10 Reasons Why Telegram Could Fail
The Blockchain is touted as the most revolutionary technology of the decade. No doubt, it has the potential to disrupt the way present-day transactions are conducted. But in all this hype, we have conveniently overlooked the flaws lurking below the surface, which could spell nothing short of doom.
The newest star in the world of cryptocurrency is Pavel’s Telegram. A messaging app with a highly secure chat feature is causing a furore among the investors who are scrambling to cash on this gravy train. Currently valued at $2 billion, trade pundits believe it to be largest ever Initial Coin offering (ICO). In all this frenzy, people are failing to realize that half-baked knowledge about any public offering could result in huge losses.
For a more holistic picture, we are going to discuss some of the inherent flaws in the Telegram ICO.
- A Flawed Business Model
Telegram’s founder Pavel claims that making profits will never be his end goal. While a benevolent thought, he proposes to control a major chunk of the currency for the time being, wherein lies the major flaw. Industry experts believe that Blockchains are useful only when there is no central authority or the risk of the owner folding. In Telegram’s case, this very principle is defeated and forces you to question the feasibility of its business model.
Another school of thought is that with growing consumer base, it is quite possible that Telegram might eventually run out of finances, since it is self-funded by Pavel. To mitigate this risk, the team decided to opt for ICOs as a means for getting the requisite funds without diluting the company ownership. If this is the case, the investors need to think twice before buying the tokens, as the proposed business rationale does not support growth. Eventually, the business would stagnate leading to the Telegram’s downfall.
- Ambiguity Around Government Regulation
Synonymous with ICOs, is the uncertainty of possible regulatory impositions. The White Paper issued by Telegram clearly states that they are unsure of how the government regulation could affect their operations. While there is not much Telegram can do about this, it nevertheless adds to the risk of the investors. For instance, if the regulations were to be too cumbersome, there is a high possibility that Telegram might exit the country, or in a worst-case scenario, shut down its operations.
- Lack of transparency
If you are familiar with cryptocurrencies, you would be well aware that transparency in operations is the key to success for such Blockchain technologies. The rationale being that peer reviews and public feedback could help detect plausible flaws and lead to system improvements. Nakamoto also agreed to this philosophy, which led to the phenomenal success of Bitcoin.
However, Telegram operates in an environment of secrecy. Not inviting public scrutiny could not only be dangerous but propagate distrust, and not surprisingly could lead to its unpopularity and eventual downfall.
- Soles issuer and user of funds
There are no restrictions on how Telegram uses the funds, which could be a risky proposition for the investors. For instance, if the team is unable to build the TON and decides to terminate the contract with the token buyers, there could be every chance that it may not have any money to return anything to the gram holders.
As evident, whether Telegram is a sure bet is far from certain at this point. Such uncertainties about this Blockchain technology could very much impact the investor sentiments and shrink its user base.
- Possible Flaws in the Encryption Technology
Telegram’s decision to “role their own encryption” is looked upon as a fatal flaw in the world of encrypted messaging apps. Their homegrown MTproto Protocol has no proper proofs regarding their security. This makes the application extremely unreliable. The usual practice for cryptographers is to reveal their algorithm completely, but Pavlov refuses to do so, raising some very uncomfortable questions.
- Legal Loopholes
TON Blockchain is likely to function in a new and developing legal environment. Since no one can predict how supportive the legal framework would be for the cryptocurrency market; we cannot discount the associated risk of unfavourable policies.
- Blockchain is susceptible to risks
Blockchains are indeed disrupting the way we conduct our business. But they are not completely risk- free and are prone to failure. There could be mistakes in codes, quantum computing could break all encryptions, or they might just cease to be relevant in the near future. Downfall of Blockchain technology would mean the end of Telegram as well.
- Telegrams security might lead to more losses than gains
The combination of rigorous security at zero cost has been responsible for the dizzying success of Telegram. While the proposition might be appealing to the crypto elite and dissidents, what we tend to overlook is that Telegram also becomes an ideal communication tool for hackers, terrorists, and other low lives.
What especially attracts the underbelly is the Telegram’s secret chat option. Here the messages are encrypted end-to-end and cannot be forwarded from these chat rooms. This gives people added secrecy to conduct their underhand business.
So, the question is how could this impact businesses opting for Telegram? Let’s take the Blockchain-based cloud computing platform DADI as an example here. When DADI launched a dedicated Telegram channel, it experienced strong traction, with more 25000 users showing interest in their development project. What they were not prepared for was the reactions of the toxic community elements that made maintaining the channel a complete nightmare.
We’ve seen death threats, racism, sexism, extortion, impersonation, scamming — and a level of vulgarity that would be unacceptable in any context.” DADI Product Director Paul Regan commented in one of the press interviews.
The deduction is apparent. Telegram no doubt is a great place where you can connect with potential supporters, but it also becomes a source of attraction for scammers. Plus, the presence of highly offensive language, abusive imagery, and other such elements make it a toxic environment for the women and minorities. The only way to deal with it is to hire moderators that can work on the platform 24/7, which is both tedious and expensive.
To make a long story short, Pavel needs to look at some of these flaws and work around it if he does not want to meet the same fate as his previous ventures.
- Previous failure of the Team
Pavel’s experiment with his first digital currency in 2011 was anything but encouraging. Vkontakte, a Russian Facebook clone, failed to expand its user base. To top it, only a percent of users were spending their currency on shopping. Pavel had no other option but to sell his shares, and with the money, he launched Telegram.
While the response to Telegram ICO has been far from lukewarm, the question is, does Pavel have the business insight to pull it off? I guess it’s a wait and watch game.
- Blockchain might just be a fad
The latest buzzword in technology, Blockchain has been extremely successful at least with regard to cryptocurrencies. Many believe that the open source ledger has the potential to revolutionize the way transactions are conducted across sectors, right from banking to healthcare. While it does seem to have certain aspects in its favour, what we are unable to see is the whole gamut of problems lurking below the surface. Industry experts also believe that no real world applications are truly possibly by using this technology. All in all, Blockchain could be nothing more than a fad that could phase out, sooner than expected.
To conclude, while Telegram could emerge as one of the most successful ICOs ever, right now it would make sense to proceed cautiously, till there is more clarity.
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