Social and Encryption: Telegram's Next Decade

Written by: 0x26, Rhythm BlockBeats

In August 2023, the instant messaging protocol Telegram celebrated its tenth anniversary. In addition to celebrating over 800 million monthly active users, Telegram highlighted its Story feature on the anniversary day, which allows users to share video and image updates with contacts, similar to a feature on Meta's social platform Instagram.

Various signs indicate that the "paper airplane," which started as an independent, secure, and privacy-focused platform, seems to be breaking free from the pull of gravity and soaring to greater heights.

One day in 2012, Telegram founder Pavel Durov and his former colleagues from VK threw paper airplanes made of banknotes out of the office window in a bustling area of St. Petersburg.

For users familiar with cryptocurrency, the popular bot services on Telegram are thriving, with the most well-known and highest market cap project being Unibot. This bot product, which has been listed for less than six months but has already surpassed a market cap of $150 million, has captivated many crypto users due to Telegram's vast user base and its simplicity and convenience.

Supporters often claim, "Unibot is a hundred times better than the largest wallet application on the market, Metamask, and with Telegram's 800 million users, Unibot's mass adoption will surpass that of Metamask."

Why do so many people have high hopes for products on Telegram? The reason is simple: Telegram, with its broad user base and sufficient openness, is an undeveloped frontier.

As founder and CEO Pavel Durov wrote in his tenth-anniversary letter,

"In just 10 years, Telegram has gained over 800 million active users purely through word of mouth.

…

Telegram's next step is to go beyond messaging and lead innovation in social media. We should leverage our visibility to improve the lives of hundreds of millions of people, inspiring and uplifting people on Earth.

While the past 10 years have been exciting, the next 10 years will be the time for Telegram to realize its true potential."

Super App

In recent years, Telegram's attempts to transition from a messaging protocol to a broader social platform have not ceased. With the launch of its paid Premium subscription service in June 2022, the frequency of product updates on Telegram has rapidly accelerated.

Since 2022, the speed of product updates on Telegram has noticeably increased, primarily focusing on social features.

Not only has it recently launched a Story video-sharing feature to compete with Instagram, but Telegram also introduced the Premium subscription service in June 2022, providing value-added services for Premium users. It has continuously revamped the platform's emoji system, launched a blockchain-driven anonymous number login feature, and introduced the Topic feature—directly competing with Discord's multi-group management capabilities.

It seems that Telegram aims to encompass the features of outstanding social media platforms both domestically and internationally, whether it be Instagram or Discord. Moreover, Telegram is learning from WeChat, attempting to leap from a messaging protocol to a social platform, ultimately becoming a super app.

Thanks to the open-source nature of the Telegram client, various rich SDKs, and a comprehensive Bot API provided for developers, countless developers can create various service bots themselves and freely compete with the official application. Users can easily find various service functions on Telegram, such as music, movies, books, and games.

The TON Foundation, closely related to Telegram, launched the Telegram Apps application center in August this year, integrating various applications within Telegram, from games and wallets to practical tools.

Telegram's "Dark History"

Telegram and cryptocurrency seem to share some similarities; both were initially underestimated and often used for illegal purposes, while aiming for transformation and targeting open and transparent large-scale application scenarios. Furthermore, Telegram once chose to issue its own cryptocurrency—in 2017, during the ICO boom, Telegram planned to develop the next-generation blockchain platform TON (Telegram Open Network) and intended to name its cryptocurrency Gram. However, the good times did not last long, as the TON project, which raised over $1.7 billion, was halted due to U.S. regulatory intervention.

Telegram's choice to issue a cryptocurrency instead of going public like social giants Meta and Tencent has its reasons: founder Pavel Durov insists on freedom of speech and privacy protection, as evidenced by his early experiences.

Young and already showcasing remarkable programming talent, Pavel Durov and his genius brother—Nikolai Durov, who has won multiple gold medals in mathematics and information Olympiads—founded VKontakte (VK), the most popular social website in the Russian-speaking world. Although it borrowed ideas from Facebook, VK was the only product that outperformed Facebook in free market competition.

As VK's influence grew and factional struggles in Russia intensified, the Russian government demanded VK shut down opposition social pages to stabilize public opinion. Pavel firmly refused.

To uphold freedom of speech, the uncompromising Pavel had no choice but to flee Russia. Even so, he was ultimately forced to relinquish VK—by selling his stake in VK, which eventually ended up in the hands of companies closely related to the Russian government. It is rumored that Pavel made hundreds of millions of dollars from the sale of his shares.

Pavel Durov's early response to the consortium's attempt to acquire VK.

