When people with stratospheric levels of risk tolerance - e.g. those who invest in ICOs for a living - are dazed and confused - look out. That’s what’s up with the Telegram ICO - the largest in history by a factor of 10, and the most hyped of 2018.
It’s a fitting irony that the super-secret messaging app which has become the dominant chat-hub for the crypto-elite has now itself become the highest-priced & most chatted-about ICO in history.
The Whole Shebang
What’s now on offer to early investors, if you believe the hype, at a price tag that is rapidly approaching the $2 billion mark, is nothing less than the whole shebang - Telegram Open Network (TON), a completely decentralized online experience. An entire family of blockchains from scratch that will create a new virtual world of commerce without all the bots tracking your every move and the corporate behemoths collecting and selling your personal data.
It’s an audacious goal considering there’s not even an alpha version yet, and CEO Pavel Durov, though provably adept at building social networks, has yet to show he can deliver on a massive network of blockchains with all their attendant infrastructure, encryption, and governance issues.
Long On Hyperbole
There are charges that Telegram’s technical whitepaper is long on hyperbole (“millions of transactions per second”) and short on detail, that its homegrown encryption algorithms have yet to be rigorously tested, and even that the ICO is just a cash-grab to keep the company afloat after Durov burned through his $300 million VKontakte proceeds.
$850 Million Pre-Pre-Sale
None of that has deterred Durov in the least as he was able to convince some of Silicon Valley’s biggest venture capital firms, including Google backer Kleiner Perkins, Sequoia Capital, and Uber investor Benchmark, to pony up $850 million in a pre-presale. Now he’s trying to raise even more money from accredited investors before the public ICO. Estimates including the crowd sale go as high as $2.55 billion.
Owning The Crypto-Chat Space
Telegram’s messaging app is utilized by most ICO projects, and its group feature is particularly popular among crypto watchers. Since it owns the crypto-chat space, and boasts 200 million users, it would seem to check all the boxes as the springboard for the decentralization of the online experience.
But in an interesting twist, although several large traditional VC firms have signed on, it seems that seasoned crypto investors are steering clear.
Charles Noyes of Pantera Capital, who passed on the deal, described Telegram’s whitepaper as "essentially a wishlist of things they want to have, and how it will work assuming that their wishlist doesn't crash and burn.”
Out Of Whack
Andreessen Horowitz and Union Square Ventures, both of which made early bets in the crypto space, have also demurred, and Travis Scher, vice president of investments at Digital Currency Group in New York said his firm isn't investing because "the numbers are totally out of whack.”
Spencer Bogart, a partner at Blockchain Capital, one of the first crypto-venture firms had an interesting take on this phenomenon - FOMO.
"It was an absurd valuation for something that's effectively field stage”, said Bogart, going on to speculate that traditional firms are buying the pitch because they missed the initial frenzy and are feeling the pressure to get in on crypto-mania.
Emin Gün Sirer, Cornell professor and co-director of the Initiative for Cryptocurrencies and Contracts noted the inherent contradiction between the vision of a decentralized internet emerging from a network of blockchains and Telegram’s current business model - "Telegram ICO’s appeal stems from its reach to 200 million users, and its central vision over the future of the platform. If the owner folded, there would be little value to what remains. So their adoption of a blockchain, in fact, a whole family of blockchains, seems spurious.”
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