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Telegram has become the go-to app for heroin, guns, and everything illegal. Can cryptocurrency save it?
“Not even close to the standard you’d expect. Strong ammonia smell. Very jittery. One star,” writes one dissatisfied customer about buying $240 worth of Colombian cocaine. Another reviewer reported a better experience, leaving a five-star review and saying, “Better than the street stuff around me! Recommended.”
This is not a South American drug market or even a dark web market. That’s it Telegramone of the five best in the world most downloaded apps and the communication platform of choice for everyone from activists to cryptocurrency enthusiasts. A recent Fortune tour of the Telegram channels that operate like stores revealed that it’s quick and easy to find everything from pots of heroin to stolen stimulus checks to AK-47 machine guns.
Telegram’s end-to-end encryption means no third party can access user data. But as a result, it has failed to build an advertising-based economy and regulate content. So to keep the lights on without selling user data or enduring the regulatory oversight required to go public, the app turned to cryptography. (Telegram initially created the Telegram Open Network (TON), but abandoned the project due to regulatory concerns. The TON Foundation resumed work on the blockchain to preserve the technology, renaming it The Open Network and launching Toncoin.)
If successful, Telegram could become a “super app”Without having to clean up their act. But the implications of this go deeper than bringing the dark web to the masses: extremists and criminals who run popular channels can earn cryptocurrency for their content.
“Creating a Telegram is easier than creating a Facebook account,” says David Maimon, a professor of criminal justice and criminology at Georgia State University who has monitored thousands of illicit groups and channels on Telegram since 2019. For criminals, “Telegram now is the place to go.”
The dark net in your pocket
Telegram’s philosophy is rooted in its political origins. CEO Pavel Durov created Russia’s most popular social media network, VKontakte. In 2014, he was forced to flee after refusing to share his Ukrainian users’ data with the government. Before his expulsion, he developed Telegram to communicate with his brother, and now CTO, Nikolai, out of fear of government spying.
With over 900 million monthly active users, Telegram has almost doubled in size since 2021 and aims to reach 1.5 billion by 2030. Headquartered in Dubai, he has “revealed 0 bytes of user data to third parties, including governments.” As a result, it is difficult to regulate and monetize, leading to a boom in illicit channels. (Fortune messaged Telegram’s PR channel seeking additional comment but did not receive a response.)
The dark net itself is slow, requires the Tor browser, and its complex URLs change frequently. Telegram can be easily found on the App Store. And if anyone can imagine something they want, Telegram almost certainly has it. LSD and OxyContin. Cloned credit cards. Stimulus checks. Winding paragraphs of stolen identitieswith victims reduced to names, birth dates, Social Security numbers, emails, passwords, home addresses and credit card numbers. Typing vaguely related jargon into the app’s search engine yields dozens of channels, many with tens of thousands of members competing to offer you the best deal.
Channels feature drop-down menus, shopping carts, wish lists, and reviews. An “exclusive for members of the carding industry” offers free tutorials on how to commit fraud, before customers move on to purchasing CVV codes and card clones. “Our hundreds of satisfied customers will attest to the fact that we offer only the highest caliber supplies for your project. We appreciate your business!” the admin writes in a broadcast to more than 50,000 members. In the most mundane corners, discounted gift cards, flights and hotel stays change hands. “It’s truly crazy what’s happening. The spectrum it’s very broad,” says Maimon.
So attracting big advertising dollars has proven to be a challenge. “If you protect data and privacy, you can’t sell ads,” Cosmo Jiang, a portfolio manager at Pantera Capital, told Fortune. “They’ve been really bad at monetization.”
Telegram launched an ad platform in 2021. Advertisers can post text messages of 160 characters or less on channels with at least 1,000 subscribers. Telegram channels generate 1 trillion views monthly, but only 10% of them are monetized with ads, Durov he said in February.
Turning to Cryptography
An alternative option for Telegram to raise some money is crypto, which promises the “greatest potential to maintain its control and monetize,” says Jiang of Pantera, which invested in TON. The funding is from Pantera “The greatest investment of all time”, and earlier this month, the company revealed that it is increasing its initial sum, according to a letter shared with investors and seen by Fortune.
Launched in 2018, the original TON network was abandoned in 2020 after a legal battle with the Securities and Exchange Commission. But now, amid a more favorable regulatory environment and better market conditions, the company is moving headlong into crypto in a desperate attempt to monetize without bowing down to authorities.
TON, also known as Toncoin, Jiang notes, is Telegram’s “largest liquid asset on its balance sheet.” It accrues staking rewards from transaction fees and protocol issuance. Additionally, there are “commercial agreements” through which it earns more TON over time based on certain performance criteria, Jiang adds.
Telegram in September saw the launch of a self-custodial wallet called TON Space — built by third-party developers — that lets users send USDT, its native Toncoin, and Bitcoin to other users. Most illicit payments are made outside the app via cryptocurrency, Maimon says, though he has seen “some mentions” of TON wallet payments starting to appear on Russian-operated channels. But with the wallet still in its infancy, TON transfers for illicit goods could become more popular.
Building on this momentum, Telegram announced in March that channel owners would begin receiving 50% of any revenue generated from ads on their channels, with all payments settled in TON. It also unveiled its Mini Apps feature, which allows users to create apps within Telegram in an attempt to become more like the super app WeChatwhich has more than 1.3 billion users, mostly Chinese.
When browsing some of the illicit channels recently, the only ads that appeared were links to rival stores. So, at least for now, criminals who run stores and extremists who broadcast propaganda will be paid in Toncoin for ads on their channels.
So far, Telegram’s crypto-focused strategy is working. Toncoin has nearly tripled since March, trading at around $7, according to data from CoinGecko. In the same month as the revenue sharing announcement, Durov revealed the company is “approaching profitability.”
“If TON really takes off, they’ll never need to go public,” Jiang says. On one channel dedicated to stolen stimulus checks, a salesman quotes Lil Wayne: “Scared money don’t make money.” On another, a shop of stolen bank details that streams to more than 27,000 subscribers, are the words: “Put food on the table.”
(This article has been updated to add clarification about The Open Network’s role in the development of the TON blockchain and that the self-custody wallet integrated into Telegram was developed by a third party.)