So, recently I put out a list of some concerns that I had about Telcoin on Twitter and some of the members of the Telcoin were in strong disagreement (which I figured would happen).
However, one very knowledgeable member did take the time to write a full rebuttal to me on Twitter, which I sincerely appreciate.
In order to give him the justice of a full, diligent response — I decided to compose a formal response that I would put up as a reply using Telegra.ph (note taking website, sort of like Medium).
But, while writing, I felt that this information would serve as an important article — so, I wanted to put that up as well.
Hope you all enjoy!
Shoot me a PM on either Twitter or Telegram if you have any questions/concerns.
Telegram = t.me/CoinEducation
Twitter = https://twitter.com/cryptomedicated
Rebuttal to Telcoin Rebuttal by invest_in_hd
Rebuttal to Point One
When I say Telcoin operates like any other payment currency, I mean that in regards to their technology. There is no advantage to leveraging Telcoin for this service over Ripple, let’s say, from a technological perspective.
That means that they are in competition with any other crypto project that attempts to do what they’re doing, other Telecom-focused cryptos included.
Rebuttal to Point Two
I noted this before but AT&T has already patented blockchain technology, are partnered with Time Warner and have integrated Bitcoin (via Bitrefill) into their systems. The same can be said of Verizon as well.
These major Telecom companies in the United States have absolutely no reason to introduce Telcoin into their infrastructures.
What makes things more complicated in the United States is the fact that apps such as Coinbase (which was #1 on the app store at one point), Coinomi (among other wallets), and CashApp (ran by Square; which is ran by Twitter) all allow for the transfer of other cryptocurrencies.
Add this to the fact that most, if not all people in the United States (over the age of 18), have access to a bank account. There is no shortage of banks and the requirements to get a bank account are little to none. In addition, there are tons of prepaid credit cards, cell phones, and, not to mention, Western Union, money orders, etc.
Another thing that must be considered is the fact that Telcoin does not have a decentralized structure, which is a big deal to a lot of people that like using cryptocurrencies. That’s essentially the advantage of crypto to the unbanked. By allowing Telecom companies to have the ultimate control over who does and does not receive access to the crypto, this is essentially another form of banking that allows a centralized structure to deny access.
It also must be stated that one’s access to their funds would appear to be contingent on having a mobile phone. What if it’s lost? Are these to be stored on wallets the same way that Bitcoin and other cryptocurrencies can be? Would a private key be needed? Because, according to the whitepaper, Telecom companies are the ones that would be receiving a distribution of these tokens.
To say that Telcoin will simply crack through all of this and head to the forefront of this industry is excessively idealistic and carelessly dismissive of the numerous hurdles that would have to be climbed in order for this to happen.
Rebuttal to Point Three
This response fails to note that in the same paragraph cited in the whitepaper, it also states that, “We acknowledge that at least in the beginning we will need to rely heavily on traditional cash-in partners (banks and remittance agents) in order to sell Telcoin.”
This is no small feat here. As we all know, virtually all major banks in the United States have denied access to crypto payments for customers. Exchanges themselves have had difficulty finding reliable banking in the United States and customers have seen their accounts closed simply for receiving crypto-related payments.
Therefore, this too is another major hurdle that Telcoin will have to hurdle in their efforts to bring their visions to fruition.
Cumulatively, the market capitalization of Telcoin is approximately $30 million. In my opinion, this is nowhere near the amount of capital necessary to bring these visions to fruition or to access the necessary resources in order to facilitate the partnerships that Telcoin advocates are insisting will happen. And that would be assuming that Telcoin owned 100% of the circulating currency (which I know that they don’t).
Therefore, at the very least, the price/demand of the coin has to raise exponentially (literally) in order for this to be a viable option.
As acknowledged before, yes, there are a substantial amount of remittance payments that are sent from the United States and elsewhere.
However, there are already major players in this market that Telcoin advocates have not even considered, such as:
Here is yet another example:
BitSpark is already integrated with blockchain technology as well
The same can be said of BitPesa as well.
Then, there’s Visa and Mastercard.
Once again, there needs to be an infrastructure created to facilitate the cashing out of these tokens.
Intermediary Comment About the Financial/Economic Model or Structure of Telcoin
It is alleged that they will simply be able to issue the Telcoin to remittance partners for free, according to the tweet that I cited above.
Specifically, the user states, “Telcos will get #Telcoin for free (= 100% profit).”
How does that work? And how will Telcoin remain viable under a model like this?
Let’s say there are 100k Telcoin in existence and the company owned 50% of the tokens (just for arguments’ sake, humor me); Once the company gives up the 50k tokens, how will they continue further business development?
I’m assuming that at least some of these tokens are being held in order to be liquidated in the future for future infrastructural needs.
Also, why would companies pick Telcoin without any viable means for liquidity? The token has zero worth on the network if there is no liquidity. This is a major deal, because it is unrealistic to expect companies to do Telcoin’s legwork for them.
