Memecoins, Audience & Telegram

"The longer we go without seeing Telegram’s TON...the more skeptical I get about [its] potential, and the more [it] begins to look like an overt 2017-2018 cash grab.”

Yesterday's top story touched on a bunch of major themes from my 2020 theses.

Telegram, the messaging giant and crypto’s largest SAFT seller ($1.7 billion in its much hyped 2018 private placement), has been having a tough go of it with the SEC. The company initially planned to begin the distribution of its “Telegram Open Network” (TON) tokens in October, but was stopped in its tracks when the regulator filed an emergency action and restraining order against the company, alleging the distribution constituted an unregistered securities offering.

Though the company is challenging the allegations in court (they notched a small victory yesterday when a court ruled the SEC was overreaching in its request for bank records), they seem to be actively taking steps to separate the “gram” tokens from the only thing that really makes them interesting in the first place: the integration into the 200 million+ user messaging platform itself.

Telegram released a statement yesterday distancing the TON Wallet from the Telegram app. That makes sense if you’re trying not to trip the “efforts of others” prong of the Howey test, but not if you’re actually trying to distribute a useful token to your target users.

Exactly zero people happen to believe the two entities are independent (TON Issuer Inc is a wholly-owned sub of Telegram), and the SEC pressure seems to be a good forcing function for Telegram to build out the "not-Telegram" TON network before they recalibrate the gram distribution plans for actual Telegram users.

That may be a good thing given how other mega-token distributions have fared recently.

According to the company:

"Telegram’s TON Wallet application is expected to be made available solely on a stand-alone basis and will not be integrated with the Telegram Messenger service...Telegram may integrate the TON Wallet application with the Telegram Messenger service in the future to the extent permitted under applicable laws and governmental authorities.”

Reading between the lines, it looks like they might forge ahead with the gram token distribution plans, anyway. Perhaps to the chagrin of their investors, who want liquidity, but also don't want to lose the ability to dump grams on retail users during the initial distribution. Without the benefit of Telegram’s massive existing user base to sop up demand, you’d expect the price (especially vs. its sky high early 2018 private valuations) to tank. That hurts the weaker short-term crypto "VC’s", and spares the retail Telegram users, who can always get in at a lower price when the TON wallet does eventually find its way baked into the app. (When, not if.)

That seems like a net positive? I’m kind of on the SEC’s side here?

Regardless, there’s a greater trend about memes and audience that's gradually playing out.

That is, you have the chance to bootstrap a monetary crypto asset if you have an audience of believers or captive users. Pick one of two.

You can’t fake audience or real users, but you can fork useful functionality into your token since everything in crypto is free and open-source. The trick is that you must also strike the balance between earning audience and actually being able to launch your token to that audience.

When TON and Libra were first announced, I was curious how these initiatives would play out. It seemed like Telegram, Facebook et al could launch tokens, fork in functionality/tooling around those tokens, foie gras them to their existing users, and call it a day.

In practice, what we’ve seen so far with the healthiest “memecoins” like bitcoin and ethereum (and perhaps polkadot when it launches) is that it's earned communities that are (ironically) benefiting from SEC regulation.

It’s proving difficult for the big platforms to drop what look more and more like affinity tokens to their users because they keep running into regulatory brick walls. We’ve seen this with Kin, Grams, and Libra so far, and perhaps it will prove a universal gating item to centralized platform-coins.

What’s more interesting is whether we’ll start to see this friction translate to major institutional - crypto network alliances instead. “Protocol M&A” by another name. I’d look at networks with big token treasuries (Ripple, Stellar, Tron?) that could brute force their way into legitimacy by turning their monetary premiums into capital they share with new institutional allies.

We’re seeing hints of this already. Ripple and SBI demonstrate how XRP could scale if Ripple is able to cut more big global banks in on their seigniorage action. Tron has proven adept at using its monetary premium to print currency for the M&A of actually useful tech and user bases (Bittorrent, Polo, Steem?, dLive?)

If institutions want in on the crypto action, and find themselves legally restricted from rolling their own coins, I’d expect more unholy alliances that marry memecoin maintainers and platforms with legit audiences.

Whether you like it or not.

-TBI