Telegram plans multi-billion dollar ICO for chat cryptocurrencysteemCreated with Sketch.

in cryptocurrency •  last year

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Encrypted messaging startup Telegram plans to launch
its own blockchain platform and native cryptocurrency,
powering payments on its chat app and beyond.
According to multiple sources which have spoken to
TechCrunch, the “Telegram Open Network” (TON) will be
a new, ‘third generation’ blockchain with superior
capabilities, after Bitcoin and, later, Ethereum paved the
way.
The launch will be funded with an enormous Initial Coin
Offering, with forthcoming private pre-sales ranging into
the hundreds of millions, potentially making it one of the
largest ICOs to date. Demand is driven by the fact that
rather than the ICO coming from a fresh startup,
Telegram is a well-established messaging platform used
around the world.
Adopting a homegrown cryptocurrency could give
Telegram’s payment system enormous independence
from any government or bank — something Co-founder
and CEO Pavel Durov is known to covet after investors
took over his last company, Russian social network VK.
Durov has not responded to TechCrunch’s several
attempts to contact him regarding this story.
The potential for a cryptocurrency inside a widely
adopted messaging app is enormous.
With cryptocurrency powered payments inside Telegram,
users could bypass remittance fees when sending funds
across international borders, move sums of money
privately thanks to the app’s encryption, deliver
micropayments that would incur too high of credit card
fees, and more. Telegram is already the de facto
communication channel for the global cryptocurrency
community, making a natural home to its own coin and
Blockchain.

Selling a TON of cryptocurrency

Telegram is understood to be considering raising as
much as $500 million in the pre-ICO sale at a potential
total token value in the range of $3 billion to $5 billion.
However, those figures could change before the ICO,
which could come as soon as March. Those figures
would make it possibly the biggest private crypto raise to
date after Tezos, which raised over $230 million in July.
A pre-sale in an ICO is a minimum cap on investments
(sometimes with discounts) to attract big investors
(‘whales’) before a wider token sale to retail investors.
The public, retail phase of an ICO tends to raise less
because there is a long tail of people investing small
sums. But front-loading the ICO with institutional
investment inspires confidence for retail investors.
Those pre-sale investors may be required to place a
minimum buy-in of $20 million if they’re outside of
Durov’s inner circle. Sources say that the ICO will require
real fiat currency like US dollars for buy-in, not Bitcoin or
Ether as others ICOs have to date.
Top-tier institutional investment firms have expressed
interest, but Durov is said to be wary of accepting their
cash. One firm rumored to have pushed for a pre-sale
allocation is Mail.Ru Group (formerly DST), founded by
Russian emigre Yuri Milner. A spokesperson for DST did
not reply to our inquiry about this story. Interestingly,
Mail.Ru Group is the fund that ended up buying Durov’s
last company VK.

