In the cryptocurrency era, Telegram is the social media platform of choice for the vibrant and growing coin communities. The instant messaging platform has hundreds of millions of users, making it one of the largest messaging platforms in the world.
This popularity is part of the general global trend of the widespread use of instant messaging apps. To date, over 70 billion messages have been sent by more than 200 million active users.
As such, Telegram has the prominence and user base to properly dive into cryptocurrency. Telegram endears itself to crypto users because of its superior privacy and security. To capitalize on this popularity, Telegram saw an opportunity for a blockchain cryptocurrency network.
Telegram, being the first widely used social network to adopt crypto and blockchain, will likely draw in many more people to the space.
Let’s first take a brief look at Telegram’s history before exploring the Telegram Open Network.
The History of the Telegram Project
Telegram was founded in 2013 by Pavel Durov, working together with his brother Dr. Nikolai Durov. Nikolai and Pavel also founded VKontakte, Russia’s largest social network.
Telegram allows users to send voice messages, photos, videos, and files of all types as well as form groups of up to 200,000 members. By 2018, Telegram had attracted over 200 million users thanks to its superior features, seeing 3 million new users a day in 2019 following network outages on Facebook and Messenger in early 2019, according to CEO Pavel Durov. In terms of security, Telegram uses a three-layer encryption system, while WhatsApp only uses a two-layer encryption system. The security and commitment to decentralization make Telegram attractive to millions of crypto enthusiasts across the world.
Telegram Messenger, LLC. is based in Dubai, with its headquarters shifting from time to time. The company takes an uncompromising position on privacy and security. To achieve high-level security, Telegram uses distributed server infrastructure across multiple countries. This distribution guarantees a high level of decentralization that has resulted in pushback from certain governments.
In 2018, Russia blocked Telegram on account of its failure to provide certain information to the country’s security agencies.
Telegram Open Network
Telegram Open Network (TON Network) is a blockchain project that aims to create a fast, secure, and scalable ecosystem capable of handling millions of transactions per second.
Pavel’s goal was to build a platform that disrupts the decentralized application space by leveraging Telegram’s wide user base and satisfactorily competing with Ethereum by eventually launching a scalable, fast, and secure blockchain network. Understandably, TON became arguably the most anticipated blockchain project of all time.
Notably, the Telegram Open Network showcases a next-generation blockchain that offers features as dynamic sharding, “tight coupling” for blockchain interoperability, and multichain networks.
The platform promises the speed and scalability that are important for the mass adoption of cryptocurrency. Through TON, Telegram users will be able to buy, transfer, and store value in ID-verifiable wallets facilitated by the GRAM coin.
GRAM, like ETH and BTC, will be subject to market forces and will fluctuate according to demand. Moreover, the TON network intends to add digital payments, file storage, and censorship-proof browsing.
In summary, Telegram Open Network offers a blockchain that:
- Is fast
- Is secure
- Uses a scalable Byzantine Fault Tolerant Proof of Stake (BFT PoS) consensus mechanism
- Is capable of handling millions of transactions per second
In terms of fulfilling the project’s goals, the TON mainnet will be a peer-to-peer network with a distributed database fusing together the following elements:
- A domain name system (DNS) to generate domain names in a human-readable format
- A distributed hash-table
- A proxy for node privacy
- An interface for external integration
Telegram Open Network ICO
In 2018, the Telegram Open Network completed a blockbuster ICO that raised about $1.7 billion by selling GRAM tokens to accredited investors. Accreditation means that the investors who bought the Telegram Open Network coin needed to have a certain amount of capital to proceed and had to submit their personal details.
Interestingly, in early 2018, Telegram sold almost half of its investor-allocated tokens to 180 investors. In the first phase of the ICO, each token was available at $0.38, and that figure rose to $1.33 in the second phase.
So, what is the GRAM coin? The GRAM token is the native utility token of the TON network. Upon the project’s successful launch, GRAM will serve as the principal cryptocurrency for the TON ecosystem and for external use.
GRAM tokens will be used to pay for services on TON Network dApps, as commissions for TON node validators, and as voting power capital for protocol changes, among other uses in the TON network.
There will be 5 billion GRAM tokens, and of all those in circulation, Telegram will retain 52%. Roughly 2.89 billion, or 44%, were pre-sold to institutional investors for $1.7 billion in 2018, while 4% has been reserved by the team for development.
The TON network is scheduled to release its first GRAM tokens on October 31, 2019.
Liquid and GRAM Asia
GRAM Asia is the largest holder of GRAM tokens from Asia. Before this public sale, the only GRAM token sales had been in the form of private sales. The GRAM token sale on Liquid ended on July 12, 2019. There were 12.5 million GRAM tokens available for investors, and USD and the stablecoin USDC were the only accepted currencies.
