Remember when everyone realised Facebook was selling their personal data to advertisers?
Or, at least, pretended to realise, that is…
Because by 2018, when the Facebook scandal hit, people generally took for granted that if an internet service was free to use, that was because the users were the product.
It was basically a catchphrase… “If the service is free, it’s because you’re the product.”
People knew it. People accepted it. But at the same time, people didn’t really want to think about it too much.
Using free internet services was like eating McDonald’s. It tasted great , but you didn’t ever want to delve too deeply into how it was made.
Eventually though, curiosity got the better of people. And delve they did. Which is what led to the whole Facebook/Cambridge Analytica scandal in 2018.
From the Guardian in March 2018:
The data analytics firm that worked with Donald Trump’s election team and the winning Brexit campaign harvested millions of Facebook profiles of US voters, in one of the tech giant’s biggest ever data breaches, and used them to build a powerful software program to predict and influence choices at the ballot box.
A whistleblower has revealed to the Observer how Cambridge Analytica – a company owned by the hedge fund billionaire Robert Mercer, and headed at the time by Trump’s key adviser Steve Bannon – used personal information taken without authorisation in early 2014 to build a system that could profile individual US voters, in order to target them with personalised political advertisements.
Christopher Wylie, who worked with a Cambridge University academic to obtain the data, told the Observer: “We exploited Facebook to harvest millions of people’s profiles. And built models to exploit what we knew about them and target their inner demons. That was the basis the entire company was built on.”
Yes. That’s how advertising works.
It’s the same way advertising has always worked.
You harness people’s emotions and channel them into a deep desire for the product or service you’re trying to sell them.
The more data you have on your customers, the easier it is to determine their hopes, dreams, desires and fears.
The easier it is to harness and channel their emotions.
And the bigger “list” of potential customers you can access, the more successful your campaign will be. It’s a numbers game.
(Probably worth noting here that I’ve worked in advertising for more than a decade. It’s my main job outside of this website.
So maybe I have a bit of a curse of knowledge with all this stuff. But my non-advertising friends all still used to say, “if the service is free, you’re the product.”)
So Facebook became the holy grail to advertisers.
Because of Facebook, entire new industries emerged and became insanely profitable.
Case in point, the whole dropshipping craze: Inside the weird, get-rich-quick world of dropshipping (Wired).
Of course, the press being the press, Facebook advertising was all spun into being the sole reason Brexit happened and Trump was elected. Gotta stir up the ire to get those clicks.
And of course, suddenly everyone pretended that they didn’t know their Facebook data was being sold to advertisers and we had a couple of years of “big tech backlash”.
(Which I covered extensively when I was an Editor at Southbank Investment Research. I’d link to some of those articles, but the archive has been taken offline now. RIP).
You can check out any time you like, but you can never leave
What was equally as concerning for people was that Facebook also owned WhatsApp (which it bought back in 2014). And although many people were beginning to delete their Facebook accounts, no one wanted to leave WhatsApp.
However, it soon became clear that Facebook was planning to integrate all its apps.
(Zuckerberg Plans to Integrate WhatsApp, Instagram and Facebook Messenger – New York Times, 2019)
So, Facebook was set to become the Hotel California… you could check out any time you liked, but you could never leave.
That’s when a fairly fringe privacy-first messaging app called Telegram started gaining traction.
As you can see on the chart above, Telegram has been around for a while. But it was during the big tech backlash that its popularity really started ramping up.
And this ramp-up in users coincided with an idea…
Given that Telegram was privacy-first, anti-big tech, and gained popularity at around the same time as cryptocurrency burst into the mainstream… well, of course it decided to launch its own crypto via a now infamous Initial Coin Offering (ICO).
The Telegram ICO that wasn’t
Right as ICO fever was reaching its peak, in January 2018, Telegram announced its plans for a new cryptocurrency – Telegram Open Network – funded by the biggest ICO in history.
Before the official public ICO, Telegram had a series of private sales and raised an insane, record-breaking $1.7 billion.
