have a significant number of users)

The ICO has seemingly already raised a massive amount of money, more than any other ICO. Tech Crunch has reported that an estimated $1.7 billion has already been raised from private investors.

Telegram’s founder, Pavel Durov, already has a significant amount of credibility even before founding Telegram. He founded Russia’s largest social network VK and sold his stake in the company in 2014 for a significant sum of money.

With all the hubbub around the Telegram ICO, we thought it’d be best to provide people who are interested in learning more about the ICO an overview of it. There are several benefits and several limits to the ICO. This article will explore that in further detail.

To understand the Telegram ICO, however, it’s important to first understand what Telegram is in the first place so that you can understand why the ICO has gotten so much attention.

What is Telegram?

Telegram is the brainchild of Russian entrepreneur Pavel Durov. Before Telegram, Durov created Russia’s most used social networking website VK before being ousted as CEO of the company in 2014. Durov then went on to create Telegram.

Telegram is an incredibly popular encrypted messenger app, which Durov refers to as “hack-proof”. Latest reports of Telegram estimate the number of users of the app to be around 180 million people, according to Bloomberg. 40 million of those users are from Iran alone — which makes sense, given the fact that the entire purpose of Telegram is to allow for secret communication between people. Telegram would probably be especially popular in countries with restrictive governments that punish dissent and dissidents.

For example, Russia has taken significant measures to block access to Telegram according to The Verge. This resulted in blocking 50 internet VPN services and blocking 15.8 million IPs on Amazon and Google cloud platforms.

Telegram is still seeing massive amounts of growth; the app is acquiring approximately half a million users a day. Durov appears to be steadfast in ensuring the privacy of many things surrounding Telegram. The locations of Telegram’s servers are unknown, as well as the names of many of Telegram’s employees. Durov also refuses to let Telegram to be bought out by a larger company. He told Bloomberg, “Even for $20 billion, [Telegram is] not for sale.”

What’s the Telegram ICO about?

Telegram has plans to build what it calls the TON — Telegram Open Network. According to Tech Crunch, TON would be a blockchain-based platform that extends its messaging app to include a number of different services including:

Distributed file storage akin to Filecoin

A proxy service for creating decentralized VPN services and TOR-like secure browsing environments based on the blockchain

Services for decentralized apps, smart contracts and decentralized web browsing experiences

Payments for micropayments and peer-to-peer transactions

As stated earlier, TON has already raised more money than any other ICO in 2018 ($1.7 billion) all from private investors alone. This is despite the fact that the original TON whitepaper stated that it planned to raise only $1.2 billion through both an invite-only private pre-sale and public ICO.

However, it seems as though Telegram has decided to cancel the public portion of the ICO completely. There are conflicting stories as to why this might’ve been the case, but one reason that stands out is that Telegram had already raised enough money for TON. Extending the ICO to the public would invite significant regulatory scrutiny from governing bodies such as the SEC.

So what does this mean for most investors who didn’t get access to the ICO? For one, it means that they won’t have access to Telegram’s Gram token until it gets released on cryptocurrency exchanges.

By the time the token gets released on exchanges, chances are it’ll have a significantly higher valuation than it currently does right now. According to Tech Crunch, a secondary market outside of cryptocurrency exchanges has already been created for buying and selling the token. For example, one investor who acquired a large batch of tokens at $0.37 is seeking those same tokens for $1.30. That’s an over 300% return for a token that hasn’t even been listed on exchanges yet! Considering that the current crytocurrency market is considered by many to be in a “bear” cycle, that sort of return is massive.

Although the Telegram team is aware of these secondary markets popping up to trade their token, they claim that there is nothing that they can do about it because the ICOs are not yet regulated and they are not violating any laws.

So what are the downside of TON?

Despite the hype surrounding the token sale for TON, it has also received some significant criticisms from institutional investors and analysts. Charles Noyes, principal at Pantera Capital, has referred to TON as “600 million TONs of crap”.

In an article, Noyes states “Telegram is a nice messenger app but it is neither as secure nor as trusted as Signal… Telegram/TON’s 132 page whitepaper says nothing substantial about the hard parts of designing a decentralized protocol. It is essentially a wishlist of things they want to have, and how it will work assuming that their wishlist doesn’t crash and burn.”

If that wasn’t bad enough, MIT Technology Review stated that “The encrypted messaging company’s plan is bold, but short on details… There are no details clarifying how tokens will be distributed, how the network will make decisions and handle disagreements, and how much control the company will maintain over those processes… although Telegram’s blockchain dream may make sense at first glance, many cryptocurrency experts will be skeptical until the company clarifies how it intends to solve some big technical and economic challenges.”

It seems that well-known VC funds are divided over the ICO. According to Recode, Andreessen Horowitz and Union Square Ventures decided not to invest in the Telegram ICO. In contrast, also well-known funds Sequoia and Benchmark decided to participate in the Telegram ICO.

Another potential downside to the Telegram ICO is that it has already seemingly raised a significant amount of money for TON. This means that the token will probably be at an inflated valuation by the time it reaches official exchanges. Many funds could decide to sell their tokens as soon as the token hits massive exchanges in order to realize a relatively safe profit, meaning that people who buy on the exchange would be left holding the metaphorical investment bag.

In Conclusion

There is an incredible amount of attention surrounding the Telegram ICO because of its founder, the amount of money it has raised, and the grand claims that the ICO whitepaper claims regarding what the TON platform will be able to do.

There are definitely some benefits that the Telegram ICO has over other ICOs, such as a founder who already has experience running a large company as well as the network effects that Telegram already has. The Telegram team definitely has credibility in running and managing successful projects.

At the same time, there are also some legitimate criticisms of the Telegram ICO. Critics say that the whitepaper is light on technical details and doesn’t explain how it’ll accomplish everything that it sets out to do. Furthermore, critics say that the Telegram team has raised much more money than necessary, and is taking advantage of the fact that people want to get involved with anything relating to Telegram. This could lead to an inflated valuation and cause retail investors to be left holding the bag

Ultimately, I’d recommend waiting until more information is released for the TON token to see if the team has a technical plan to implement everything that they’ve outlined in their whitepaper.