Arrested Telegram founder: legendary entrepreneurial history and his crypto ambitions

Note: In the early morning of August 25, 2024, Telegram founder Pavel Durov was arrested by the French National Anti-Fraud Office at a French airport. According to French police, Pavel Durov faces multiple criminal charges including "terrorism, drugs, guns, fraud, money laundering, receiving stolen goods, child pornography", and may face up to 20 years in prison.

After Pavel Durov was arrested, many celebrities expressed their support for him, including Musk, American journalist Tucker Carlson, and Pantera Capital general partner Franklin Bi.

Jessy, a reporter from Golden Finance, previously published an article in-depth analysis of the story of Telegram founder Pavel Durov's creation of Telegram and his entry into the crypto world. When Durov was arrested, he republished this article to review his legendary story.

Introduction: "I am not fighting for freedom, I am just using my existence to prove that freedom has not disappeared." - "The Durov Code"

Telegram Pavel Valeryevich Durov (Pavel Durov) presents himself as a fighter who pursues freedom in the business world: in the face of big capital, he responded to rumors that the Internet giant Mail.ru would acquire VKontakte (hereinafter referred to as VK) with a photo of him showing his middle finger. In response to the Russian government's request to censor comments on VK, he posted photos of "dog heads".

However, the above are all stories about Durov when he founded VK, Russia's largest social networking site. Durov is more well-known and worthy of praise for creating Telegram. This social software, which has caused headaches for governments around the world, has become a free front for some anti-totalitarians because its content is difficult to crack, and it is also a hotbed for various crimes.

However, this is also naturally in line with the spirit of blockchain fundamentalists: fighting against totalitarianism, advocating liberalism, and people being responsible for themselves.

Durov himself is a supporter of the crypto world, and Telegram is naturally close to crypto: it is a public chain, equipped with third-party crypto wallets, trading robots, and the confirmation and trading of user names on the blockchain, etc.

As a social software with more than 800 million users worldwide, Telegram's entry into encryption is undoubtedly a dimensionality reduction attack on existing Web3 applications. But the story of Telegram is far more than encryption. What happened since Durov was forced to give up the Russian social software VK he founded and started Telegram is a unique business legend, and also a story about how the political ideals of liberalism are realized in the business world with the help of blockchain technology.

The business setbacks of liberals

To understand why Telegram is close to encryption, we must first understand its founder Pavel Valeryevich Durov.

Durov does not like to be interviewed by the media, but based on some interviews with people around him and his own social dynamics, Durov's image is roughly outlined: he wears black clothes all year round, loves fitness, has a toned body and a handsome face. He is unruly and rarely bows his head in the face of power and capital in order to defend his belief in freedom. He is a technical genius with an obsession with privacy. After founding Telegram, his whereabouts are uncertain... Of course, in the eyes of people around him, angels also have a devil side. When Durov was in college, he founded a website to help students cheat. Some classmates said that he was a very vain young man who rarely had a common language with others, but he cared very much about the opinions of people around him and wanted to make himself look successful.

Born in 1984, this Russian (now a UAE citizen), Durov's wealth was estimated at $11.5 billion in 2023. He ranks tenth among Russian billionaires overall. So far, Telegram is privately owned by the Durov brothers, and unlike other commercial companies, Telegram refused to raise funds from traditional venture capital firms. Instead, the founders paid for the development out of their own pockets and later turned to ICO and bond issuance.

However, among Durov's characteristics, the one that is most closely related to encryption and his conception of Telegram is that he is a liberal.

The influence of this characteristic was already evident when VK was first founded.

As with Telegram, Durov completely indulged all kinds of speech and piracy on the VK platform. However, as VK continued to grow and had a large enough influence, the conflict brought about by this "freedom" broke out.

In December 2011, Russian protesters organized an event on VK over suspicions of rigged State Duma elections. This became the trigger for the Kremlin’s crackdown on Durov. However, Durov did not comply with orders to delete his account and page, and instead turned his VK page, Twitter and Instagram accounts into a battlefield, expressing his dissent with ridiculous pictures of cute pets.

In the story that circulated, Durov’s intransigence led to the armed forces entering his home the same night he posted the photo. What followed was like all stories of government intrusions into business. Durov gradually lost control of VK, and VK was controlled by Mail.ru, a company close to the Kremlin.

