The tech world is split over Telegram’s fund-raising campaign
nytimes.com
nytimes.com
>“It’s a pitch that sounds good to V.C.s that haven’t participated but makes no sense to people that have been in the space,” said Nick Tomaino, the founder of a virtual currency investment fund, 1confirmation, that didn’t invest in Telegram.
>The most obvious reason to be skeptical of the project is that there is not even a prototype — just a 132-page paper promising what the system will look like one day. The Telegram team is promising to release the software late this year or next year.
>What’s more, Telegram is promising to do more than any other virtual currency and to fix the intractable problems that have plagued virtual currencies like Bitcoin, such as overcoming the network’s difficulty handling all the transactions that have poured onto the network as it has become more popular.
>An analyst at one virtual currency-focused hedge fund, Pantera Capital, wrote a scathing essay noting that the Telegram team has given no evidence that they will be able to solve the problems that have dogged everyone else.
>“I cannot, in 132 pages, gain the slightest intuition as to how to go about proving that the hard problems it needs to solve will be solved,” the analyst, Charles Noyes, wrote about the Telegram project on Medium.
On the one hand the Telegram team have a solid track record & a lot of users: They produced a high quality app that’s used by hundreds of millions of users. Also add to that the fact that more of the crypto chat related channels are on telegram.
On the other hand if you read through the white paper they put out, they give a timeline that promiss to do everything from wallets, to distributed file storage/computing/exchanges. That’s a very high bar to set without providing a lot of technical details. A leaked copy of the white paper can be read here:
https://drive.google.com/file/d/1ucUeKg_NiR8RxNAonb8Q55jZha0...
Personally I think it’s worth taking a small bet on them. The biggest problem in crypto right now is a lack of widely used consumer apps. Getting hundreds of millions of people to use an app is a harder than solving some of the distributed systems problems facing crypto right now in my book. I could see the telegram team pulling this off.
This isn't a matter of one startup failing where another stands a chance. The problems that Telegram is proposing they can solve aren't execution problems. They are unsolved research problems. And some of those problems (like verifiable computing) have been actively researched for decades, well pre-dating cryptocurrency and Bitcoin.
Everybody has blinders on.
Do you want to be specific? I suppose one question is do they need to pull off everything they claim in the whitepaper in order to be successful? Do you feel the things the Telegram team promise are an all or nothing deal.
If they just had hundreds of millions of people using Telegram for payments and perhaps filestorage/bots backed by crypto could they do that without all the things promised in the white paper? Would the market consider that a success and would that be reflected in the currencies price?
Not OP but the whitepaper claims that it wants to produce a decentralised blockchain product with the same efficiency and scale of credit cards or similar payment methods.
Now I'm not terribly knowledgeable as far as crypto currency is concerned, but as far as I'm aware that's a yet unsolved problem because there's a payoff between security, performance, and decentralization.
The article mentions sharding but sharding usually reduces security, you can increase the block size but that will lead to centralisation, and so forth.
The scale / decentralisation trade-off is inherent to almost all complex systems. Overcoming it is a pretty big thing to promise.
Not sure if I am reading the white paper correctly but I think Telegram appear to be going with a masternode type solution initially for their proof of stake solution
https://en.m.wikipedia.org/wiki/Proof-of-stake:
“Another form of staking is running a masternode,[9] a form of decentralized server. The main disadvantage of operating a masternode is the relatively high barrier to entry as opposed to staking alone. In order to secure the network, those willing to run a masternode are required to purchase a certain number of coins as collateral at current market price.”
Will a solution like this, which is more centralized than something like btc be good enough? Will people be happy with this level of centralization or refuse to use the service on principle? I don’t know. I do think that at least the earlier parts of their roadmap seem plausible (2018). The 2019 section however does seems rather ambitious and ambiguous.
I think if you're careful about it, sharding can be done without impacting security much. Suppose you would split the Bitcoin network exactly in half. Each half has only has as much hashpower, so you can attack it for half the cost. But each side also contains only half as much money, so the potential payout went down by the same factor as the price of attack.
Of course it's more complicated than that, because a realistic attack isn't about stealing money from everyone but from a handfull of large targets. Also, TON is proof of stake and not proof of work. And you have to scale sharding not with money present, but with transaction rate. And the shards (presumable sidechains?) will transfer money between each other, and you have to scale that as well. It's a complicated problem, but I wouldn't rule sharding out as a viable approach.
I highly doubt they can do the promised "millions of transactions per second" in any realistic scenario, that would be a major breakthrough. VISA can only do 57 thousand transactions per second [1]. But I also don't think they need remotely that much. Paypal has an average transaction rate of ~200 transactions/second, VISA of ~1700 transactions/second. At least paypal's average rate would be achivable even with Bitcoin's codebase if you were to take some liberties with block time and size (which isn't entirely unreasonable, the internet got faster in the last 8 years)
1: https://mybroadband.co.za/news/security/190348-visanet-handl...
I don't think this is correct, if it were split in half each side would start at the same point with the exact same amount of money. Unless you were talking about the amount of money each half controlled maybe?
