Market Mad House

In individuals, insanity is rare; but in groups, parties, nations and epochs, it is the rule. Friedrich Nietzsche


Can Telegram’s TON Compete with Facebook’s Project Libra?

Facebook’s (NASDAQ: FB) Project Libra is a revolutionary and disruptive cryptocurrency proposal, yet is hardly original as I have note elsewhere.

Interestingly, Project Libra could be Mark Zuckerberg’s attempt to counter a cryptocurrency proposal from one of his most dangerous competitors. Last year, Russian social media entrepreneur and crusader Pavel Durov nearly launched TON, a cryptocurrency on his Telegram Messenger social media.

To explain, Telegram Messenger is an encrypted messaging app and social media network similar to Facebook’s WhatsApp. Like WhatsApp, Telegram encrypts every message, and fiercely guards users’ privacy.

In January 2018, Durov proposed the Telegram Open Network (TON) cryptocurrency. They supposedly intended TON as a crytpocurrency and peer-to-peer payment mechanism to embed in Telegram, much like Libra.

However, Telegram never launched TON. The Telegram cryptocurrency is still missing in action, even though TechCrunch claims the TON initial coin offering (ICO) raised $1.7 billion from private investors..

Telegram TON vs. Project Libra

Durov intended TON as social media for money. To explain, TON’s goal, like Libra’s, is to enable anybody to send funds anywhere in the world at the press of an app.

Durov planned to distribute TON through Telegram, much as Mark Zuckerberg plans to distribute Libra through Facebook Messenger, WhatsApp, Facebook, and Instagram. Like, Libra Ton could feature a Light Wallet, they call Libra’s Wallet Calibra.  

There are serious differences between Durov’s plans and Zuckerberg’s Libra scheme. In particular, Facebook plans a central authority; it calls the Libra Association, will operate, Libra. In contrast, the Telegram Open Network could have no central authority.

Thus, TON offers a new model of finance; a decentralized currency anybody could access. Libra, however, extends the current finance system of centralized banking into the blockchain. In fact, I think the Libra Association looks like a global Central Bank.

Where is Telegram’s TON Cryptocurrency?

The Telegram Open Network token has been missing in action for over a year. Telegram cancelled the TON initial cryptocurrency offering (ICO) in June 2018.

TechCrunch alleges they cancelled the ICO because of complete chaos in fund raising. Instead, of an ICO Telegram planned  sales of TON on exchanges like South Korea’s Liquid on 10 July 2019, TechCrunch’s John Russell claims.

On the other hand, I could not find a TON listing on CoinMarketCap on 29 July 2019. However, Liquid’s website was bragging about a successful sale for GRAM, another name for TON on that day. Yet I could not find a listing for GRAM on CoinMarketCap.

To explain, CoinMarketCap estimates Coin Prices, Market Valuations, and 24-Hour Market volumes for publicly traded cryptocurrencies. Additionally, I could not find listings for GRAM or TON at CoinSwitch, an Indian platform that claims to offer fast conversions for 596 altcoins.

What Happened to the Telegram TON Cryptocurrency?

My suspicion is that financial authorities and central banks blocked the Telegram Open Network scheme.

Central bankers had some very good reasons to block TON. The decentralized cryptocurrency could have been susceptible to inflation and uncontrollable. In addition, TON could quickly become a playground for terrorists, tax evaders, and criminals.

Worst of all, TON was uninsured. Therefore, the Telegram Open Network could have run out of money at some point. Consequently, the millions of people relying on TON could have nothing to spend.

Libra, in contrast, has a central authority; the Libra Association in Switzerland, banks could seize of control at any point. Switzerland’s Central Bank, the Swiss National Bank, the European Central Bank, or the Bank of International Settlements (BIS) could take over the Libra Association in an emergency.

Why Central Banks could Allow Libra but not Telegram’s TON

Importantly, the BIS is a trade association and clearinghouse for central banks. Notably, the BIS headquarters is in Basel, and the Libra Association is in Geneva. Meanwhile, the European Central Bank is the central bank for the European Union.

I think Zuckerberg is betting central bankers will allow a social media cryptocurrency they might control. If Libra succeeds and becomes a successful currency, the BIS or the Swiss National Bank can take it over. If Libra fails, that’s Zuckerberg’s problem not the bankers.

