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Inside Telegram’s ambitious $1.2B ICO to create the next Ethereum (techcrunch.com)
127 points by abhi3 on Jan 15, 2018 | hide | past | favorite | 63 comments



If it looks like a scam, expressed like a scam, and promoted like a scam, then it probably is a scam.

Let me explain... achieving scale with public and private blockchains is a difficult computer science problem. Even if Dr. Nikolai Durov [1] is a genius, he is competing with other geniuses who are at least trying to probe their points in a more formal way [2]. It is not by chance that it is taking so long for Vitalik and other researchers to solve the scalability and security issues in Ethereum. So until other peers don't analyze Dr. Durov results via adversarial attacks we will not know how real are his claims.

A serious alternative to this ICO would be raising money for a PoC including hiring other researchers to break the original scheme. For example, before RSA was finished, Adleman worked on breaking the schemes devised by Rivest and Shamir until RSA was born [3].

This does not mean that you cannot make money, speculation works in a different dimension.

[1] https://en.wikipedia.org/wiki/Nikolai_Durov

[2] https://docs.google.com/document/d/1J8hehbnZWzcIUMQcxMiGbjz8...

[3] http://teacher.scu.edu.cn/ftp_teacher0/chjtang/teach/adleman...


No kidding. Blockchain is the new hotness right now, shouldn't be difficult to raise a seed round for a crypto startup if your product is genuinely interesting.


It's not difficult to raise a seed round for crypto startup even if the product is stupidly boring and useless. It's called an ICO.


> The “TON Blockchain” will consist of a master chain and 2-to-the-power-of-92 accompanying blockchains

> “Infinite Sharding Paradigm” to achieve scalability

> “Instant Hypercube Routing”

> "it will also use 2-D Distributed Ledgers."

There's no doubt that if you want to make a quick buck, this buzzword-laden series of claims will attract many greater fools. But the ongoing crypto-hubris is unattractive to say the least.


> How do I know which Crypto to buy into? > Read the Whitepaper.

I've seen this interaction so many times now. It's great that people read these whitepapers, but what to they judge them on? They're often a one-sided technical explanation with zero objective information in terms of feasibility in the market.

There's one (apparently delayed) ICO planned, for a company that wants people to share their CPU time to train neural networks in exchange for some token. I can hardly believe that a distributed network of laptops in living rooms can be more efficient (and therefore cheaper) at doing this than centralized, purpose built hardware in data centers with efficient cooling systems (like Google's new TPU). And that's even if they figure out how to make this technology work effectively.

My colleague, though, was very impressed though, because he heard somebody say that training a neural network takes a lot of time, which is true, depending on the complexity and whether you run it on a €500 Acer laptop or on specialized hardware.


While the economies of scale often offer a discount, there are some possibilities here, power cost increases when demand at a single location increases beyond a certain factor, inherent network capabilities suit a decentralized service, network services can route around censorship and handling heat and safety cost are not linear when resources are centralized.

So perhaps switch the laptop for a wall based crypto-heater packed with silicon (see here for the heat output of a gaming pc vs a space heater https://www.pugetsystems.com/labs/articles/Gaming-PC-vs-Spac...) and there may be some potential there, maybe Elon can throw a battery in there too...

It's certainly fascinating that for all the talk about blockchains and ICO's I've read very little about the fact that the internet has been augmented by a distributed cryptographic system available for rent, altcoins that rely more on CPU and memory and therefore discourage GPU and ASIC use might mean the network moves to more general computing power for rent, interesting times as they say.


Altcoins rely on economics. If you're a miner, you invest your fiat in mining coins showing sufficient value and liquidity. If an altcoin rises high enough, ASICs will follow.


I wonder whether the hypercube part is related to Vitalik's idea from 2014: https://blog.ethereum.org/2014/10/21/scalability-part-2-hype...


Probably. TON looks like it is trying to combine all the good-sounding ideas from Bitcoin, Ethereum, Blockstack, Sia/Filecoin, I2P/Tor, etc.


Hypercube routing seems Similar to hypercast: http://www.comm.utoronto.ca/hypercast/overview.html


Is it a multi-dimensional database?https://en.wikipedia.org/wiki/Data_cube


That's certainly true, except that these are people with boatload of money who, objectively, decided to leave quite a bit of it on a table time and time again. Something that cannot be said about anyone else in this game.


The next Ethereum? I'm still waiting for the current ethereum to show any kind of reason for its existence beyond an admittedly cool tech demo.

