From housewives in Delhi to most of Silicon Valley, Telegram is the instant messenger du jour. Whether this reporter wants to reach his mother-in-law, or the founder of a new crypto start-up, chances are they’ll be easiest to reach via the encrypted app.
Last week, the Telegram reached a record 200 million monthly users – all without having advertised once. With rival Whatsapp’s owner Facebook embroiled in a damaging row over its use of user data, it looks plausible that this growth will continue.
If Russia-born founder Pavel Durov – currently based in Dubai and now in self-imposed exile as a citizen of Saint Kitts and Nevis – sticks to his reported word, cashing out is not an option.
“Even for $20 billion, it’s not for sale,” he told Bloomberg last year.
“That’s a lifetime guarantee.”
No to Cashing Out. Yes to Coining In.
The British Virgin Islands-registered company – which keeps the location of its servers a secret, but its code open-source – is currently in the midst of the world’s largest ICO.
It raised a record-breaking $850 million last month from investors for the rights to its tokens, or virtual coins, called Grams. The company is on track to double this sum via a second, ongoing offering. (It is also reported to be considering a public offering in June).
So what’s the masterplan?
Telegram says money will be used to roll out a whole Telegram Open Network (TON) ecosystem, including mobile payments, via a new blockchain that can also host decentralized services – and process anonymous transactions of Grams within the app.
If it gets it right, its existing 200 million-strong user base means this will bring blockchain – and certainly blockchain-based payments – truly to the masses for the first time. (The new network will include digital wallets, a proxy layer to hide identity, an applications platform and storage facilities, like a Blockchain-based Dropbox, according to reports).
But can the company make the idea work?
UK use of mobile payments (the “old fashioned” pre-blockchain sort) has hardly begun, with just over 22 percent of British smartphone owners expected to use their phones to pay for goods in 2018. Some 77.5 percent of Chinese smartphone users by contrast are expected to do so this year, according to research from eMarketer.
China’s Weixin, or “WeChat” is the trail-blazer. Last month it hit a milestone of 1 billion monthly active users, a “remarkable number” according to Pony Ma Huateng – CEO of its owner Tencent Holdings – at a media briefing in Beijing earlier this month.
More than 688 million WeChat users sent or received digital versions of new year holiday season cash gifts its chief executive said. But such transactions are just the tip of the iceberg: WeChat is also used to order food, hail taxis, do a little social networking and more.
Just one year ago, the notion that this could be replicated via blockchain would have been seen as absurd. Blockchain-based payments were cumbersome, owing to the “latency” problem of blockchains and there was far more talk than action.
Minds are rapidly changing.
Chris Painter, the founder and CEO at the UK’s Omnitude, told Computer Business Review that things have already changed dramatically. His blockchain smart platform connects blockchain technologies, eCommerce platforms and enterprise systems.
Omnitude recently inked deals with Switzerland’s largest telecommunications provider Swisscom, as well as e-commerce specialist CS Cart. He said: “Just a year or two ago the speed was horrendous. That’s changed markedly.”
“Ethereum is running at about 15 transaction per second. By contrast we’re using Hyperledger as our base layer and running 3500 transactions per second. The next gen of blockchain tech is coming in now; 2018 will be the year that blockchain gets mass-uptake”.
He added: “It’s still hard to do crypto payments with mobile and there is big demand for what Telegram are trying to do in the market. One of the biggest pain points at the moment though is the ability to exchange fiat for crypto currency or vice versa. That’s why we’re looking to deliver exchange functionality. Just imagine through every eCommerce site that runs the Omnitude middleware layer there is a live ledger of customers who wish to move their crypto currency into FIAT or their FIAT into crypto currency, that transaction can take place through matching both ledgers simultaneously. The result would be an instant exchange.”
Proof in the Pudding
Telegram meanwhile says its next-generation network aims to clear millions of transactions per second, compared to 7 to 15 per second for crypto market leaders Bitcoin and Ethereum, to potentially challenge Visa and Mastercard as a mainstream payments network. (Visa’s VisaNet can handle more than 30,000 transaction messages a second).
In a leaked white paper (the authenticity of which has not been commented on by Telegram’s founders) the company said that its blockchain is “a scalable and flexible Blockchain architecture that consists of a master chain and up to 292 accompanying Blockchains.”
An infinite ‘sharding’ paradigm which will allow the Blockchain to split and merge in response to different network loads. Instant hypercube routing will supposedly manage transaction across different Blockchains. Along with a proof-of-stake (PoS) protocol, the use of 2-D distributed ledgers is said to allow TON to build “new valid blocks on top of any blocks that were proven to be incorrect, to avoid unnecessary forks.”
Token Garage CEO and cryptocurrency expert Gopinath Sivalingam told Computer Business Review: “Ethereum’s founder thinks Ethereum itself will be able to match Visa in a few years. If Telegram continues its growth rate, I think it could execute its plans in three to five years. But Tx’s have to be low cost or almost free. This will be possible once Proof of Work (POW) is replaced by Proof of Stake (PoS).” (See explainer here…)
While investment is slowing, it is still strong, with Bloomberg reporting that investors are placing sufficient orders in the second round even after the token was priced at more than triple last month’s level.
If Telegram executes on its plan and its TON blockchain, founder Pavel Durov – who has expressed libertarian sympathies – will have created his own crypto-utopia: a huge online community, with its very own currency and linked services, all removed from any government intervention or involvement.