The popular encrypted messaging company Telegram plans to launch their blockchain, named Telegram Open Network (TON), and they have planned a massive Initial Coin Offering (ICO) of their cryptocurrency Gram, as reported earlier. New information suggests that there are multiple key questions still open with respect to this ICO.
The Telegram ICO, including private presales and the public sale, is expected to raise US $ 1.2 billion, which will be the biggest ever ICO, more than four times of the biggest so far. Naturally, the first question is why such a large ICO is being planned. It’s worth remembering that Telegram has never monetized their messaging platform as they had planned to do. The only source of their funds then has to be the personal fortune of founder Pavel Durov, and, as a matter of fact, FAQ section in their website confirms this. Is high operating expenses, amounting to $ 70 million in 2017 alone, the driving factor behind such a massive ICO, i.e. is the large fund expected to be raised from ICO going to cover for lack of revenue so far?
The second question is whether Telegram has the necessary competence to build the highly sophisticated system they have in their mind. TON will be a blockchain alright, but with certain distinguishing characteristics. Blockchain is a technology where a network of computers maintain a shared, verifiable, and permanent record of data. It is a distributed database comprised of two or more block records (referred to as “blocks”), which are linked together while adhering to a predetermined standard or protocol. Each node in a blockchain can be considered as a ledger, hence blockchain is also referred to as “Distributed Ledger Technology” (DLT). There is no centralized authority, rather, every node in the blockchain is a point of authority, and every node has the same version of information. By providing proof of work (POW), which is essentially evidence that a very significant amount of number-crunching work has taken place, and by getting consensus from the majority of the nodes in the network, a node can add a new block. This rigorous process reduces economic viability of hacking blockchain, hence, every information in blockchain is mathematically proven. However, blockchain is presently not scalable enough, since every node validates every transaction. Telegram plans several specialized technology measures to make their blockchain more scalable, two of which are as following:
- A ‘proof of stake’ consensus protocol instead of POW, where transactions will be validated by designated nodes that deposit tokens as their ‘stakes’.
- “Infinite Sharding Paradigm”: Sharding is currently used in databases to make them more efficient. In this technique, a shard is a horizontal portion of the data in the database, and each shard is stored on a separate database server instance. It helps spread the load. In case of blockchain, the overall state of the blockchain is separated into different shards with each part stored by different nodes.
With such advanced technology, Telegram plans to make their blockchain significantly faster than Bitcoin (7 transactions per second) and Ethereum (15 transactions per second). Telegram plans to make their system capable of handling 1 million transactions per second, towards their objective of making Gram a cryptocurrency for day-to-day transactions. However, experts believe that Telegram doesn’t have the necessary competence to pull off a project like this. As a matter of fact, there isn’t even an Alpha version of their product yet.
There is lingering doubt about the approach Telegram has about encryption, and cryptography experts have voiced concerns over this. They believe there are security risks inherent in Telegram’s technology, although denied by the company. This question is likely to assume renewed importance in view of the large ICO planned.
Governance is another open question. To put matters into perspective, let’s look at some of the numbers:
- The very first token in the public sale will sell for 10 cents, and each subsequent token will have a price increase of at least one-billionth of the price of last token sold.
- Participants in the private pre-sales will have access to a fixed price of US $ 0.308 per Gram, with a minimum investment requirement of US $ 20 million. This minimum investment requirement is much more than any other ICO.
- The pre-sales is expected to raise US $ 600 million, the public sale another US $ 600 million.
- As the token price increases, Telegram would bring in around US $ 14.7 billion, and the five billion Gram supply will be valued at US $ 74.21 billion.
With 52% of the Grams retained by the TON foundation, the foundation will obviously have majority voting rights under their control. For such large money at stake, and for a foundation exerting this much control, available information regarding the ICO was expected to be transparent about governance, especially on a matter as crucial as voting. Information currently available regarding the ICO does not shed enough light on the matters of governance.
The fourth question is whether the investors can agree with a long wait. Following is an outline of Telegram’s roadmap:
- Q1-2018:- secure ID launch
- Q2-2018:- Minimum Viable Product (MVP) of testing of network of TON
- Q3-2018:- Testing and security audit for TON
- Q4-2018 – stable version of TON deployed
- Q1-2019:- Telegram wallet launched
- Q1-2019:- TON-based economy is launched inside Telegram
- Q2-2019:- TON-services, a platform for third-party services that will allow smart interfaces such as mobile, storage and proxy launched
This implies that first lot of Grams will be released in December-2018, with listing on exchanges due for Q1-2019. Investors can trade their coins only in Q1-2019, which is a long wait.
With Telegram’s 180 million global user base, and the messaging app being a go-to app for the crypto community already, TON and Gram will get a large push from the existing user base. With their promise of launching a scalable blockchain, and a cryptocurrency that will be used for day-to-day payments, Telegram’s ICO can transform the cryptocurrency space, however, it is desirable for the company to address the open questions.