I'm not seeing anything in this offering which couldn't be done more easily and cheaply by a ton (sorry) of other payment options. Notably they say they want to be WeChat - and they've done it all without any need for blockchains.


I would have to agree about Ethereum being not much more than a tech demo at present.

A few months back I tried to learn building an Ethereum distributed app, or "dapp" as they call it. I installed my own Ethereum node to see how that works.

The Ethereum toolchain is a strange combination of actual JavaScript (command line tools + REPL to a live node) and a pseudo-JavaScript called Solidity: a custom language inspired by JavaScript but with abundant new syntax for developing smart contracts. That doesn't seem like a good idea from a robustness point of view -- did anyone ever say "I know, I'd like my money to be handled by immutable JavaScript functions"?!

Still, I can see the mindshare appeal of reaching the widest possible developer demographic by making everything look "web-like". I would be OK with that choice if the platform worked as advertised, but it doesn't, and it just keeps getting worse.

I spent about $100 on deploying my toy dapp's smart contracts, and then I gave up. Debugging on Ethereum is a nightmare. It seems very easy for a non-obvious bug that's not caught on the testnet to make a deployed program go into a loop and burn through all the money you allocated for it. With today's USD/ETH rate, my failed $100 experiment would have cost $300.

Even if I had got the app deployed, who's going to use it when fees are this high? Nobody wants to pay $10 to store a piece of data in my dinky little dapp. The whole concept of dapps is ridiculous with the current Ethereum implementation.

Ethereum is a victim of its success: the network is congested, fees are running sky-high, and my Ethereum node has stopped working because of the exploding demands of storing the blockchain. Realistically there doesn't seem to be anything the Ethereum founders can do to fix this on the short term, which means that there will be a painful implosion as the network goes useless until it's replaced by a new sharded Ethereum (which will naturally come with its own growing pains).

My conclusion is that Ethereum today is like MongoDB in its first year: breathless promises of "web scale" are in no way matched by the reality of what the platform can do... But like Mongo, it's in JavaScript and has a formidable hype machine, so people will flock in. Eventually things will get better, I'm sure.


I agree that the ecosystems is very shitty and amateur. Just look at web3.js--they pushed the alpha version to NPM so anyone getting started will automatically get their alpha.

I wouldn't say anything if this alpha was working, but it's one of the buggiest piece of software I've ever seen in a while. They shouldn't ship something if it's so obviously not ready, especially if it has to do with people's money.

I actually tried so hard to make it work with this alpha version but finally gave up after a while and manually "downgraded" to the earlier version, because my time is precious and I don't have time to help them develop that buggy software by sending pull requests for every single bug I've found.

And I don't even want to get started with Solidity. Everyone in the industry knows Solidity is a bad language which encourages unsafe and careless programming.

That said, I think it's a wrong way to think about Ethereum from the perspective of building a normal web app. A lot of people confuse this point and think they're building "Twitter, but for crypto", "AirBnb, but for crypto", etc. but it's a whole new class of software, and the faster you drop the old frame of "what web programming is", the faster you'll adapt and more likely that you'll come up with neat ideas to build. The gist is, you have to think like an economist than a programmer.

Lastly, you could just use testnet to test your stuff. I've been mostly running my demo apps on testnet and only deploy when I think there's a chance for any traction. Which means you don't need to spend any money to try building these apps.


I'm not sure why people latch to the javascript thing.

Javascript is to Solidity what C is to Java. It is similar on the very surface level, but other than some syntax similarity, it's very different.

There is plenty wrong with Javascript and there is way more wrong with Solidity. But the languages are not very similar


I'm not sure the analogy holds. C is a very specific programming language you can characterise as a byte-array manipulation language. That's a very specific building block for making software if that building block is what you need, hence its merit. Java "on the very surface level" has absolutely nothing that relates to C, modulo some syntax if you think that has a lot of weight.


This is exactly the point he was making


Are most DApps silos? Is there a market for a direct clone of ethereum that is just less congested?

Lots of apps just don't make sense at $3 per transaction. It's quite discouraging.


I don't know if a clone would solve anything.

My humble opinion is that the Ethereum design is just fundamentally flawed. It doesn't do any specific thing very well at all, but it looks enough like Bitcoin to encourage speculators. As a product, it's like: "The gold coin that also works as toothpaste!"