Notably, private banks originally printed paper money. Governments and central banks only began printing paper money after people accepted it. Moreover, the world’s most famous central bank; the Bank of England the United Kingdom’s central bank, was a private bank until 1946.

My guess is Zuckerberg knows this history, he believes banks will allow a cryptocurrency that operates within accepted parameters. Pavel Valerievich Durov operates well outside the mainstream.

Durov is a citizen of Saint Kitts and Nevis; a Caribbean island nation, and a libertarian. Moreover, Durov has moved Telegram’s base between several jurisdictions. Facebook (NASDAQ: FB) has a headquarters in Menlo Park, California, and Libra has an office in Geneva. Thus, Zuckeberg operates well inside established parameters despite his offbeat hipster/slacker persona.

Facebook is a publicly traded corporation they list on the NASDAQ. Meanwhile, Telegram is a shadowy privately held entity operating on the fringes. Therefore, central banks and regulators could work with Libra while trying to suppress TON.

Facebook vs. Telegram

Finally, I think Telegram lacks to the resources to launch a payment infrastructure like TON.

Notably, Telegram’s social network is tiny. Tellingly, Statista did not list Telegram among its 10 largest social media networks in July 2019. However, three of Statista’s 10 most popular social networks worldwide in July 2019 were Facebook products.

Those networks were:

  • Facebook with 2.325 billion global users.
  • WhatsApp with 1.6 billion users worldwide.
  • Facebook Messenger with 1.3 billion worldwide users.

In addition, one other Facebook product, Instagram had one billion users globally in July 2019. Consequently, Facebook’s social networks have a theoretical membership of 6.225 billion people. Notably, Worldometers estimated Earth’s population at 7.7 billion people in July 2019.

Telegram, in contrast, claims it had 200 million users in February 2018, the most recent count I could find. In addition, Durov was boasting about adding three million users to Telegram in February 2019, The Vox reports.

Given these numbers, I do not think Telegram’s network is big enough to launch a successful global social media currency. I believe Facebook’s network; on the other hand, is big enough to support a global cryptocurrency.

Facebook has the Resources to Support a Cryptocurrency, Telegram does not

Finally, I think Telegram lacks the money and technological resources an entity will need to launch a global cryptocurrency.

Telegram’s financial resources are small, Durov could only raise $1.7 billion with his ICO. That’s a lot of for an ICO, but not enough money to fund a financial network that could serve tens of millions of people in dozens of countries.

Facebook (NASDAQ: FB); on the other hand, has vast amounts of cash. Specifically, Facebook had $48.596 billion in cash and short-term investments on 30 June 2019. In addition, Facebook reported a quarterly free cash flow of $4.983 billion, and an operating cash flow of $8.616 billion on the same day.

Facebook has the Money to Build Libra

Finally, Facebook makes money from its social networks. The company reported a quarterly gross profit of $13.579 billion on revenues of $16.866 billion on 30 June 2019. Plus Facebook reported an operating income of $4.626 billion, and net income of $2.616 for the last quarter.

Thus, Zuckerberg can afford to spend billions; or tens of billions of dollars, on the Libra Project. Libra will need that kind of cash, because it will be astronomically expensive to build a working global financial network that offers a liquid crytocurrency. That is what Zuckerberg envisions Libra as.

Therefore, one reason central banks could allow Libra is Zuckerberg has the money to finance it. My guess is one reason why the powers that be, pulled the plug on TON is Durov did not have the money to build it.

Central bankers were afraid Durov’s TON scheme could crash and leave them responsible for his mess. Millions or tens of millions of ordinary people all over the world could lose all their money if something like TON ran out of cash. Libra could keep operating because Facebook has the cash to fund it, for now.

Yes Libra could be a Global Currency

Ultimately, the Libra network’s liabilities could theoretically exceed Facebook’s cash. At that point, the BIS will probably have to step in and takeover. However, I do not think the problem will occur for over a decade.

Hence, Zuckerberg and central bankers bet that the public will accept cryptocurrencies at that point and demand a world currency. Libra will be there  to fill that need.

Therefore, investors and speculators need to buy Facebook stock and watch Libra closely if they want to make money from cryptocurrency. Moreover, I advise speculators to ignore Telegram’s TON because it is a curiosity and niche product. Presently, Libra is probably the future of cryptocurrency.