The inspiration for Telegram came from Pavel's experiences of outsmarting the Russian government during his time at VK. In a critical moment, Pavel suddenly realized that all his communication methods, including phone calls and emails, could be monitored by the government.

The successful technical foundation of Telegram comes from the underlying encryption protocol MTProto, developed by Nikolai and a group of top geeks. Meanwhile, Pavel's competition with Mark Zuckerberg shifted from social media to messaging protocols—Facebook acquired WhatsApp in February 2014. Today, Telegram and WhatsApp frequently clash over privacy issues.

Even though the plan to issue a cryptocurrency to fund operations was halted by the U.S. government, Telegram has never enforced charges on users. In its early days, Telegram's operational funds primarily came from the personal wealth of the Durov brothers. However, as the user base continued to grow and product features upgraded, Telegram's operational costs surged, leading Pavel to choose to finance Telegram through bonds.

Since 2021, Telegram has accepted external funding twice. The first was in March 2021, when Pavel announced that he raised over $1 billion by selling bonds. The second was in July 2023, when Pavel announced that Telegram issued $270 million in bonds to maintain operations, with Pavel himself purchasing 25% of them. In this letter, Pavel also revealed two important pieces of information: Telegram adds 2.5 million new users daily; Pavel himself does not own real estate or private jets, but only "owns" Telegram, some Bitcoin, and Toncoin.

Telegram's Crypto Landscape

Following the examples of Meta and WeChat to create social media and a more open super app can only be seen as a superficial approach; introducing and promoting cryptocurrency is the real hidden strategy.

Superficial Approach, Hidden Strategy

Although Telegram's official blockchain platform Ton Network was declared finished in 2020, at the end of 2021, Pavel Durov suddenly posted on his personal Telegram channel stating,

"I am encouraged to see the champions of the Telegram programming competition continuing to develop the open-source TON project and rebranding it as Toncoin.

…

Toncoin is different from the original TON; it is independent of Telegram. But I hope their team can achieve the same success."

Note: Toncoin is the token of The Open Network.

This statement was seen as one of Telegram's endorsements of the TON project, and it garnered over 7 million views, far exceeding the daily data of Pavel's channel.

Subsequently, TON has been closely associated with Telegram in a manner that is unofficial yet almost official.

In 2022, Telegram launched a domain name system based on Ton Network and planned to auction Telegram usernames as NFTs, settling in TON tokens. In promoting a decentralized domain name system, the freedom-loving Telegram even resorted to centralized and coercive measures.

According to reports from Twitter and V2 EX users, Telegram unexpectedly reclaimed usernames that had been inactive for a long time and some premium usernames used for announcement channels. One user whose username was reclaimed stated, "No one is willing to pay about $160 for a Telegram username." However, he clearly underestimated the enthusiasm of the crypto industry, as multiple usernames have been sold for over $2 million.

Data source: Statista, unit: $1,000

In October of the same year, Pavel stated that he personally got involved and, along with four others, built a decentralized auction platform called Fragment based on TON in just five weeks. Not only usernames, but also Telegram's anonymous numbers and Premium features have been launched on the Fragment platform, supporting TON token payments.

The non-custodial wallet Wallet (TON Space) built into Telegram was launched in August 2023, currently supporting USDT, BTC, and TON.

As a financial settlement method that Telegram anticipates, the built-in non-custodial wallet not only ensures security but also eliminates the need to introduce third-party payment settlement platforms as hidden risk points for Telegram. It unlocks the financial attributes of the Telegram platform itself, conveying financial security and freedom to more users, significantly increasing the composability and user stickiness of Telegram's features.

Demystifying The Open Network

As for the closeness of the relationship between Telegram and TON, perhaps only Pavel and his inner circle can fully clarify it.

According to a member of the former core development team of TON, drawesomedoge, we can outline some details in the development process of TON and the TON token.

New Ton, formerly known as TON, had a core development team of 13 members from Slavic-speaking countries like Russia and Ukraine, who continued to maintain and develop the project after the official TON was announced to be halted, gaining Pavel's recognition by the end of 2021. As New Ton "rose to power," another branch called Free TON chose to leave, rebranding itself as Everscale and changing its programming language.

The distribution of the TON token is even more mysterious. In general, the TON token has already been distributed through Proof of Work (PoW) mining, with the vast majority of token owners' information remaining unknown.

According to drawesomedoge, out of the total supply of 5 billion TON, about 100 to 200 million were allocated to the earliest developers. The remaining tokens were divided into 4.7 billion and 1 billion, respectively, to be mined in two PoW smart contracts. The majority of the 4.7 billion TON tokens were mined within two to three months in mid to late 2020.

