The tech world is split over Telegram’s fund-raising campaign

https://www.nytimes.com/2018/03/04/technology/telegram-initial-coin-offering.html

by thmslee • 8 years ago

87 75 8 years ago

skellera• 8 years ago

Just more signs were at the end of a business cycle. Hopefully everyone is prepared for the eventual downturn but they never are.

What about Telegram explains needing to raise $1B?

snissn• 8 years ago

https://www.investopedia.com/articles/investing/032515/whats...

https://www.expressvpn.com/blog/whatsapp-vs-telegram-encrypt...

daveguy• 8 years ago

That explains why telegram might be worth over $1 billion one day (or even today).

It still doesn't explain why telegram needs $1 billion.

It also doesn't explain how any of the value of telegram is imparted to the coin itself.

Just because a coin is associated with a company doesn't make it as valuable as the company.

zanny• 8 years ago

Except Telegram is not pervasive in emerging markets like Whatsapp was, and history has demonstrated that users are very fickle with messaging apps - they aren't keeping an essential history like in social media that they cannot easily export or take with them, they are used for moment to moment conversations that are discardable, just like the apps that host them.

Even then, all that argues for is the value in buying Telegram, not in giving them more money. What the hell does an already established and functioning group chat / voice calling / semi-encrypted phone and electron desktop app need in 2018? Whatsapp was spending hundreds of millions just to acquire users with no monetization strategy for the sake of having users, same with Telegram.

I highly doubt Facebook can get any reasonable conversion ratio from Whatsapp user to Facebook regular that already wouldn't happen on its own. Having an audience is worth something, but it is not worth billions unless you are actually getting substantial value from that audience consistently.

rebuilder• 8 years ago

I haven't read much at all about the particulars as far as Telegrams ICO goes. Generally, though, I'd point out that the total sum invested in an ICO doesn't necessarily equal the sum available to the company issuing the coin. Usually, as I understand it, the ICO issuer will hold some of the coins, and sell some of them, and potentially more will be minted in accordance to the issuance schedule of the coin in question.

So in an ICO, the initial sum of tokens might be, e.g. 1,000,000 coins, with the issuer keeping, say, 300,000 coins and selling the rest. If buyers invest USD 1,000,000,000 as in this case, then very theoretically, the issuer now holds USD 300,000,000 worth of the tokens they issued. In practice, to use those funds for operational expenses (or drugs and prostitutes, as the suspicion tends to be), they need to sell the tokens on the open market, and are likely to get much less than the "nominal" value if they sell large amounts.

Again, I have no knowledge of what the particulars of Telegram's ICO are, just pointing out that they probably haven't raised USD 1B in operational funds.

atomical5• 8 years ago

I'd point out that the total sum invested in an ICO doesn't necessarily equal the sum available to the company issuing the coin.

That's exactly what it means. Circulating supply is a different story though based on lock up.

If buyers invest USD 1,000,000,000 as in this case, then very theoretically, the issuer now holds USD 300,000,000 worth of the tokens they issued.

If the buyer sends $1bn directly to Telegram for any amount of coins then Telegram now has $1bn in the bank.

pjc502• 8 years ago

Other way round: there is a huge amount of dumb money raining down in the cryptocurrency space, and Telegram have decided to put out a bucket to catch some. They're already some way ahead of the average ICO in having an actual product, a management team whose names are known and not living in non-extraditeable countries, and so on.

Y_Y• 8 years ago

In other news, pumping the value of bandwagoning shitcoins is at an all time high.

fbonetti• 8 years ago

2017 was the year of the shill.

atomical5• 8 years ago

2018 is the year of the security token -- also known as another way for VC's to raise a fund. Good luck actually getting access to the broader market of startups.

cornholio• 8 years ago

When even the most invested in the crypto bubble are skeptical, you should stay well away. This sounds like the blockchain equivalent of pets.com, the hype inflection point:

“It’s a pitch that sounds good to V.C.s that haven’t participated but makes no sense to people that have been in the space,” said Nick Tomaino, the founder of a virtual currency investment fund, 1confirmation, that didn’t invest in Telegram.
The most obvious reason to be skeptical of the project is that there is not even a prototype — just a 132-page paper promising what the system will look like one day. The Telegram team is promising to release the software late this year or next year.
What’s more, Telegram is promising to do more than any other virtual currency and to fix the intractable problems that have plagued virtual currencies like Bitcoin, such as overcoming the network’s difficulty handling all the transactions that have poured onto the network as it has become more popular.
An analyst at one virtual currency-focused hedge fund, Pantera Capital, wrote a scathing essay noting that the Telegram team has given no evidence that they will be able to solve the problems that have dogged everyone else.
“I cannot, in 132 pages, gain the slightest intuition as to how to go about proving that the hard problems it needs to solve will be solved,” the analyst, Charles Noyes, wrote about the Telegram project on Medium.

goptimize3• 8 years ago

They invested in competitors

geofft2• 8 years ago

So? Isn't that evidence that they're genuine in their belief that Telegram won't succeed?

htormey4• 8 years ago

I wouldn’t be so quick to write the telegram team off. Most of the existing players in crypto have a vested interest in seeing them fail.

