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Chingari's $19 million crypto bet and what it means

Responses to the short-video platform’s venture into crypto are mixed. The company, however, says crypto is its survival ticket and is needed to get an edge over rivals.

November 09, 2021 / 07:03 PM IST
Representative image

Representative image

Chingari, the Indian TikTok clone that started in 2018, raised close to $20 million from about 5,000 investors, selling its cryptocurrency token GARI over four days from November 2 to 5.

Last month, the company raised $19 million from 30 venture funds and individual investors for its crypto bet.

As surprising as it might be for a social media platform to adopt crypto, Chingari is doing more than just attempting to cash in on the crypto bull run. It is also the company’s answer to uniquely position itself in the overcrowded Indian short-video space that is struggling to monetise its user base, according to experts.

Moneycontrol spoke to the company and experts to decode what this move means for Chingari, if the hype is worth it, and the claims are justified.

A bit about Chingari

Chingari was founded by Sumit Ghosh, Biswatma Nayak and Deepak Salvi in 2018, amid the TikTok boom in the country. The ban on TikTok two years later gave the company a much-needed fillip as downloads exploded from 5.7 million before the ban in June 2020 to 23.6 million a year later. The company so far has 80 million downloads and 3.5 million active users on its platform.

Even as Chingari grew, so did its competitors, many of which were launched around the time of the TikTok ban. ShareChat launched its short-video platform Moj and DailyHunt launched Josh in June and September 2020, respectively. Moj and Josh are currently the two large players in the short-video space along with MX Takatak, not to mention competition from global entities Instagram Reels and YouTube Shorts.

Bootstrapped for the first couple of years, the company now has raised about $40 million. In comparison, the parent companies of both Moj and Josh have raised close to $650 million so far in 2021.

To survive and monetise, Chingari had to diversify, and fast, the company realised six months ago, cofounder and CEO Ghosh told Moneycontrol.

“You can’t build a copy (of TikTok) and compete. Instagram will come and crush you. You have to innovate, you have to build something uniquely different and be better than what is already out there. The Moj and Josh of the world may not have realised it, but they are or have already lost the race,” Ghosh said. “That's what led us to build it ($GARI). This is something that none of the other Indian competitors have done so far. Crypto is the necessary edge over other players, including Instagram.”

The crypto bet

The company started building the token on the Solana blockchain 6-9 months ago and the token, GARI, went for a public sale on November 2. By November 5, the company had raised $19.84 million from the public.

With GARI integrated into the Chingari platform, the company aims to offer a level playing field for all creators to monetise their work through tipping, non-fungible tokens (NFT), influencer marketing, ads and the sale of their courses. Actor Salman Khan launched the NFT marketplace where people can buy the actor’s video NFTs.

With close to $40 million in its kitty, Chingari has huge plans for expansion. Ghosh said that the company is also looking to expand overseas.

“We are launching in Indonesia in November, which has TikTok. There we will have a clear understanding of whether creators actually choose Chingari and $GARI over TikTok and if they actually like the new innovation that we're bringing to the table,” he said.

After Indonesia, the company is looking to expand to Southeast Asia. Ghosh is pretty confident that this is the future. “In the future, you will see Instagram or Facebook copying us and, you know, bringing out a version of their own token. If not today, a year down the line,” he said.

Some community has largely welcomed the move. Kashif Raza, who runs YouTube channel Bitinning, said, “Crypto is a new technology and is growing very fast. The way the exchanges are growing and gaining traction, they want to be a part of it.” Amit Karpe, a crypto enthusiast, also pointed out that the move has a huge potential for the platform.

How will Chingari make money?

Chingari has multiple revenue streams. It is building an NFT marketplace where the company gets a 3 percent  commission per transaction. It is introducing a feature where users can video-call creators and pay them in GARI.

Creators can sell their merchandise on Chingari or send video messages to specific users on request. For all such transactions, the company will take a 3 percent cut. Ghosh expects the company to achieve a $100 million annual revenue run rate by December 2022.

He said the company will come up with more features powered by GARI and will charge a transaction fee for them. However, there are others who are not as convinced about the strategy and have raised questions.

