Telegram is disrupting the cryptocurrency world with its massive ICO, raising a whopping sum of $1.7 billion, making it the highest ICO yet, with tongues waggling in the crypto sector. It initially raised $850 million in mid-February 2018, before raising an additional $850 million to bring the figure to $1.7 billion. Investors seem to be interested in Telegram as the price Bitcoin is plummeting disturbingly in the first quarter of 2018.
Telegram, a secure messaging service, is poised to establish the first mass-market cryptocurrency by creating an avenue that provides a fast and inherently scalable multi-blockchain architecture.
Although the Telegram looks like WhatsApp, the difference between this messaging app and WhatsApp is the strict emphasis on privacy, whereby users can have conversations in secret chats. The app was launched in 2013, and in 2018, it boasts of having 180 million users. Telegram also supports larger groups up to ( 10000) users and provides a sleek platform for building web APIs around it.
Pre ICO Campaign
Telegram which is a well-known encrypted messaging app used to exchange messages and media files garnered a lot of attention in 2017 due to its prompt responsiveness, commendable security, and simple user interface. It later considered launching its own blockchain platform and an associated cryptocurrency. The platform to be launched was going to be called TON (Telegram Open Network) with the currency being named “grams”.
Earlier in February 2018, Telegram raised the sum of $850 million in its first pre-ICO sale, although they had a target of $1.2 billion. Later that month, they raised the sum of $850 million in its second pre-ICO sale, which came to a total of $1.7 billion, exceeding the $1.2 billion mark.
The amount raised so far is 2018’s biggest token sale. With the massive success, however, Telegram seems to be tight-lipped, and the information is gotten from leaked sources.
According to a Form D disclosure file with the Securities and Exchange Commission, Telegram says that the additional $850 million raised were from 94 investors, which brought about $1.7 billion. It does not seem to rest on this figure because it might just pursue one or more offerings in addition to the previous sales.
In late December 2017, it was reported that Telegram was seeking to do some kind of ICO come 2018. Later on, reports about its plans started to seep out, with its technical ambitions seen as broad for the Telegram Open Network (TON). There were also promises of super fast payments and micropayments using mobile devices, with negligible transaction fees.
The Telegram team, however, intend to use the funds to develop the TON, which is an ambitious blockchain that is meant to decentralize multiple facets of digital communication, which can range from file sharing to browsing transactions. The proceeds will also be used for the development and maintenance of Telegram Messenger.
The Pros and Cons
As successful as the Telegram’s pre-ICO sale has been, there is a sprinkle of people who believe that its activities are questionable because Telegram is yet to recruit a team and build the platform necessary to launch the TON coin. The group of people advises investors and crypto enthusiasts to tread with caution as regards the Telegram token. While some people claim that it’s all smoke and dust, some others believe that it is a wonderful opportunity to invest in a platform that offers communication and commerce. Below are some of the Pros and Cons of investing in Telegram’s ICO.
- Telegram is seen as one of the most popular encrypted messaging platforms with 200M monthly active users. Although this is significantly below Facebook and WhatsApp, it is enough for a standalone messaging platform. According to ICO Whitelists, 99% of ICOs use Telegram to communicate with prospective investors, making it the most used messaging app for many communities in the cryptocurrency space.
- The platform’s cryptocurrency, TON, is said to be able to be used for real transactions thereby allowing micropayments between users and businesses all over the world. This is unlike the BTC that is beset with price volatility, high fees, and difficult processing. Due to all these, the BTC is now primarily being used as a store of value.
- The Telegram founders, Pavel and Nikolai Durov, are two brothers who are seasoned entrepreneurs. The previously founded VKontakte (VK) in October 2006, which is Russia’s largest social network. In 2014, VK was acquired by Mail.RU in 2014 that valued the company at $3 billion. The Durov team are seasoned in consumer technology, consumer platform, and building and scaling. Their success in other projects speaks volume about their ability to handle obstacles and maximize opportunities.
- Another thing that makes the Telegram ICO worth its salt is that it has liquidity status. Investors will receive tokens in December 2018. They will be subject to a lock-up period between 3-18 months. Even at the longest end of this range, investors can liquidate their stake significantly earlier than a normal venture investment. The liquidity status has also enabled some investors to flip their ICO allocation early, thereby gaining in the process.
- One thing that makes the Telegram stand out is its unique form of crypto exposure. While the TON itself is a coin, investors are exposed to the cryptocurrency market in general, as Telegram is one of the main sources of communication. The exposure, however, is diverse, as every coin has a Telegram channel.
- Its size of fundraising is called into question by critics. In a very short period of time, it was able to raise $1.7 billion through two pre-ICO sales. It’s incredibly fast, compared to big fast-growing consumer industries like Facebook who took seven years to raise $1 billion, and Uber five years. The advent of the Telegram token has dwarfed crypto giants such as Filecoin (which raised $257 million) and Tezos (which raised $232 million). Critics see the Telegram’s size of fundraising as completely unnecessary.
- Another reason why critics are calling for caution is that there is limited crypto experience when it comes to the Telegrams platform. The Telegram founders are proficient in the social/messaging platform but have little or no experience in building blockchain platforms and they haven’t hired any high profile blockchain developer guru to lead the way. As seen on LinkedIn, no Telegram employee has any blockchain-related experience.
- Another flip side to the Telegram Token is that last year, it was reported that in 2017, Telegram burned $70 million on server expenses, security, user verification, and employee salaries; and this figure is going to increase as the team and infrastructure scale to accommodate the new blockchain platform. According to the leaked white paper, the company is planning to spend $620 million in the next four years. If there are no plans to generate revenue and expenditure continues to increase, bankruptcy may be imminent or they may be forced to raise capital at inappropriate terms.
Telegram, however, is not the first messaging platform to launch its own crypto coins; Kik and YouNow (Rize) were other messaging platforms to launch their crypto coins. Kik, an instant messaging platform was founded in 2009 and has raised over $200 million in venture funding and raised $98 million during its ICO in 2017 for its new crypto coin called Kin. Just like the TON, Kin can be used for in-app transactions. As at the time of the ICO in 2017, according to TechCrunch, Kik had approximately 15 million users, falling short of Telegram’s 100 million users.
YouNow on the other hand, is a live streaming app that launched its cryptocurrency in 2017, with an app called Rize. This app enables users to pay each other for creating content in coins called PROPS. Founded in 2011, YouNnow raised $26 million in venture funding before raising $25 million in an IC for the new PROPS platform. As at the time of the ICO, YouNow had 40 million registered users, an average of 60k in-app purchases every day, and over $5 million in quarterly virtual goods sales.
The Telegram, Kik, and YouNow, are similar in many respects.
- They have an established messaging platform available worldwide
- They plan to integrate coin for in-platform transactions
- All three messaging apps don’t have fully developed crypto platform or a built out crypto team.
The Telegraph token seems to have very promising prospects, especially with its massive pre ICO sales. With a team of seasoned individuals who are well grounded in the communication/consumer business, it is no doubt that the Telegram token will soar. Its pre ICO sales come at a time when the Bitcoin is plummeting terribly. It also comes at a time when the SEC (Securities and Exchange Commission) is very skeptical about ICOs and Tokens.
However, there is speculation, as the team isn’t well grounded in blockchain or cryptocurrency, and as such, can be a problem for investors. Critics have advised that the team bring in someone who is a cryptocurrency developer guru to lead the way. Critics have also said that the platform should create a means by which they can generate income instead of just spending, to avoid bankruptcy in the near future.
PS : There is no official Telegram ICO offering open to the public as of yet ( 4 April 2018) and any website selling tokens are scams.