Later, Durov's shares were diluted more and more, and at the end of the story about VK and him, he was removed from the position of CEO by the board of directors.

He is a typical liberal who believes that freedom of speech is above all else. When he was in charge of VK, he was often asked by the Russian government to censor and delete posts, which was completely contrary to Durov's political philosophy. Durov himself was a tough character who was unwilling to give in, so the outbreak of direct conflict became inevitable.

However, during the operation of VK, Durov had to compromise. After all, the company was not owned by him alone, and the combined forces of politics and capital were strong enough. In the end, VK agreed to share user information with the Russian Federal Security Service. Later, Durov threw several paper airplanes made of 5,000 rubles from the window of his office in St. Petersburg. He said that this move was to prove that the company's decision was not for money.

Embracing encryption is both a political ideal and an inevitable business choice

The paper airplane later became the icon of Telegram.

In January 2014, Durov completely sold his shares in VK, left Russia, and began his "wandering" life.What was sold was not only shares, but also all fixed assets such as houses and cars.

Before going into exile, Durov had already started the entrepreneurial journey of Telegram with his brother. The widely circulated version is that he realized the importance of personal privacy when he was operating VK because he was monitored by the government.The company's headquarters is in Dubai, but Telegram has no fixed office location. He and the core team migrated around the world to work, and he held all the shares of Telegram himself, in order to avoid a similar ending to VK.

Telegram supports freedom of speech, follows end-to-end encryption (users need to manually select private chat mode), and does not conduct any censorship on the content on the platform. This brings people freedom of speech, of course, it also becomes a hotbed of crime because of the lack of review: drug trafficking, personal information trading, and even groups like "South Korea's Nth Room" can be found on Telegram.

This is the original background of Telegram, although he has made some "correct" compromises later, such as blocking accounts, robots and channels related to terrorist organizations and child abuse.

But at heart, Durov is still an extremely liberal person and a supporter of blockchain and virtual currency. In 2012, when he was on VK, he publicly suggested that Russia abolish the existing monetary system. And he himself publicly stated that he owns Bitcoin. In 2012, he published a manifesto he named "Liberalism", in which he specifically explained his ideas on how to improve Russia. In the manifesto, Durov advocated reforming the Russian education system; abolishing taxes in the information field; abolishing the visa system, registration and conscription; reducing tariffs; giving regions full autonomy; and opening up jury trials.

With such a background, it is not surprising that Telegram is involved in encryption. Starting from the public chain, it is Durov's ambition to build an encrypted world that blends with Telegram. In 2018, Telegram issued its own digital currency Gram and blockchain platform TON. Recalling that six years ago, Durov advocated the abolition of the ruble, supporting digital currency and decentralization. Six years later, he began to practice his original ideas.

The public chain TON aims to provide Telegram users with fast and secure decentralized payments, digital identities and other services. As a Layer 1 public chain, compared with similar Ethereum and Solana, the biggest feature is scalability and sharding, with advantages such as ultra-fast transactions and low fees.

From the characteristics of TON, it is hoped that it can carry the large-scale needs of a large number of users. Another feature of TON is the asynchronous architecture. Although it limits the development of TON in the field of DeFi, it also indirectly confirms that large-scale adoption is the real vision of TON. It is precisely because of these characteristics that TON was described at the beginning as a decentralized application and service platform similar to WeChat, Google Play or App Store, or even a decentralized alternative to Visa and Mastercard payment processing services.

Allowing Telegram users to better enter the crypto world may be the vision of TON. For example, the current payment and wallet applications on Telegram are carried on TON, and on TON, a full ecosystem involving NFT, Defi, Dex, games, etc. has been formed.

Durov, who learned the lesson of being eroded by capital from VK, did not raise funds for Telegram through traditional fundraising methods. Instead, he turned to the fundraising methods of the crypto industry. TON raised more than $1.7 billion through the ICO of its token Grams. But in 2019, it ushered in strong supervision from the United States. The U.S. SEC sued Telegram, accusing it of unregistered securities issuance. Subsequently, the Telegram team suspended the launch of TON's main network, and finally chose to give up in the struggle with the SEC, stopping the development of TON and returning ICO funds to investors.

In 2020, Telegram announced that it would abandon TON. But the technology supporting the project continues, and even for such an open source project, "TON's independence" has brought new opportunities and vitality to its development. Because of the participation of the community, the TON public chain project has become a more decentralized project, realizing the co-construction of the community.