But I thought the point of sharding was to enable double-spending which would only really concern itself with the amounts the attacker(s) controlled. Well, I also recall reading about using sharding to destroy faith in the network as a whole but that doesn't seem to apply here.
Large adoption can smooth over a lot of flaws, and Telegram has the right tools and vision for achieving that.
The big risks I see with the Telegram ICO have nothing to do with the tech. They are as follows:
A) They build out all this functionality to support crypto currency, etc and it sees low adoption/usage with their users.
This happened with Snapchat and messenger when they introduced the ability to send money. People still used Venmo, including many of my friends who work at Facebook.
B) They roll out this tech, it starts taking off, Facebook detects it and they smoother it by cloning the functionality and rolling it out in messenger/WhatsApp. Aka what happened to Snapchat with stories.
They do not. Telegram still does not encrypt chats.
> “TON can become a VISA/Mastercard alternative for the new decentralized economy,” said a TON primer that was sent to investors. “We believe that a whole new economy saturated with goods and services sold for cryptocurrency will be born.”
run for the hills.
This is one of the most generic and regurgitated ideas in cryptocurrency. There are tons, pun intended, out there promising to be the next payment channel but have no idea on what it takes to run one.
Did anyone else who went for this idea have this resource?
But personally I would put my money on the good team over the bad regardless of the idea
The thing that's happening with ICOs today is that we're skipping steps, over-valuing things, and making impossible promises. The largest ICOs also tend to handwave away some very substantial, long-term research problems that the general audience they are pitching to has no awareness of.
Teams get put in a position where they raise 5 years of runway with rapid growth all at once, pre-product, pre-traction. That's not a problem with the ICO model, that's just a function of the space being extremely overheated.
If people wanted a structure that had some sort of accountability for non-delivery of results they'd do a share offering.
Another piece of technology that is always used for the same need is Telegram. You got drug-selling bots, channels who aggregate your local dealers, secret chats... Everybody uses this messenger, exclusively, to communicate. It doesn't matter if it's really secure or if it's just good PR – it works.
So, back to Bitcoin: it's a pain in the ass. People constantly try alternatives, even if they're even less secure (like Qiwi). Now imagine that suddenly, you can pay someone straight through Telegram, which has a reputation (doesn't matter of deserved or not) of being secure. What do you think is going to happen?
My company has done more than $10 million in hardware sales selling cryptocurrency miners for bitcoin. Bitcoin is really the only option for us, because there's so much fraud (check, credit, etc.) that we couldn't accept another form of payment without something like 30% markup. The instant finality (well, 1-2 hour finality) of Bitcoin makes that tractable.
Several startups that I know of have also gained a ton of traction and competitive edge by switching to bitcoin for payment rails. You won't know that they use Bitcoin based on their website or based on interacting with them, but when you send money to another country, they are on the back-end transferring bitcoin, and this allows them to shave days off of their process vs. competitors using other payment rails.
Cryptocurrency services a very wide range of niches, because it offers several very substantial features that no other currency or payment option can offer. Beyond all the hype and sillyness, there is a technology that is actively changing the world and is gaining real traction every day.
There have been a lot of puff pieces written about this. Very little actual proof in numbers.
> My company has done more than $10 million in hardware sales selling cryptocurrency miners for bitcoin. Bitcoin is really the only option for us, because there's so much fraud (check, credit, etc.) that we couldn't accept another form of payment without something like 30% markup. The instant finality (well, 1-2 hour finality) of Bitcoin makes that tractable.
Can you not take payments through Visa? I thought the standard was 2-3% for fees.
> Several startups that I know of have also gained a ton of traction and competitive edge by switching to bitcoin for payment rails. You won't know that they use Bitcoin based on their website or based on interacting with them, but when you send money to another country, they are on the back-end transferring bitcoin, and this allows them to shave days off of their process vs. competitors using other payment rails.
There aren't many companies taking Bitcoin. The book 50 foot blockchain by David Gerard has more on this. The gist though is that often a payment processor is encourages by Bitcoin maximalists to accept Bitcoin. Months later they realize no one is using it and remove it as a payment option. Then the Bitcoin maximalists pounce and harass them.
> Cryptocurrency services a very wide range of niches, because it offers several very substantial features that no other currency or payment option can offer. Beyond all the hype and sillyness, there is a technology that is actively changing the world and is gaining real traction every day.
In the niche of get rich quick it offers many features.
Sounds like the problem is that fraud/chargebacks are more common, which Visa won't protect from. And for that matter, if you have too much fraud Visa might just dump you as too risky.
> There aren't many companies taking Bitcoin. The book 50 foot blockchain by David Gerard has more on this. The gist though is that often a payment processor is encourages by Bitcoin maximalists to accept Bitcoin. Months later they realize no one is using it and remove it as a payment option. Then the Bitcoin maximalists pounce and harass them.
That's true for small time merchants like tshirt providers and restaurants. That's not true for more serious platforms like Circle, Abra, and a couple that facilitate large (6 figures or more) payments across borders. Those companies absolutely find value in the fast finality, in the low fees (a $10 transaction fee is less than 0.01% for a 6 figure USD transaction), and in the fact that there are bitcoin exchanges in almost every country in the world. Fiat payment rails provide other features, but for some use cases Bitcoin is by far the best option.
