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Telegram to release its cryptocurrency by October 31

Telegram Open Network
Source: ton.click

The messaging app Telegram is planning to send out the first batches of its digital currency, the Gram, within the next two months, according to a New York Times report. A test version of the Gram network will be released within the next two weeks.

Gram digital wallets will be made available to Telegram’s 200-300 million global users, and Grams will make it possible to buy and sell other goods on Telegram.

Telegram had raised $1.7 billion in early 2018 through its initial coin offering (ICO) through which Telegram promised investors future Grams. Grams need to be delivered to its investors by October 31, or Telegram would have to return the money to investors. Telegram’s ICO documents had said that initially 5 billion Grams will be released to users, NYT had earlier reported. The 81 investors who put in the first $850 million paid 37 cents for each gram. In its second fund-raising round, Telegram charged its 94 investors $1.33/token.

Telegram has said that the Gram will operate with a decentralised structure similar to Bitcoin.

How will the Gram work?

According to the 132-page paper that Telegram had shared with investors in 2018 during its ICO, it is building a virtual currency network called Telegram Open Network, or TON through which users will be able send each other payments even when they are not in the same country. TON will use blockchain to maintain records of the Gram on computers globally. Unlike Bitcoin, TON’s blockchains will reportedly serve as the basis for a global super computer, like the Ethereum network. TON is the network through which Grams will be delivered to investors, and thus needs to be up and running by October 31.

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However, yet-to-be-issued Grams are already trading in an unauthorised secondary market, Coindesk reported. These sales are reportedly being made through over-the-counter desks, sales on small cryptocurrency exchanges, and at least one investment fund. However, investors who bought their tokens through Telegram’s ICO in 2018 cannot sell or pledge their token before the launch, or their allocation will be cancelled, as per their token purchase agreement with Telegram (available here). As a result, the investors are apparently sharing their allocations with friends, without signing documents.

Crypto trading on Telegram?

Button Wallet, a bitcoin and cryptocurrency wallet provider, is reportedly introducing cryptocurrency trading on TON, Forbes reported. Any Telegram user can activate TON’s wallet and receive 6.6 testnet Grams on the account. Bitcoin, Ethereum, Litecoin, etc. are supported on Button Wallet.

Problems with Telegram

Gizmodo had reported significant problems with Telegram’s self-touted encrypted messaging service. These will have significant consequences when when money is involved:

  • It does not encrypt chats by default, a feature that was introduced to WhatsApp in 2016.
  • It “rolls its own encryption”, that is, made up a protocol which is widely considered to be a fatal flaw when developing encrypted messaging apps.
  • It leaks metadata.

Differences between Telegram’s Gram and Facebook’s Libra

  • Unlike Facebook, which announced its plans for Libra, its digital currency, before the first token was ready, Telegram has already developed its token.
  • Libra will be backed by fiat currencies, held in bank accounts, but Gram will be backed by nothing, like Bitcoin, and will gain/lose its value by whatever someone is willing to pay for it.

Facebook’s fraught path could presage Telegram’s

  • On August 6, privacy commissioners from the US, the UK, the EU, Australia, Canada, Albania, and Burkina Faso expressed their concerns about the risks posed by Libra in a joint statement.
  • In July 2019, a group of Senators in the US raised their concerns against Libra, noting that it would be “crazy to give them [Facebook] a chance to experiment with people’s bank accounts”.
  • US President Donald Trump tweeted on July 12 that Libra would have little standing or dependability. Calling for regulating Libra by US regulators, he wrote that “if Facebook and other companies want to become a bank, they must seek a new Banking Charter and become subject to all Banking Regulations”.
  • On July 7, Benoit Coeure, executive board member of the European Central Bank, said that regulators must act quickly to prepare for the entry of US tech giants such as Facebook into the financial system. He said it was “out of the question to allow them to develop in a regulatory void for their financial service activities, because it’s just too dangerous”, and that “we have to move more quickly than we’ve been able to do up until now”.
  • When Facebook unveiled its plans for Libra on June 18, reactions critical of the move poured in: “Facebook’s Libra isn’t a pure cryptocurrency”, “nobody should expect privacy by using it”, and “[Libra is a] catastrophic regression”. Some people also highlighted the threat that Libra poses to governments and the global financial ecosystem.

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