On the one hand the Telegram team have a solid track record & a lot of users: They produced a high quality app that’s used by hundreds of millions of users. Also add to that the fact that more of the crypto chat related channels are on telegram.

On the other hand if you read through the white paper they put out, they give a timeline that promiss to do everything from wallets, to distributed file storage/computing/exchanges. That’s a very high bar to set without providing a lot of technical details. A leaked copy of the white paper can be read here:

https://drive.google.com/file/d/1ucUeKg_NiR8RxNAonb8Q55jZha0...

Personally I think it’s worth taking a small bet on them. The biggest problem in crypto right now is a lack of widely used consumer apps. Getting hundreds of millions of people to use an app is a harder than solving some of the distributed systems problems facing crypto right now in my book. I could see the telegram team pulling this off.

tfha• 8 years ago

You can see the telegram team pulling this off because you aren't in the crypto space. They are claiming to be able to solve open research problems that some of the best minds in the world have been studying for years, and don't have an answer to.

This isn't a matter of one startup failing where another stands a chance. The problems that Telegram is proposing they can solve aren't execution problems. They are unsolved research problems. And some of those problems (like verifiable computing) have been actively researched for decades, well pre-dating cryptocurrency and Bitcoin.

Everybody has blinders on.

ryanlol• 8 years ago

have a solid track record

They do not. Telegram still does not encrypt chats.

nopinsight• 8 years ago

If the amount of capital willing to take high risks from cryptocurrencies only increases a bit over time but more and more high-profile cryptos are launched successfully, wouldn't the capital in existing cryptos decrease, which effectively dampen down their valuations?

Obviously, this depends on the rate of incoming new capital vs successful crypo launches, but as long as the appetite for such high-volatility assets is limited, the ceiling must be hit some day. Wouldn't that then start the unwinding of crypto prices as less devouted believers increasingly sell as losses mount?

granaldo• 8 years ago

The total number of ICOs https://www.coingecko.com/en/ico happening now is just insane

And how the market dropped and correct recover in a span of less than 24 hours is beyond everyone's mind https://www.coingecko.com/en

The way to get through this is to assume that blockchain finance industry is unconventional wisdom

paulpauper• 8 years ago

but the price of a lot of coins is far , far from the jan 2018 highs

cslarson2• 8 years ago

I think many people involved in Ethereum community now believe the current ICO model to be fundamentally broken despite being the platform most of them are hosted on. Vitalik, for instance, has said "fund ideas, not teams" and proposed the DAICO model - which makes it easy for investors to move their money to whoever is most likely to get the job done. ICOs were for 2017. Hopefully they will be replaced with something superior.

paulie_a• 8 years ago

That seems counterintuitive, a team has to implement the idea. A bad idea can be successful with a good team. And yes a good idea can become successful with a bad team.

But personally I would put my money on the good team over the bad regardless of the idea

cslarson2• 8 years ago

I don't think it's that the team is not crucial to delivery, but rather that incentivising that team by giving them such an upfront, guaranteed reward is not ideal.

Taek5• 8 years ago

We've learned a lot of things about how not to do an ICO, but I don't think the model is fundamentally broken. The idea of getting to a situation where the network carries itself by the weight of so many people supporting it (like Bitcoin) I think is very powerful.

The thing that's happening with ICOs today is that we're skipping steps, over-valuing things, and making impossible promises. The largest ICOs also tend to handwave away some very substantial, long-term research problems that the general audience they are pitching to has no awareness of.

Teams get put in a position where they raise 5 years of runway with rapid growth all at once, pre-product, pre-traction. That's not a problem with the ICO model, that's just a function of the space being extremely overheated.

pjc502• 8 years ago

The purpose of ICOs is to transfer money from speculators to prospectus-writers as fast as possible. Like pre-crackdown Kickstarter, any actual product delivered is up to the goodwill of the people who now have the money.

If people wanted a structure that had some sort of accountability for non-delivery of results they'd do a share offering.

golergka6• 8 years ago

Every time crypto is discussed on HN, I amazed how few mentions of drugs are there. Bitcoin is filling, first and foremost, one single human need: to buy drugs. It's not safe from dedicated investigators, but drug USERS (not dealers) almost never find themselves targets of such investigations.