Your disagreement with a post pointing out that criminal activity is a major driver of adoption of cryptocurrencies is "our cryptocurrency industry company can't accept any payment method other than Bitcoin due to rampant crime and fraud by cryptocurrency users"?
It's a problem that Bitcoin readily solves.
Just because they cited it in the article -- I'm sure the people who manufactured greenhouses during Tulip Mania* also made a ton of cash (and probably accepted tulips in payment, dunno?) by riding the bubble.
*not that I think bitcoin is the same as tulips.
I know no one who transacts with Bitcoin for drugs (I've been involved with Bitcoin since 2011). DNM is obviously big, but I think you overestimate drug transactions vs how many are merely speculating.
How many "normies" have you encountered using Bitcoin, and what do they use it for? The only case I see all the time around me is drugs. I doubt there's a single dealer in the whole city who's still accepting cash.
Most people I know (outside of my nerd circle) that are into Bitcoin buy and hold from places like Coinbase.
> The only case I see all the time around me is drugs. I doubt there's a single dealer in the whole city who's still accepting cash.
I presume you're not living in the poor side of town.
No disrespect intended, but I think this is a classic case of confirmation bias.
Same here, as I articulated earlier.
> and 99% of them deal in cash only
Curious, why haven't the dealers moved on from delivering the merchandise hand-to-hand? Isn't it significantly more dangerous than burying?
What about Telegram explains needing to raise $1B?
It still doesn't explain why telegram needs $1 billion.
It also doesn't explain how any of the value of telegram is imparted to the coin itself.
Just because a coin is associated with a company doesn't make it as valuable as the company.
Even then, all that argues for is the value in buying Telegram, not in giving them more money. What the hell does an already established and functioning group chat / voice calling / semi-encrypted phone and electron desktop app need in 2018? Whatsapp was spending hundreds of millions just to acquire users with no monetization strategy for the sake of having users, same with Telegram.
I highly doubt Facebook can get any reasonable conversion ratio from Whatsapp user to Facebook regular that already wouldn't happen on its own. Having an audience is worth something, but it is not worth billions unless you are actually getting substantial value from that audience consistently.
So in an ICO, the initial sum of tokens might be, e.g. 1,000,000 coins, with the issuer keeping, say, 300,000 coins and selling the rest. If buyers invest USD 1,000,000,000 as in this case, then very theoretically, the issuer now holds USD 300,000,000 worth of the tokens they issued. In practice, to use those funds for operational expenses (or drugs and prostitutes, as the suspicion tends to be), they need to sell the tokens on the open market, and are likely to get much less than the "nominal" value if they sell large amounts.
Again, I have no knowledge of what the particulars of Telegram's ICO are, just pointing out that they probably haven't raised USD 1B in operational funds.
That's exactly what it means. Circulating supply is a different story though based on lock up.
> If buyers invest USD 1,000,000,000 as in this case, then very theoretically, the issuer now holds USD 300,000,000 worth of the tokens they issued.
If the buyer sends $1bn directly to Telegram for any amount of coins then Telegram now has $1bn in the bank.
Obviously, this depends on the rate of incoming new capital vs successful crypo launches, but as long as the appetite for such high-volatility assets is limited, the ceiling must be hit some day. Wouldn't that then start the unwinding of crypto prices as less devouted believers increasingly sell as losses mount?
I've heard this described as bing similar to an IPO. But in that case, you are buying part of the company. Is there any similarity here?
Telegram is a defacto standard app for any Crypto user and integrating crypto makes total sense. Native crypto integration changes the telegram app into the largest crypto platform.
Too bad they decided to do an ICO, as it would be much better for the ecosystem to integrate Bitcoin or Eth (see status.im). But why do that when you can get a cool couple of B and roll your own.
when i think of blockchain as it is, im not focused on “currency” as much as I am focused on accurasy - in that I am looking at blockchain asa soluition to tracability for things such as agri
so we can complain about how maybe there is hype in the blockchain space when it revolves around currency exclusively - but there are valid reasons to use it for things other than money.... thus, I like the idea of blockchain intrinsicly
changeMyView
The only one I could maybe see is domain registration, but I doubt the cost is worth it.
If you don't need distributed consensus (e.g., you're fine with a centralized party maintaining the current state of the system), you don't need the above. If double-spend attacks aren't meaningful for your application (e.g., there's nothing that someone can maliciously do twice in different ways, and cause two different groups of people to believe two different, incompatible actions happen), then you don't need proof-of-work. If Sybil attacks aren't a concern (e.g., you can only use the system if you're authenticated via some external means), then you might not need proof-of-work.
For tracking ownership of physical items by known participants in a real-world economy, blockchain probably doesn't help a whole lot. Just use normal Merkle trees.
And how the market dropped and correct recover in a span of less than 24 hours is beyond everyone's mind https://www.coingecko.com/en
The way to get through this is to assume that blockchain finance industry is unconventional wisdom