“Not even close to the standard you expect. Strong ammonia smell. Very edgy. One star,” writes one disgruntled customer about his $240 purchase of Colombian cocaine. Another reviewer reported a better experience, leaving a five-star rating and gushing, “Better than the stuff on the street around me! Recommended.”
This is neither a South American drug market nor a dark web dark market. Telegramone of the five best in the world Most downloaded applications and the communication platform of choice for everyone from activists to cryptocurrency enthusiasts. A recent tour of Fortune Telegram channels that operate as stores revealed that it is quick and easy to find everything from vials of heroin to stolen stimulus checks and AK-47 machine guns.
Telegram's end-to-end encryption means that no third party can access user data. But as a result, it has failed to build an advertising-based economy or regulate content. So, to continue operating without selling user data or enduring the regulatory oversight that going public requires, the app turned to cryptocurrencies. (Initially, Telegram created the Telegram Open Network (TON), but abandoned the project due to regulatory issues. 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 needing to clean up their act. But the implications of this go beyond bringing the dark web to the masses: extremists and criminals running popular channels could earn cryptocurrency for their content.
“Creating a Telegram account is easier than creating a Facebook account,” says David Maimon, a professor of criminal justice and criminology at Georgia State University who has been monitoring thousands of illicit groups and channels on Telegram since 2019. For criminals, “Telegram is now the place to go.”
The dark web in your pocket
Telegram’s philosophy is rooted in its political origins. Its chief executive, Pavel Durov, created Russia’s most popular social network, VKontakte. In 2014, he was forced to flee after refusing to share the data of his Ukrainian users with the government. Before his ouster, he had developed Telegram to communicate with his brother, and now chief technology officer, Nikolai, out of fear of government spying.
With more than 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, has "It disclosed 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 I sent messages to the Telegram PR channel seeking additional comments, but received no response.)
The dark web itself is slow, requires the Tor browser, and its complex URLs change frequently. Telegram can be easily found in 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 identities, with the victims reduced to names, dates of birth, Social Security numbers, emails, passwords, addresses and card numbers. Typing vaguely related slang into the app's search engine turns up dozens of channels, many with tens of thousands of members competing to give you the best deal.
Channels feature drop-down menus, shopping carts, wish lists, and reviews. One “exclusively for card industry members” offers free tutorials on how to commit fraud, before customers start purchasing CVV codes and card clones. “Our hundreds of satisfied customers will attest that we only offer the highest level of supplies for your project. We appreciate your business!" writes the administrator in a broadcast to more than 50,000 members. In the most banal corners, discounted gift cards, flights and hotel stays are exchanged hands. “It's really crazy what is happening. The spectrum is really broad,” says Maimon.
Attracting large amounts of advertising dollars has therefore proven to be a challenge. “If you protect data and privacy, you can’t sell ads,” explains Cosmo Jiang, a portfolio manager at Pantera Capital. Fortune. “They’ve been really bad at monetizing.”
Telegram launched an ad platform in 2021. Advertisers can post text messages of 160 characters or less in channels with at least 1,000 subscribers. Telegram channels generate 1 billion monthly views, but only 10% of them are monetized with ads, Durov said. saying in February.
Moving on to cryptocurrencies
An alternative option for Telegram to make some money is cryptocurrencies, which promise the “greatest potential to maintain control and monetize,” says Pantera’s Jiang, who has invested in TON. The funding is from Pantera. “The largest investment ever made”, and earlier this month, the company revealed that it will increase 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 following a court battle with the Securities and Exchange Commission. But now, amid a more favorable regulatory environment and improved market conditions, the company is racing headlong into cryptocurrencies in a desperate attempt to monetize without bowing 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 “trading agreements” through which it earns more TON over time based on certain performance criteria, Jiang adds.
In September, Telegram launched a self-custodial wallet called TON Space (built by third-party developers) that allows users to send USDT, its native currency Toncoin, and Bitcoin to other users. Most illicit payments are made outside the app via cryptocurrencies, Maimon says, though he has seen “some mentions” of payments through the TON wallet starting to appear on Russian-operated channels. But since the wallet is still in its infancy, TON transfers for illicit goods could become more common.
Building on this momentum, Telegram announced in March that channel owners would begin receiving 50% of the revenue generated by ads on their channels, and that all payments would be settled in TON. It also revealed its Mini Apps feature, which allows users to create apps within Telegram, in a bid to become more and more like the super app. WeChatwhich has more than 1.3 billion users, mostly Chinese.
While 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 spread propaganda will receive money in Toncoin for ads on their channels.
So far, Telegram's cryptocurrency-focused strategy is working. Toncoin has nearly tripled since March and is trading near $7, according to data from CoinGecko. The same month as the revenue sharing announcement, Durov revealed the company is "close to profitability."
“If TON really takes off, then they’ll never have to go public,” Jiang says. On a channel dedicated to stolen stimulus checks, a seller quotes Lil Wayne: “Scared money don’t make money.” On another, a store of stolen bank data that broadcasts to more than 27,000 subscribers, the words read: “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 built into Telegram was developed by a third party.)