Information from the TON official website states,

"To prevent the team's cessation of work from affecting the project's development and to allow enthusiasts to continue researching the technology, the Telegram team placed all available tokens in the network into smart contracts, allowing anyone to mine fairly.

Starting in June 2020, all circulating Toncoin tokens (accounting for 98.55% of the total supply) were opened for mining. Subsequently, the miner code was published in the code repository, and tutorials on how to mine were released on the project website. At that time, the blockchain was still in the testing phase, and the tokens had no value, only being used for testing purposes.

On June 28, 2022, the last Toncoin was mined, successfully concluding the initial distribution of TON."

Today, TON has transitioned to Proof of Stake (PoS) and is increasing its supply at a rate of approximately 6 per thousand per year, or about 30 million TON annually.

The uncertainties surrounding the distribution of TON loom like the sword of Damocles over all enthusiasts. As for who took the largest portion of TON, drawesomedoge believes it may have been early developers and enthusiasts, while also noting that the TON Foundation holds more tokens than the core developers of TON.

This brings us to the TON Foundation, which is responsible for finance, marketing, and all other work except development, making it one of the few entities exposed to the outside world regarding TON. According to drawesomedoge's speculation, the founding members of the TON Foundation may be early investors in Telegram. Additionally, LinkedIn data shows that many members of the TON Foundation are located in Dubai, which is rumored to be the headquarters of Telegram.

Among the founding members of the TON Foundation, we also find Andre w Rogozov, the former CEO of VK, which Pavel founded. Andre worked at VK for seven years and stepped down as CEO in 2021, a key time for the launch and distribution of the TON token. This accumulated information inevitably raises suspicions about whether all of this is a ploy by Pavel to evade U.S. regulations.

Wild Growth of Crypto Services

Compared to TON, Telegram, as the most crypto-friendly platform, is more famous for its various crypto groups, bots, and announcement platforms. A large number of real users migrating from Slack and WeChat have brought fresh and high-quality users to Telegram, nurturing various services such as news, CEX announcements, large transfer notifications, and daily push notifications. In summary, Telegram possesses the two essential elements needed by major Layer 1 projects—users and developers.

Innovation thrives in this open and vibrant soil.

Although Telegram's core features are not open to third-party developers, transaction bots that simplify user operations and allow direct interaction with blockchain networks like Ethereum through commands have gained popularity. These bots not only have broader dissemination than TON but also possess strong data support—on August 26, Unibot's trading volume accounted for 2% of the entire Uniswap, referencing Uniswap's absolute leadership in the DEX space, indicating that Unibot's trading volume could surpass some well-known VC-backed DEXs.

Not only is the trading volume high, but the revenue from these tool products is also substantial. According to statistics from Twitter user Sammi, the leading Unibot is expected to generate over $6 million in monthly revenue from transaction taxes and fees, while MaestroBots relies entirely on subscription fees and transaction fees, generating over $4 million in monthly revenue.

The resulting wave of Telegram bots has led to the emergence of various types of bot services, including leveraged contracts, sports prediction markets, airdrop farming, and derivatives. The crypto data analysis site Coingecko has even added a category for Telegram Bots, with over 100 projects listed, totaling a market cap of over $250 million.

One can even imagine that in a few years, when a figure like Elon Musk "calls out" a new generation of Dogecoin, users will no longer open wallets, start DEX or CEX, and undergo personal verification. Instead, they will open Telegram, enter the token code and amount in the pinned bot window, and directly send instructions to Ethereum through the bot protocol to complete the purchase.

Unlocking a phone and entering commands replaces entering wallet passwords and opening web pages, making the process not only smoother but also quicker.

For cryptocurrency, every user can call various data and contracts anytime and anywhere through bots. For Telegram, which has a built-in wallet function, industries such as e-commerce and food delivery are also likely to integrate and migrate to bots. We might look forward to a future where Telegram addresses the vast majority of ordinary people's daily needs.

Whether it's TON or those bot products based on Telegram, they are crucial components in stimulating market vitality and imagination, promoting mass adoption. As TON ecosystem enthusiast Jerry said, "A product with 800 million monthly active users needs no introduction; it has everything you want."

With a massive user base that continues to grow, Telegram is leveraging cryptocurrency to target social interactions, opening up broader horizons for itself and the crypto industry.

Telegram has spent 10 years teaching users what an independent and secure messaging protocol is, and what Telegram is doing and will do is something that similarly scaled giants will find hard to learn and replicate.