In 2020-2021, the New TON team restarted the development of TON based on open source materials. The New TON team was also renamed the TON Foundation, as a non-profit community to support and develop TON.

This is the TON we are familiar with now, the full name is The Open Network. Although TON has so many advantages, it is undeniable that its current situation is mediocre and lacks ecology. According to Defiliama data, the current TVL on TON is $10.65m, ranking 61st.

Telegram uses ICO to raise funds for itself. On the one hand, Durov himself is naturally close to encryption. On the other hand, the real dilemma exposed is that Telegram is not profitable, and Durov's unwillingness to compromise with "capital" may have no other way to go. From some aspects, although Telegram has a hot product and market fit, it has not yet achieved the fit between product and business model. Embracing encryption is also an exploration for Telegram to achieve better commercial profits.

Analogous to WeChat, access to blockchain third-party programs on Telegram

At this year's Token 2049 conference, Telegram officials stated that Telegram will be transformed into the entrance to Web3 through TON. Although TON is independent of Telegram, they still cooperate frequently.

Telegram has long been a must-have APP for the crypto industry. The founder of Telegram said in his personal channel on July 18 this year that Telegram has more than 2.5 million new users registering every day, and the monthly active users have exceeded 800 million.

In fact, Telegram is not only accessing blockchain third-party applications in an orderly manner. This is similar to the access to various third-party applets in WeChat, so that users can directly use third-party services without leaving the platform, such as "taking a taxi, financial management", and Telegram acts as a traffic pool. And Telegram has entered the game, such as launching the Telegram Passport function.

Telegram Passport is designed to help users complete services that require personal identity identification through unified authorization. Telegram officials describe it as "just upload your proof document file once, and you can immediately share your data with service providers that require real identity authentication, such as finance and ICO". These identity information is stored in an end-to-end encrypted manner.

In July this year, TON blockchain launched Telegram's new Wallet Pay function, which allows merchants to integrate wallet robots in Telegram to collect cryptocurrency payments in the future. Users can pay Bitcoin, USDT, and TON to merchants in the App.

And users can directly deposit and withdraw funds through bank cards, and can use @wallet to directly pay for many services in the Telegram ecosystem. For example, you can directly purchase Telegram Premium, or purchase a virtual eSIM phone card in @Mobile, or even use TON to trade usernames in Telegram.

It is understood that the operation of Wallet Pay is completely independent of Telegram. Wallet robots and applications are based on the Telegram Web Apps open protocol, which allows developers to create their own applications and services on Telegram. However, transactions will charge commissions. In fact, the cooperation between Telegram and TON has never been interrupted. Telegram has also integrated TON Space, a self-hosted crypto wallet launched by TON.

Another feature worth mentioning is the "Fragment" feature. On December 7, 2022, Telegram officially announced that users can have a Telegram account without a SIM card and log in using the blockchain-supported anonymous number provided on the Fragment platform. In October of the same year, Telegram was able to implement username auctions on the Fragment platform, which means that the power and assets of the social media platform have begun to shift to users.

This is an important milestone. As Durov said, this is the first time in the history of social media that a fair and transparent username market has been established, and people will own their own social media addresses. These addresses are protected in the unchangeable ledger "TON" of a decentralized blockchain network. It costs Toncoin to buy a username, and the launch of the application actually enriches the ecology on TON.

This is a smart contract similar to NFT that confirms the user's username on the blockchain. According to Durov's own news, $50 million worth of usernames were sold in less than a month after Fragment went online.

And it is precisely because of Telegram's openness and tolerance for encryption that many innovations around Telegram and encryption to build a bridge between Web2 and Web3 have been launched one after another. For example, trading tool robots like Unibot built into Telegram are undoubtedly a hot track this year. Similar trading robots allow users to issue trading instructions in the form of dialogue with robots in Telegram to complete the trading activities of on-chain tokens on Uniswap, such as token exchange, copy trading, limit orders, privacy trading, etc.

From the access to the wallet to support the transaction of virtual currencies and payments, to the confirmation and trading of user personal data. These are all major innovations for Web2 social products. Compared with the Socialfi product currently trying in this direction, Telegram, which has such a large number of users, is undoubtedly a dimensionality reduction attack.

What Telegram has done, and what various project parties have done on Telegram, is also making the connection and communication between the Web2 and Web3 worlds smoother, which is one of the futures of the industry.