Is Telegram an ICO Scam?

Cryptocurrency was the go-to investment of people who wanted to make lots of money in a short period of time. In fact, especially now that it seems that Bitcoin is back on its bullish ways. Bitcoin along with other altcoins have been able to recover after weeks of looking bearish mainly due to regulatory concerns.

If you think that you’re a bit too late to invest in Bitcoin, then that’s where ICOs come into play. Part investment and part cryptocurrency, isn’t it such a great idea? Though there really is no actual utility for most tokens produced by ICOs, these companies are attracting billions of dollars. And in recent months, there are many ICOs that have turned out to be scams. One of the ICOs that is now in question is Telegram.

A Bit About Telegram

Telegram was founded by Russian entrepreneurs Pavel and Nikolai Durov. What made Telegram special than other ICOs is that it had a $2 billion valuation. It is an app that competes with the like of Viber and WhatsApp. However, it is important to point that “compete” is quite a misleading term for this app. For one, it makes no money mainly because it doesn’t have a viable business model. And this isn’t exactly surprising. It was made to be this way.

According to Telegram’s FAQ, “Pavel Durov, who shares our vision, supplied Telegram with a generous donation, so we have quite enough money for the time being”. They also mentioned that “If Telegram runs out, we will introduce non-essential paid options to support the infrastructure and finance developer salaries. But making profits will never be an end goal for Telegram”.

What Makes It a Scam?

Telegram has published a white paper that has delineated its plans for the ICO. It has touted the potential benefits of the token. Unfortunately, its paper lacks depth.

According to Nick Tomaino, the founder of 1confirmation, “The teams that will win are teams with deep historical context who have been tinkering with consensus mechanism and scalability for several years. It’s more like science than entrepreneurship”. He also mentioned that “In my mind, Telegram doesn’t have the talent to do that”.

It is now clear that the ICO is set to cover the bills for Telegram. According to Gregory Klumov, CEO and Founder of STASIS: “with growing user base, he would eventually run out of money”.  he also added that “Therefore he opted for an ICO as a mechanism to raise funds without getting outside investors into Telegram’s shareholder capital”.

Burning Money and Therefore Turn to ICO?

It is apparent that Telegram turned to ICO in order to raise funds to cover its expenses. Travis Scher, the Vice President of Investments at Digital Currency Group believes that this is the case. “It really felt like it was one of these start-ups that’s burning through cash and needs a way to bring money in to keep funding their operations”.

If this is true, this isn’t the first or the last of the ICO scams out there. In fact, there are websites from that have collected Bitcoin, Ether, and even cash and disappeared online without a trace.  If this is the case, these practices give ICOs a bad name.