27.02.2018 | Is Telegram's ICO even an ICO?

By Jessica Sier 2 February 2018 2 min read
  • Published 27 February, 2018

When you buy a coin in an Initial Coin Offering, you are buying a digital asset that will be useful when the organisation who issued the coin builds the crypto-network they say they will.

Hopefully.

Unlike shares, they don’t mean you own a percentage of the organisation. They are just the future mechanisms by which the crypto-project will run.

ICOs have been fabulously helpful to crypto startups who need money to develop their projects (when they can’t get the money from banks).

There’s no guarantee the project will work, (or is even legal) but this is tech! There’s gotta be a bit of risk!

A thriving market has sprung up because people are swapping these coins with each other, despite few projects actually nearing completion (yet).

But for some, the size of some of these raisings is getting a bit ridiculous.

Telegram - a messaging app that has a wildly active, crypto-mad population - has just raised $US850 million by issuing tokens called GRAMs.

The company is hoping to develop a blockchain that runs smart contracts, similar to Ethereum, that offers remote file storage, anonymous browsing and micropayments for all kinds of services.

The 200 million existing users would transact on this not-yet-developed blockchain, called the Telegram Open Network, using GRAMs. (The whitepaper is here.)

So far, Telegram has only issued tokens to private investors, who happen to include venture capital heavyweights Sequoia Capital and Benchmark.

But apparently $US850 million is not enough to develop the Telegram Open Network, and the founders Pavel and Nikolai Durov have decided to raise another $US1.15 billion. Privately.

Which sounds a lot like a regular old venture capital raising, except instead of the VC funds getting slices of the company, they are receiving GRAMs.

Telegram looks like it could have a valuation in excess of $US2 billion, making it the largest ICO in history.

And it's posed the question, is this the new norm for large ICOs? Rather than subject themselves to the mercy of the pump-and-dump ICO traders, founders are heading back to the safety of private money?

We'd be interested to know your thoughts.

Enjoy your Tuesday.

Words by
Jessica Sier Right Chevron

Jessica Sier is a financial journalist who currently heads up Spaceship's content. Prior to that she was a reporter at the AFR where she discovered breaking down financial bulls**t was a public good.

27.02.2018 | Is Telegram's ICO even an ICO?