Another piece of technology that is always used for the same need is Telegram. You got drug-selling bots, channels who aggregate your local dealers, secret chats... Everybody uses this messenger, exclusively, to communicate. It doesn't matter if it's really secure or if it's just good PR – it works.

So, back to Bitcoin: it's a pain in the ass. People constantly try alternatives, even if they're even less secure (like Qiwi). Now imagine that suddenly, you can pay someone straight through Telegram, which has a reputation (doesn't matter of deserved or not) of being secure. What do you think is going to happen?

swznd2• 8 years ago

The prbolem is the drugs not the currency. Drugs dealer using dollar away before bitcoin exists, and sill using it until now. Should we worry about dollars too?

golergka6• 8 years ago

What are arguing against, exactly? I'm a pro-legalisation recreational user. Did my post look like I mean drugs as something bad?

Taek5• 8 years ago

Uh, no? Maybe in 2013, but Bitcoin is used for substantially more than that today. It keeps people alive in Venezuela. A lot of African communities are finding it to be an excellent source of stability as well.

My company has done more than $10 million in hardware sales selling cryptocurrency miners for bitcoin. Bitcoin is really the only option for us, because there's so much fraud (check, credit, etc.) that we couldn't accept another form of payment without something like 30% markup. The instant finality (well, 1-2 hour finality) of Bitcoin makes that tractable.

Several startups that I know of have also gained a ton of traction and competitive edge by switching to bitcoin for payment rails. You won't know that they use Bitcoin based on their website or based on interacting with them, but when you send money to another country, they are on the back-end transferring bitcoin, and this allows them to shave days off of their process vs. competitors using other payment rails.

Cryptocurrency services a very wide range of niches, because it offers several very substantial features that no other currency or payment option can offer. Beyond all the hype and sillyness, there is a technology that is actively changing the world and is gaining real traction every day.

atomical5• 8 years ago

Uh, no? Maybe in 2013, but Bitcoin is used for substantially more than that today. It keeps people alive in Venezuela. A lot of African communities are finding it to be an excellent source of stability as well.

There have been a lot of puff pieces written about this. Very little actual proof in numbers.

My company has done more than $10 million in hardware sales selling cryptocurrency miners for bitcoin. Bitcoin is really the only option for us, because there's so much fraud (check, credit, etc.) that we couldn't accept another form of payment without something like 30% markup. The instant finality (well, 1-2 hour finality) of Bitcoin makes that tractable.

Can you not take payments through Visa? I thought the standard was 2-3% for fees.

Several startups that I know of have also gained a ton of traction and competitive edge by switching to bitcoin for payment rails. You won't know that they use Bitcoin based on their website or based on interacting with them, but when you send money to another country, they are on the back-end transferring bitcoin, and this allows them to shave days off of their process vs. competitors using other payment rails.

There aren't many companies taking Bitcoin. The book 50 foot blockchain by David Gerard has more on this. The gist though is that often a payment processor is encourages by Bitcoin maximalists to accept Bitcoin. Months later they realize no one is using it and remove it as a payment option. Then the Bitcoin maximalists pounce and harass them.

Cryptocurrency services a very wide range of niches, because it offers several very substantial features that no other currency or payment option can offer. Beyond all the hype and sillyness, there is a technology that is actively changing the world and is gaining real traction every day.

In the niche of get rich quick it offers many features.

creato• 8 years ago

My company has done more than $10 million in hardware sales selling cryptocurrency miners for bitcoin. Bitcoin is really the only option for us, because there's so much fraud (check, credit, etc.) that we couldn't accept another form of payment without something like 30% markup. The instant finality (well, 1-2 hour finality) of Bitcoin makes that tractable.

Your disagreement with a post pointing out that criminal activity is a major driver of adoption of cryptocurrencies is "our cryptocurrency industry company can't accept any payment method other than Bitcoin due to rampant crime and fraud by cryptocurrency users"?

UncleEntity2• 8 years ago

My company has done more than $10 million in hardware sales selling cryptocurrency miners for bitcoin.

Just because they cited it in the article -- I'm sure the people who manufactured greenhouses during Tulip Mania* also made a ton of cash (and probably accepted tulips in payment, dunno?) by riding the bubble.

*not that I think bitcoin is the same as tulips.

Animats• 8 years ago

No, the real use case for Bitcoin is getting money out of China despite China's exchange controls. That's much bigger than drugs.

bdcravens3• 8 years ago

Bitcoin is filling, first and foremost, one single human need: to buy drugs.

I know no one who transacts with Bitcoin for drugs (I've been involved with Bitcoin since 2011). DNM is obviously big, but I think you overestimate drug transactions vs how many are merely speculating.

golergka6• 8 years ago

I've mined some in 2009-2010 (sold everything at about $20 sometime later), and then everyone around it was just a crypto enthusiast, yes. But none of these were "normal" people using Bitcoin for normal needs.