Understanding Telegram Open Network
Durov’s idea is to launch an entirely new blockchain,
using the Telegram’s 180 million users as rocket fuel to
power forward into mainstream adoption off
cryptocurrency and making Telegram, effectively, a
kingmaker of other cryptocurrencies, because of its
existing scale.
According to Telegram’s white paper that TechCrunch
has review portions of, its cryptocurrency will be called
“Gram” and could potentially gain immediate mainstream
adoption by being tied to Telegram’s chat app.
Sources say Durov has decided to combine both a
centralized and decentralized infrastructure, since a
totally decentralized network doesn’t scale as fast as one
which has some elements of centralization, hence why
Telegram needs to own its own blockchain.
Moving to a decentralized blockchain platform could kill
two birds with one stone for Telegram. As well as
creating a full-blown cryptocurrency economy inside the
app, it would also insulate it against the attacks and
accusations of nation-states such as Iran, where it now
accounts for 40% of Iran’s internet traffic but was
temporarily blocked amongst nationwide protests against
the government.
Telegram has played a delicate political balancing act to
try and retain its users in the country, shutting down
some channels for calling for the downfall of the
government, while keeping others open.
WeChat But With Crypto
With TON, Telegram aims to develop cryptocurrency-
based utility akin to WeChat, which has blossomed into
much more than a chat app and acts as default payment
mechanism for many in China.
While payments can be made very quickly in WeChat for
a variety of services, the system remains very
centralized. A decentralized platform such as TON could
offer more security and resilience.
Sources say that Telegram plans to allow users to hold
both Telegram’s currency and fiat currency in a
forthcoming wallet.
There’s also the existing developer ecosystem Telegram
has built up around it, where bots and services are
offered by third-party developers. Again, here TON could,
in theory, underly everything a developer brings to
Telegram.
Inside TON
In a 132 page white paper, Telegram has outlined a four-
stage plan:
“TON Services” will be a platform for third-party services
of any kind that enables smartphone like friendly
interfaces for decentralized apps and smart contracts.
“TON DNS” is a service for assigning human-readable
names to accounts, smart contracts services and
network nodes. With TON DNS, accessing decentralized
services could be like “viewing a website on the World
Wide Web.”
“TON Payments” is a platform for micropayments and a
micropayment channel network. It aims to be used for
“instant off-chain value transfers between users bots and
other services”. Safeguards built into the system are
designed to ensure that these transfers “are as secure as
on-chain transactions”.
The “TON Blockchain” will consist of a master chain and
2-to-the-power-of-92 accompanying blockchains. Its
most notable aspect is that it will have an “Infinite
Sharding Paradigm” to achieve scalability. Thus, TON
blockchains aim to be able to “automatically split and
merge to accommodate changes in load”. This would
mean new blocks are generated quickly and “the absence
of long queues helps keep transaction costs low, even if
some of the services using the platform become
massively popular”.
It will also consist of “Instant Hypercube Routing”
designed so the blockchain can maintain top speed even
as it grows. Its proof of stake approach will reach
consensus through a variant of the ‘Byzantine Fault
Tolerant’ protocol, again increasing speed and efficiency.
And it will also use 2-D Distributed Ledgers. This means
the TON can grow new valid blocks on top of any blocks
that were proven to be incorrect to avoid any
unnecessary forks. In other words, TON aims to be ‘self-
healing’.
TON’s third generation blockchain will be based on a
dynamic ‘proof of stake’ secured by multiple parties with
a high degree of fault tolerance. It will also handle
storage of ID, payments and smart contracts. So, instead
of relying on proof of work to create its currency,
Telegram will rely on a new, less energy-hogging way of
mining cryptocurrency than the original Bitcoin method.
The claim is that it will be capable of a vastly superior
number of transactions, around 1 million per second. In
other words, similar to the ambitions of the Polkadot
project out of Berlin — but with an installed base of 180
million people. This makes it an ‘interchain’ with so-called
‘dynamic sharding’.

Keeping Control
The white paper also makes clear that four percent of the
supply of Grams (200 million Grams) will be reserved for
Telegram’s development team with a four-year vesting
period. Telegram also plans to retain “at least 52
percent” of the entire supply of the Grams cryptocurrency
to protect it from speculative trading and maintain
flexibility. The remaining 44 percent will be sold in both
the public and private sale.
The currency will be listed on external exchanges and
used inside the Telegram app.
Timing-wise, the first quarter of this year will see the
launch of the Telegram External Secure ID, followed by an
MVP of TON. The launch of the Telegram Wallet is slated
for Q4 2018, and the creation of the TON-based economy
could launch in Q1 2019. The rest of the TON Services
would follow in Q2 2019.
Some in the crypto community remain skeptical of
TON. “I just think this is the CEO’s way of monetizing
Telegram, basically,” says Jackson Palmer, the founder
of early cryptocurrency Dogecoin.
The Brothers Durov
Durov and his brother Nikolai Durov, a mathematical
genius, were behind the creation of VK, “Russia’s
Facebook”, worth an estimated $3 billion, but were
effectively forced to sell their stake in the company by
oligarch shareholders deeply connected to the Putin-led
government. Although Pavel managed to negotiate an
exit with a large payoff, he’s known to have harbored a
resentment against outside investors ever since.
Pavel reportedly left Russia with $300 million and 2,000
Bitcoins and, after buying a citizenship in St. Kitts and
Nevis, splits his time between London, Dubai and, where
possible, Russia. Telegram’s move into crypto could give
him another shot at a massive fortune, while potentially
turning the chat app into a vast payment network
protected from government interference.

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