Before this idea is even viable, Telcoin needs to seek out banking partners in multiple areas (20k+ locations minimum to make this a viable decision).
Rebuttal to Point Four
It should be iterated that simply posting statistics on how many individuals are unbanked is not a sufficient use case. It also does not underlie how many other companies/entities are already in this market and actively pursuing these customers with solutions that they use currently and that work.
To completely ignore this, the size of these companies, the contracts that they have inked with partners (keyword: CONTRACTS), as well as the name recognition and trustworthiness that has been established, is naive.
The tweet also states, “The center of mobile money is Africa. The focus is on Europe, Africa, Asia corridors in Q1 19, not the US.”
As stated before, these sectors are already being targeted heavily.
In addition, there needs to be liquidity on the other side of Telcoin.
Currently, the coin is not trading at a sufficient denomination to where it is even viable for the types of exchanges that are being discussed.
Given the low volume of exchange, the potential for arbitrage is massive as well. Without an established network with billions worth in volume like Bitcoin, the process of individuals simply using the network to transfer between one another could end up causing wild price fluctuations.
$5 million in daily payments would not even cover 1% of the daily volume of remittance payments around the world (per the statistics this individual cited; you do the math, it’s right). Yet that $5 million would be sufficient enough to greatly move the market value of Telcoin.
I understand how volatile that Bitcoin can be, but the availability of banking partners makes up for it. The same definitely cannot be said of Telcoin, and it is substantially more volatile than Bitcoin.
Rebuttal to Point Five #5
I personally can’t comprehend any reason for MPesa to create any type of partnership with Telcoin when they both offer the exact same product. Telcoin’s system is not anymore convenient for MPesa’s customers to use than the electronic currency system that they already have in place.
In my opinion, this is something that would have the potential to make things unnecessarily complex for the company.
Unless there is something concrete that has been inked, this stands as conjecture in my opinion. Even if the CEO did speak on it or mention it. Until we have confirmation of some valid negotiations that are taking place between the two companies, this is merely a theory and should be treated as such in my humble opinion.
Rebuttal to Point #6
On the 13th page of the whitepaper, it shows:
In my opinion, this is something that could lead to imminent disaster.
Essentially, Telcoin wants to plug directly into exchanges in order to facilitate orders. As mentioned above, there is still not enough liquidity. As far as I know, there are no Kenyan crypto exchanges where there is a high volume of buy/sells for Telcoin. Quite frankly, there are no dollar-based exchanges at this very present moment that have a sufficient liquidity for what Telcoin is proposing with this model that I outlined above.
Some may rebuttal and say, “But Telcoin could be converted into $BTC and then exchanged into a currency!”
But, if that is the case, then that once again defeats the purpose of using Telcoin and it also takes the ‘no fee’ element (for the suppliers; Telcoin companies) completely out of the equation because there would have to be some sort of fee to exchange the value of Telcoin to some other currency (crypto or fiat). If there isn’t, then Telcoin has stumbled upon something unprecedented in the financial world or currency transactions.
Also, as mentioned above in this response piece, what will they do about the slippage that will inevitably occur do to this setup?
To insist that one will be able to always fulfill their order at market is hopeful thinking, in my opinion. Which, once again, ties in the issue of liquidity in a way that I don’t think the response had considered.
Rebuttal to Point Seven #7
The response states, “Can you send $BTC via SMS? No.”
This may be true (and I’m not positive it is), but there are a slew of other cryptocurrencies that can be sent via text message.
None have proven to be done in a decentralized and entirely secure manner that allows customers to manage their private keys (CoinText was exposed on this a little while ago).
The response also states, “Does the unbanked understand #crypto? No.”
I think this is a rather arrogant assumption that assumes that all those that do not have access to banking are simultaneously ignorant of technology and how things work.
However, the point stands simply because most people in crypto do not have a proper understanding of crypto if you ask me (see: numerous project failures due to a fundamental lack of understanding of blockchain principles).
“Can I easily cash out $BTC to fiat, EVERYWHERE? NO.”
You can’t cash out Telcoin to fiat anywhere. That’s the point. Even if this proposal were premised on Bitcoin, I’d still be bearish on it long-term. But the painful truth is that Telcoin is miles behind Bitcoin.
“#Telcoin will quickly have access to all Telco subscribers.”
This is an exaggerated prediction that is not based on anything factual. I don’t mean to be hypercritical here, but insisting that Telcoin will have access to all Telco subscribers is absurd, let alone insisting that this will also happen quickly. The statement reads akin to “Bitcoin will quickly undermine any and all fiat currencies and be the only form of payment people use.” Yes, while this sounds good to maximalist supporters, it completely ignores reality and places the priority on emphasizing an over-idealized prospective future rather than one grounded in actual fundamentals.