Liquid got the GRAM tokens for the public sale from South Korea’s GRAM Asia. On August 30, Liquid announced a wallet address that contains $4,123,116.76 worth of the USDC stablecoin where the funds will rest until the tokens are released. GRAM Asia and an unidentified third-party guaranteed the delivery of GRAM tokens to Liquid.
Presently – and this is understandable – investors are keenly looking at whether Telegram and the respective sellers can deliver the GRAM tokens by October 31. The first tranche will be released three months after the launch of the TON mainnet. The purchased tokens will be released in four equal tranches spanning 18 months after TON mainnet launch.
If GRAM Asia is unable to deliver the GRAM tokens, all contributions beyond what they can issue will be refunded in full in USDC from the segregated wallet where buyer funds are stored in an escrow account.
During the token sale, Liquid intended to enforce KYC and AML requirements for compliance. Furthermore, the public crowd sale was not available to users in select countries, including the USA.
The October 31 Release Date and Challenges
Initially, the expected release date was set for Oct 31, 2019. All was in motion until Telegram ran into major regulatory hurdles in its mission to actualize the TON network. At the moment, those looking to buy Telegram Open Network coin will be dismayed to learn that the mainnet may not launch before Oct 31 after all.
Let’s recap the process that led to this moment:
After its successful ICO in early 2018, TON adopted a roadmap to transform the Telegram Open Network into a self-reliant blockchain ecosystem known as The Open Network in 2021.
The TON network had an extensive roadmap to ramp up operations.
Here are the major events in the recent past:
- Q2 2017: Beginning of TON development.
- May 2018: Beginning of TON platform development.
- October 2018: Beginning of closed platform testing.
- November 2018: Closed testing of a stable version of the TON token.
- January 2019: Closed pre-crowd sale.
Telegram has taken a more assertive role in the past two months to fulfill its mission. Telegram released the TON network code in early September for the community to try out full nodes.
This code release will give TON users insights into the Telegram network. Moreover, Telegram confirmed its registration with the SEC for the project’s SAFT (simple agreement for future tokens) a year ago.
However, the SEC has been investigating whether the TON ICO violated US securities laws. This scrutiny is because the SEC alleges that upon resale, GRAM tokens become securities in their own right. The investigation and subsequent lawsuit surrounding the alleged securities law violations in the USA has created a dark cloud around the planned token sale on Oct 31, 2019.
The US SEC Investigation
What seemed so certain months ago now comes with a degree of uncertainty. Most concerning is the recent statement by the US Securities and Exchange Commission (SEC) on the legality and legitimacy of the TON Network ICO.
The SEC, which has exterritorial privilege, announced on Oct 11, 2019, that it had filed an emergency restraining order against the Telegram Group and its subsidiary TON Issuer for their $1.7 billion token sale.
The TON network sold 2.9 billion GRAM tokens at a discounted price to 171 initial purchasers. Significantly, 39 American investors bought over 1 billion GRAM. Among the prominent investors was the American VC Benchmark and Lightspeed Capital.
The SEC is making the case that the token sale was illegal. This restraining order will prevent Telegram from selling or otherwise distributing its GRAM tokens within the US. The USA is a very important market for Telegram, and this announcement is extremely consequential to GRAM’s worth.
Telegram intends to deliver on the public crowd sale by Oct 31, 2019. The SEC alleges that the TON network failed to register its GRAM tokens as securities, a violation of the Securities Act of 1933.
Indeed, it is curious why the SEC waited this close to the token sale to strike, since Telegram notified the SEC of the token offering over a year ago in compliance with Regulation D. It is possible that the regulator is acting now because the TON Network has little time to organize its defense.
If the SEC maintains this hardline and the circuit courts uphold this stance, the worst-case scenario is that Telegram will have to pay back American investors and incur large fines for violating the law.
It will also be bad news for international investors. While they will receive part of their investment, GRAM prices will probably free fall, causing more loses.
Incidentally, this action comes in the wake of the SEC settling with Block.One, the company behind the EOS token. Even though Block.One raised $4 billion, it only paid $24 million to avoid registering as a security. This is proof that the SEC is amenable, but it is still difficult to get insights on the Telegram network’s plans.
In its scuffle with the US SEC, Telegram has announced that it is pushing the TON launch date back from Oct 31, 2019, to April 30, 2020. In an email sent to the investors who participated in the second round of the GRAM token sale, Telegram explained that its run-in with the US regulator had made the Oct 31 launch untenable.
They are now proposing an extension “in order to provide additional time to resolve the SEC’s lawsuit and work with other governmental authorities in advance of the launch of the TON network.” Second-round investors have until Oct 23, 2019, to approve the extension. If they do not consent, then they will receive 77% of their initial investment.