According to the whitepaper (on page 18) it cost $70m to run Telegram just for 2017 and a total of $171m since 2014. Pavel Durov had a net worth of about $300m when he left VK in 2014 and as far as I know he's the only source of funding for Telegram. This seems like one way to change that and hopefully ensure financial stability, if it works out. I'm not sure it will though, which is unfortunate as I quite like Telegram.

There's always Wire, I suppose. As long as they stay afloat.


That's what I thought too when I saw this. Telegram is nice but with no monetisation they will run out of cash. This could make Telegram profitable, or at least give it a longer runway.


How did you obtain the white paper? AFAIK it's not available publicly yet.


https://drive.google.com/file/d/1ucUeKg_NiR8RxNAonb8Q55jZha0...

Hopefully I'm not violating any rules by sharing this thing that looks like it might be TON's leaked whitepaper


Thanks! It seems that this paper is already in hands of TechCrunch(the currently discussed article) and CoinDesk[1] and now it's available for HN users :-)

[1] https://www.coindesk.com/big-money-murky-governance-kicking-...


Yes like any other ICO this is risky. However there is a big difference between this and other crytocoins: there is already a large base of pre-existing users of Telegram. With TON, Telegram has the potential to become WeChat outside of China.


> there is already a large base of pre-existing users of Telegram

The base is 180 million MAUs as of December 2017, and they're not growing as fast as other messaging services have in the past (in Feb 2016 they had 100 million MAUs, so in just under two years that's ~80% growth).

So yes, they have a large base of pre-existing users. But I don't think it is clear that this base of users is going to continue to grow exponentially, and they're not growing as fast as they arguably should be.


I feel that its actual potential utility as a crypto currency platform is more important than its current position as an IM platform. A better argument would be to point out what happened with Kik


That seems like good growth. Other messaging apps are growing faster? I don’t doubt it. Just surprised. Do you know which ones?


Look what happened with Kik's KIN though. That had similar positioning (though not the same vision). 1.2B seems insanely high, even with their numerous goals.


It also has the potential to ruin their business by introducing a token into an app that doesn't actually need one.


The question nobody is asking is "how does this token benefit from the value of the app, and how does this app benefit from the presence of a token?"

It's a messaging app, right? Not every stall needs its own Starbucks Giftcard.


YouNow's upcoming Props ICO has 40 million users.


Why on the earth they don't just do a telegram based digital money without any block chain but just an N nodes database Geo distributed? So that you can pay real money to have telecoins (or whatever) and that's all. Oh wait... This prevents earning 1 billion of dollars to give back monopoly money.


That might work for the intended use-case, but it does not use the blockchain, therefore it can't benefit from hype and deflationary expectations, so the "invitation only early investors" can't have exponential profits - the real motivation for the whole scheme.


The article is rather out of date, stating

> $1.2 billion. That blows any other token sale out of the water, and it would easily surpass the current record of $257 million raised by Filecoin

and showing EOS as having raised $200M. In fact, EOS claims to have already raised over $1.1B and its ICO is still continuing for another 5 months:

https://steemit.com/eos/@simoncase/eos-announcement-what-jus...


I think a serious conversation that needs to be had is that there a lot of tech companies that can produce a useful service. Twitter, Telegram, Snapchat etc come time to mind, but they will never generate a profit like a traditional business.

Does that mean that these services should not exist? Or does it mean there needs to be a non traditional way of financing to where creators can build the product and then have a reasonable way of "being done".

Something like Twitter reached a point where it didn't really need more features. How could it sustain itself without constantly growing and paying profits to shareholders?

I don't know the answer to this, but it's certainly something that needs to be discussed, because the unfortunate truth is that there are many good services that don't make money


My hope is that big businesses put a ton of money into creating new products, and when the space is understood, someone makes an open source version. Then the consumers of those products start to resent the people making money off of them and the private thing dies off. There are not really any models of this though, sadly.


First of all, open source versions often are just not as good. I was a fan of gitlab for personal projects, but after trying it for a couple of months on a company's project, we moved back to github because of all the bugs and low perfomance.

Second, who's going to pay for all the servers?


When did you try GitLab, and was it self-hosted or GitLab.com? We've been working on improving performance, especially on GitLab.com, for the last two years now. Having started around then I can definitely say it was pretty miserable back then, but it's infinitely better now.

You can see our infrastructure issue tracker for more info on what we've worked on over the last few months and what we're doing now: https://gitlab.com/gitlab-com/infrastructure/issues


If Telegram did $1.2B, Slack must be on pace for a $50B ICO. What a great world we live in!