Also, once again, it should be noted that the current valuation of all coins in circulation is sitting at $29 million at this present time. So, if every holder of Telcoin’s tokens decided to contribute toward a Telcoin-advocacy fund, they wouldn’t even add up to a drop in the bucket.
Unless there is a large angel investor or substantial connection that is willing to place an enormous sum of money behind Telcoin and back it like a corporate entity, I don’t even see how this proposed future vision of Telcoin is even plausible, truthfully.
Response to Point Number Eight (#8)
There isn’t necessarily anything for me to rebut here. What they said is factual, and I can’t deny whether or not Telcoin will be dealing with the government, money, etc.
Response to Point Number Nine (#9)
Cricket is a subsidiary of AT&T. AT&T bought Cricket years ago and Cricket uses their network. If you are a Cricket subscriber, you are an AT&T customer. Hence, why I made the points that I did.
T-Mobile owns MetroPCS in the exact same way as well. They are the parent company and thus, anyone that is a MetroPCS customer is also, by association, under Verizon as well.
GSMA is Already Pursuing Mobile Money Options That Have Nothing to do With Telcoin
In fact, there is an entire study on this phenomenon: https://www.gsma.com/mobilefordevelopment/wp-content/uploads/2018/07/Distribution-2.0-The-future-of-mobile-money-agent-distribution-networks.pdf
This chart here also shows that there are over 3 million agents that are currently in this field and servicing individuals that are in need of assistance.
So, this is not an empty field that is a ‘free for all’ for Telcoin to come in and dominate as its proponents may like to make it seem.
Here is another excerpt from that GSMA (yes, GSMA) newsletter that covers mobile money networks (specifically for the unbanked, like Telcoin):
So, until there is a concrete plan that has been created that shows me that Telcoin can create an infrastructure that satiates the different facets of providing mobile money, then I remain incredulous, and in doubt of whether this will ever come to fruition.
Now in Relation to the GSMA Member Companies Discussed in the Twitter Post I’m Rebutting
It also is worth noting that the main individuals that would benefit from such a product like a Telcoin are probably people that are buying prepaid phones (i.e., plans and phones that do not require one to have an active bank account; Telcoin targets the unbanked, correct?)
Therefore, if there were ever such a deal to be inked with a massive Telecom company that already has their own blockchain patents+remittance-esque systems either in fruition or in the works, then it would more than likely be the Cricket and MetroPCS customers that are serviced as a result.
Response to Number Nine (#9)
“The Telcos get $TEL for free.”
Once again, I don’t see how this works in any economic model or how this is a viable business model for Telcoin to even remain solvent.
“#Telcoin takes care of converting coins to local currency, which is why they need licenses”
Getting a money license in all 50 states in the United States would more than likely exhaust the available resources of Telcoin.
Here is a link with requirements to become a licensed money transmitter in all 50 states (once again, this needs to be established if Telcoin wants sufficient liquidity):
Response to Number Ten (#10)
If your grandpa can’t figure out how to buy Bitcoin through a phone, then he more than likely won’t know how to do it with Telcoin either. And I doubt that your grandpa would be tech savvy to understand how to remittance payment, but not comprehend the concept of buying Bitcoin and sending it over to you for a payment.
I know there’s a common stereotype that the elderly (65+) are technologically-adverse, and in a lot of cases, that’s true to some extent. However, they aren’t morons. And they are also significantly more skeptical, less trusting and unwilling to use new services than their younger counterparts.
Therefore, if Grandma has been sending you birthday money through Western Union, chances are that Grandma is going to continue sending you money through Western Union no matter what technological innovations come around.
Remember, Warren Buffet still reads a physical newspaper every morning.
Response to Number Eleven (#11)
And finally, we conclude with this tweet.
“$TEL’s true advantage is through its licenses.”
What licenses? I wonder. If anyone can enlighten me, I’ll amend that into this article.
However, I am unaware of any that I can find as of now.
But, I do know for a fact that Ripple has obtained one:
There are also multiple entities that also have money transmitter licenses, such as most, if not all centralized exchanges in the United States and generally abroad as well.
And yes, if you want to do business everywhere in the U.S., you need one everywhere (in all states), just like CoinX, Coinbase have obtained.
http://www.coinx.com/ (CoinX asserting their licensure)
https://www.coinbase.com/legal/licenses (List of states that Coinbase has a money transmitter license in)
Telcoin is not a bullshit project and I have never asserted as much. However, it must be noted that there are monumental barriers to accomplishing what they have purported to accomplish.
Therefore, I’m a bit baffled as to the excessive bullishness and statements of affirmation that almost imply as though accomplishing these goals will be “easy”. They are not an organization with a strong presence in the world at this time and their Founder(s) & CEO (yes, I looked into them), are not individuals with an especially long or prestigious track record that would give me pause on any of the doubts/concerns that I have raised in this piece.
Once again, I wish all Telcoin holders the best of luck! But I remain skeptical that this project will ever come to fruition at this point.