In 2017, cryptocurrency ventures raised almost $4 billion in initial coin offerings. Now, the messaging service Telegram Group Inc is planning to launch biggest ICO ever. It expects to receive $2.55 billion in 3 rounds of funding, according to published documents.
1. What is different about Telegram?
In contrast with the majority of other ICOs, Telegram is an encrypted messages’ provider that is already very popular within the cryptocurrency community. It claims more than 170 million users and it has registered its ICO with the Exchange Commission and U.S. Securities.
2. Why is the company doing an ICO?
Pavel Durov, the Telegram’s founder wants to gather money to expand and compete with greater rivals that dominate the market such as Facebook, Messenger, and WhatsApp. Further, he claimed that he will keep control of the company.
3. What does Telegram offer?
Mr. Durov wants to create a bigger, new blockchain platform and then implement a mass-market cryptocurrency to run on the system that will be named the Telegram Open Network. He is using the ICO to sell the digital coins called Grams for use within the messaging application, enabling payments that leave not many traces of identity. The new network plans to include storage services, a digital wallet, a proxy layer to hide identity, a payments channel and an applications platform. Also, the plan is that following year, users can trade Grams for fiat currencies.
4. What is the appeal?
Telegram’s next-generation network anticipates clearing millions of transactions per second (in comparison to 7 to 15 per second for cryptocurrency market leaders Ethereum and Bitcoin) and potentially to challenge Mastercard and Visa as a mainstream network of payments. The firm priced Grams at $0.38 in the first round of the ICO, $1.33 in its second round and may price higher at the final round.
5. How is the ICO going?
In its first round last month, Mr. Durov raised $850 million from venture capital funds, and he is expecting another $850 million in each of the remaining rounds in March and possibly June. Telegram has been offering the ICO only privately so far, to accredited investors in the U.S.
6. Who is skeptical about the offer?
Several long-time crypto investors are not convinced that Telegram can fulfill its promises and have passed on the offer. The technical white paper of the company does not add anything to blockchain research that would convince it can face problems that even major live projects such as Ethereum, cannot resolve.
7. Why is Telegram working through the SEC?
The SEC and other regulators are cracking down on many ICOs, claiming that they are disguised securities offerings. It has warned that the ICO market of the U.S may be full of fraud. Telegram is trying to construct a mainstream product, so it files disclosures with the SEC.
8. What are the risks?
The company’s developers may fail to build a superior blockchain platform with very fast transactions. Also, National governments may introduce legislation, restricting digital coins transactions. If Gram fails to evolve to a mass-market cryptocurrency, the investors could end up losing a large portion of their investment.