Yes, and Facebook a $bazillion. But at that point, "fiat" will already be a forgotten relic of the past, so, who cares?


Another next Ethereum ? $NEO is already operational.. $ADA is more promising..


NEO is centralized. But at least it has code.

Cardano has no published code for its smart contract platform, yes somehow it is the 5th most valuable cryptocurrency. Its hype is based on something that Ethereum already has under development: a formally verifiable programming language (and unlike Cardano, the work on formalizing the two programming languages is being done out in the open). Its website also praises regulations and implies pretty strongly that only regulated entities will be able to run consensus nodes for its smart contract platform.

I don't think either has any hope of being the next Ethereum.


> It could turn Telegram from a messaging app into a platform that hosts internet-based content which could, in theory, operate micro-paywalls that let users unlock news or subscriptions for small amounts of crypto payment, while there’s also the potential to become a major payment hub.

So... it does pretty much everything? So much for decentralization. Sure, it's theoretically decentralized, but it's disturbing that Telegram is trying to both take over so many blockchain applications and retain partial control over each one.


[citation needed]

Looks like rumors and disinformation spreaded by Anton Rozenberg - former Telegram developer. Russian journalists refer to his Facebook post[1]. IIRC, Rosenberg and Durov had some serious conflict. I've seen article on Medium[2] (earlier with unblurred screenshots) and Rosenberg seemed to me not quite adequate person.

[1] https://www.facebook.com/id77777/posts/10154846872521076 (Russian)

[2] https://medium.com/@anton.rozenberg/pavel-durov-sued-senior-...


Have I missed the link to the actual leaked 132-pages white paper?


Would it be wise to invest in this?


On Reddit someone shared a Facebook ad they were getting about this. It's being hyped like TRON and will likely share a similar fate.

"Today price $0.8 after ICO $50"

https://i.imgur.com/lxGE0dz.jpg


Mmmm, securities fraud. Did Telegram just officially say that their token will go up from $0.80 to $50? Or is Facebook allowing scammers to create fake official pages?

(On another note, ICO pricing around $1 seems like it will inevitably trigger the "I can't even afford one coin" effect. Pricing the ICO around one cent (with 100x more coins outstanding, of course) would give more breathing room.)


They're saying that if you pay them today, you get them for $0.80 as a "ico pre-sale". Then during the real ICO, coins will be available from them for $50. Nothing about market price


If they're available for $50 after it means the market price has gone up, if they can sell them at $50 why can't you? Securities/Tokens are a two way street not your typical discount aisle.


>Did Telegram just officially say that their token will go up from $0.80 to $50? Or is Facebook allowing scammers to create fake official pages?

The latter. See https://www.financemagnates.com/cryptocurrency/news/breaking...


The TRON hype train has been getting a lot of kickback recently on Reddit - claims they have been stealing content from other white papers and copying non attributed GPL code from other projects - current market cap 4.7 Billion - make of that what you will :-)

* https://www.reddit.com/r/CryptoCurrency/comments/7qfjef/tron...


Note that TRON != TON?


Yes good point - I was replying to the above comment:

> It's being hyped like TRON



Looks like a scam capitalizing on the press around TON. The article said sales wont be until march but this ad is saying you can buy them now.


I think what's interesting about this ICO is that their product is a natural fit with the blockchain ideology. Because of the encryption of telegram, people are already using for communications that they don't want observed by the authorities (eg telegrass). Adding cyptocurrency to this allows them now to exchange "money" for goods/services without having to resort to traditional money, credit cards. This would close the loop and create a compelling package, IMO.

I'm not an expert at all in this realm - but it seems to me that this is one ICO that has a good chance.


Lockup period means this ICO will behave differently than some of the other coins that have come out recently, and there's no way to tell what the market (or regulatory atmosphere) will be like in 6-18 month. It's speculation, just like all the other ICOs, but at least Telegram is a viable platform with a good use case for the coin.


[flagged]


It's basically gambling. So do it if you want to have fun and most probably lose your investment with a ridiculously tiny chance of getting rich. That is how every ICO should be approached. I haven't invested in ICO but then I've never been into gambling.


It's telling that my colleagues who have invested in Bitcoin and other magical internet money are also the ones who bet on the horses every weekend and also enjoy going to the casino.


I don't think it is good?Okay , I choose the Signal.




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