How many "normies" have you encountered using Bitcoin, and what do they use it for? The only case I see all the time around me is drugs. I doubt there's a single dealer in the whole city who's still accepting cash.

samstave• 8 years ago

serios question;

when i think of blockchain as it is, im not focused on “currency” as much as I am focused on accurasy - in that I am looking at blockchain asa soluition to tracability for things such as agri

so we can complain about how maybe there is hype in the blockchain space when it revolves around currency exclusively - but there are valid reasons to use it for things other than money.... thus, I like the idea of blockchain intrinsicly

changeMyView

lalaland1125• 8 years ago

You don't need a blockchain. You need something like certificate authority.

icebraining• 8 years ago

There may be, but frankly, I haven't found any. Some of them require mechanisms that the blockchain also uses (e.g. merkel trees), but I've yet to see one that truly needs a blockchain.

The only one I could maybe see is domain registration, but I doubt the cost is worth it.

geofft2• 8 years ago

"Blockchain" is not a well-defined technical term, but to the extent it has a meaning, it refers to a distributed-consensus system using a Merkle tree for tracking ownership of items and proof-of-work for avoiding Sybil attacks (and therefore double-spend).

If you don't need distributed consensus (e.g., you're fine with a centralized party maintaining the current state of the system), you don't need the above. If double-spend attacks aren't meaningful for your application (e.g., there's nothing that someone can maliciously do twice in different ways, and cause two different groups of people to believe two different, incompatible actions happen), then you don't need proof-of-work. If Sybil attacks aren't a concern (e.g., you can only use the system if you're authenticated via some external means), then you might not need proof-of-work.

For tracking ownership of physical items by known participants in a real-world economy, blockchain probably doesn't help a whole lot. Just use normal Merkle trees.

mythrwy• 8 years ago

Good. Variety is key to selection which is the basis of evolution.

johnchristopher• 8 years ago

It's really too bad because I find the telegram app really nice. Every URL I throw at it gets a nice og rendering when whatsapp is just soso. The bots are more open, the stickers are greater in numbers, etc.

thisisit• 8 years ago

Whenever someone in cryptocurrency says this:

“TON can become a VISA/Mastercard alternative for the new decentralized economy,” said a TON primer that was sent to investors. “We believe that a whole new economy saturated with goods and services sold for cryptocurrency will be born.”

run for the hills.

This is one of the most generic and regurgitated ideas in cryptocurrency. There are tons, pun intended, out there promising to be the next payment channel but have no idea on what it takes to run one.

wongarsu3• 8 years ago

It's crypto, you just write some code and it runs itself /s

kgwgk• 8 years ago

It’s most like “you take some money and run”.

driverdan• 8 years ago

It's the equivalent to a startup saying "If we only get 1% of [very large market] we'll be worth billions."

golergka6• 8 years ago

Telegram has enormous userbase that already loves the product, goes through a pain of Bitcoin every day and would switch to a better alternative in an instant.

Did anyone else who went for this idea have this resource?

luka-birsa• 8 years ago

My position with Telegram ICO is contrarian. I think it will be massively successful and actually makes sane investment right now.

Telegram is a defacto standard app for any Crypto user and integrating crypto makes total sense. Native crypto integration changes the telegram app into the largest crypto platform.

Too bad they decided to do an ICO, as it would be much better for the ecosystem to integrate Bitcoin or Eth (see status.im). But why do that when you can get a cool couple of B and roll your own.

atomical5• 8 years ago

How are they going to make money? Telegram users aren't like friends in the real world who send money to each other.

maelito• 8 years ago

You're saying the small groups or direct messages are a small fraction of the users ?

mtgx• 8 years ago

Investing in high-profile ICOs is just about the worst investment advice, similar to investing in cryptocurrencies when you hear about new records on CNN. At that point only the suckers invest, while the smart investors (like the ones who invested in the pre-sale and pre-pre-sale in Telegram) will start cashing out.

andrew-lucker• 8 years ago

What is the policy on rewriting headlines like this? Was it determined clickbait?

sopooneo• 8 years ago

I'm missing something huge here. What is the relationship between the tokens people get as part of the ICO, and the product(s) being made by the company doing the ICO?

I've heard this described as bing similar to an IPO. But in that case, you are buying part of the company. Is there any similarity here?

gruez• 8 years ago

you're not getting a stake. you're getting tokens that can be used in the new system. the idea goes that if the system succeeds, the tokens will be worth something, at which point you sell for a profit. straight up selling stake in the business is a no-no because it would run afowl of the SEC

The tech world is split over Telegram’s fund-raising campaign

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