Many questions

Two cryptocurrency experts told Moneycontrol that the company is riding the hype of a crypto wave, which is one of the hottest sectors right now. They are not convinced about the company’s mission and its promises for many reasons.

Of the $45.87 million that Chingari has raised so far from investors, going by Tracxn data, more than 40 percent came from cryptocurrency funders. This is apart from the $19.84 million that the company raised from the public.

Satvik Vishwanath, cofounder of Unocoin, a cryptocurrency exchange, pointed out that while the platform may have huge potential and have credible founders, it’s not clear why the company has to sell tokens to raise money from the public.

To be sure, such token sales might attract international interest and help the company expand beyond India, but according to Vishwanath, the $20 million that Chingari raised from the public is easy money without giving up equity, unlike funding from venture capitalists and other investors.

There are various instances globally of founders dumping crypto tokens when it was on a high and making money. With the lack of regulations in India, this is a concern with any new coin that comes up, he added.

Udaan cofounder Amod Malviya pointed out in a tweet a concern on social token. Before the sale of the tokens, the company stated in the official document that it can, at any point, modify the design and terms of the tokens, integration of the tokens into the platform, and their allocation. The company can also amend the purpose of the tokens without informing purchasers.

This is contrary to what the company had promised – that GARI token holders would be able to vote on any new proposals. What is also of concern is the regulatory environment. For that reason, the investment will always remain a risk since there is no single authority governing it.

The other concern is prices, pointed out Raza of Bitinning. During the public sale last week, the tokens were priced in the range of $0.25-$0.4 each. This price can fluctuate, depending on demand and supply.

Also, the price of GARI is directly dependent on Chingari’s growth. This means that as more users get on to the platform and use the tokens, the price will increase.

If many users want to liquidate their tokens, this might lower the price. While the number of users is currently rising, there is no guarantee that this will continue. Most social media platforms face a decline in downloads and this will impact Chingari as well, potentially bringing down prices.

Responding to this, Ghosh said the company will introduce features to ensure continued engagement. While Chingari is the only platform where GARI is integrated, in the course of time, it will be opened up for other third-party applications too.

“For example, the GARI community can decide to create an NFT game and use the tokens on that. If this game grows more popular, even if Chingari’s growth declines, GARI’s (price) will not,” Ghosh explained.

Are people interested?

Moneycontrol spoke to creators and buyers and their responses were mixed.

Maeraj Shaikh, a Mumbai-based architect, crypto-educator and NFT creator, said while the platform might have potential, he is not bullish on Chingari. Shaikh, who is also a Bonsai artist, is working on translating his work to NFT. But he is not looking at Chingari as a potential platform.

“In crypto, we don’t see national. We look at things that are international and have a much wider audience,” he said.

So Shaikh is more bullish on international coins such as BNB (Binance’s crypto coin). “If Chingari gives the return in BNB, ETH, Bitcoin or even SOL, then I am in, but not bullish otherwise given that there are so many coins that have come and gone,” he said.

He reasoned that because stable coins like Bitcoin have a cap at 21 million, the price will only keep increasing and will have brand value. While Ethereum does not have a cap, there is an annual supply limit of 18 million. That is not the case with GARI, which has a cap of 1 billion and has a significant Indian user base.

Natural adoption of coins is important as well. Bitcoin and Ethereum were adopted naturally by the crypto community, even as many others coins have seen highs and vanished. “Creating a coin is easy, but taking that forward is challenging,” he added.

Ashita Sondhi Chhibbar, an independent brand consultant who invests in crypto and NFTs as a hobby, said she too is not enthusiastic about trading on GARI. Like Shaikh, she said stable coins are more reliable, given the rate at which more coins are coming into the market. For others, she said the future is uncertain, especially under a volatile regulatory environment.

After getting her first Amitabh Bachchan NFT for $10, she is interested in buying a Salman Khan NFT on Chingari, but pricing will matter.

“If the NFT is going to be $200, I will think twice – it is huge for regular investors,” Chhibbar said.

Ghosh told Moneycontrol that creators will be able to make and sell their own NFTs on Chingari. But Chhibbar pointed out that an NFT should also have a value attached to it.
Swathi Moorthy
first published: Nov 9, 2021 07:03 pm