The project attracted prominent investors from all over the world, including funds Sequoia, Ribbit Capital and Lightspeed Ventures, plus Russian oligarch Roman Abramovich and former Russian government member Mikhail Abyzov.
This meant Telegram had all the money it needed to fund the project, and it decided to cancel its public ICO.
Telegram Open Network (TON) was set to launch on October 31st 2019.
Everything was going to plan.
Then, just a couple of weeks before the launch, the Securities and Exchange Commission (SEC) did what is does best: it declared TON was an unregistered security and shut it down.
From The dreaded SEC:
Washington D.C., Oct. 11, 2019 — The Securities and Exchange Commission today announced that it has filed an emergency action and obtained temporary restraining order against two offshore entities conducting an alleged unregistered, ongoing digital token offering in the U.S. and overseas that has raised more than $1.7 billion of investor funds.
According to the SEC’s complaint, Telegram Group Inc. and its wholly-owned subsidiary TON Issuer Inc. began raising capital in January 2018 to finance the companies’ business, including the development of their own blockchain, the “Telegram Open Network” or “TON Blockchain,” as well as the mobile messaging application Telegram Messenger. Defendants sold approximately 2.9 billion digital tokens called “Grams” at discounted prices to 171 initial purchasers worldwide, including more than 1 billion Grams to 39 U.S. purchasers. Telegram promised to deliver the Grams to the initial purchasers upon the launch of its blockchain by no later than October 31, 2019, at which time the purchasers and Telegram will be able to sell billions of Grams into U.S. markets. The complaint alleges that defendants failed to register their offers and sales of Grams, which are securities, in violation of the registration provisions of the Securities Act of 1933.
A court case ensued, which Telegram, of course, lost.
Telegram was ordered to pay an $18.5 million fine, terminate TON’s development and pay back everyone who’d invested in it – which it did.
Then something unexpected happened…
TON launched anyway.
TON becomes a grassroots crypto
Because TON was open source, all the code was freely available on GitHub.
So, although Telegram was forced to officially cut ties with the project, the developers that worked on it decided to launch it anyway, for free.
Launching for free meant the network had no value, so the SEC couldn’t say it was a security… it was simply a free opensource software that anyone could use.
Telegram Open Network was rebranded to simply The Open Network, and its token was rebranded to Toncoin (TON).
It ended up having a quintessential crypto launch.
From The Open Network:
Mining on TON commenced spontaneously and randomly.
In 2020, after its court case, the Telegram team agreed on a settlement with the U.S. Securities and Exchange Commission and was forced to cease its work on The Open Network.
In order to finally stop their involvement in the project and, at the same time, allow enthusiasts to continue studying the technology, the Telegram team put all the available coins of the network into smart contracts, which anyone could mine on equal terms.
July 6, 2020, is considered to be the day TON mining was born; that’s the exact time when the miner code was published in the repository, and a guide on how to mine was posted on the project’s website.
At that time, the blockchain was still in its testnet, and the tokens had no value and could only be used for testing purposes. The most surprising thing to happen was that a year after mining began, an entire Toncoin mining industry flourished.
The final result was all tokens were distributed among tens of thousands of miners. The TON project chose not to hold an ICO, IEO, or any other type of token sale. Its growth was organic much like Bitcoin’s.
Naturally, just like in any other project, those who started mining early on had little to no competition. What you’ll notice, however, is that these early miners happen to be the most passionate about the projects and technology they follow.
A case in point is all the donations from TON miners that led to the creation of the TON Foundation and the TON Reserve, both of which will be relied upon to develop the network.
So, TON went from being one of the most insider-owned, VC-bro crypto projects to one of the most open and free.
I bet the SEC didn’t see that one coming.
And over the last few years, TON has gained a ton of popularity (sorry).
So, I think it’s about time we did a deep dive on it.
And with that extremely lengthy intro out of the way, let’s get on with the deep dive proper…
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