Toncoin (TON): Analysis of Telegram's crypto

What you need to know 🐳

TON, the blockchain at the heart of the payment system for the encrypted messaging service Telegram, has had a history full of twists and turns, some of which are rather unclear.

TON is positioned as an easy-to-access blockchain keen to get Telegram's 900 million users on board its network.

TON has attracted interest from major crypto players including Tether and Pantera Capital.

It's been one of the projects with the most traction in recent weeks.

Brief history of TON 📖

We published a in-depth investigation into the secret history of TON, but here's a summary of its public adoption.

In 2018, the Telegram messaging development team began exploring blockchain technology and the possibilities of integrating it into its app. It then raised $1.7 billion from private investors to develop its own blockchain, called Telegram Open Network (TON).

In 2019, Telegram launched the TON testnet. However, the SEC filed a complaint against Telegram later this year, claiming that "gram", the native token of the TON blockchain, was an illegal financial security. One of the reasons for this accusation was that it had been sold to US investors without prior registration with the regulator.

In 2020, Telegram reached a settlement with the SEC and agreed to cease development of TON. They then decided to return unspent funds to investors.

As a result, the team deposited 98.55% of the testnet tokens in a smart contract, allowing users to mine these tokens using the computing power of their computers. The tokens were thus distributed from June 2020 to June 2022.

Meanwhile, a team of open source developers took over development of the project. In 2021, it renamed the testnet to mainnet and launched the TON Foundation, with TON now standing for The Open Network.

In September 2023, Telegram announced that TON would be the official blockchain integrated into the application. Shortly after, Animoca Brands became the network's largest validator and announced its ambitions for the development of the GameFi sector on TON.

In March 2024, Telegram announced that it would donate 40% of advertising revenue to public channel creators on its app via TON. Subsequently, Telegram revealed its intention to go public. In April, Tether announced the official launch of its USDT stablecoin on TON.

This series of announcements in two months led to a sharp rise in the price of TON. On-chain activity on the TON network began to grow almost exponentially after years of low activity.

Finally, in May, Pantera, one of the industry's largest venture capital funds, announced that it had made the largest investment in its history on TON.

Overview 🧬

TON is a layer 1 blockchain based on Proof of Stake (PoS) and capable of supporting high transaction throughput at low costs thanks to sharding.

Sharding, in the context of blockchains, consists of dividing a blockchain into several interconnected networks called "shards". Each network has its own set of validators and can therefore process many transactions in parallel.

TON is not the only blockchain to use sharding. Near also uses it and Ethereum eventually plans to implement it in the long term.

The two major shortcomings of sharding are that each individual shard is less resistant in the event of an attack and that it is complicated to ensure fast communication between shards.

The main strength of TON is that it is directly integrated into the Telegram application, unlike most blockchains that have to succeed in attracting users. TON can therefore draw directly on Telegram's huge existing user base.

Wallet can be created from within the application in just a few clicks using the "Wallet" bot. What's more, most of the applications built on TON have developed "Mini Apps" integrated with Telegram. This greatly reduces friction and allows for a better user experience.

Financing 💰

Much of the money raised in the ICO has been returned to investors, deducted from the $400 million spent (mostly used to benefit the Telegram business).

However, the TON Foundation is not destitute since it has recovered a large part of the total quantity of TONs issued (we'll come back to this point later) and is reselling them on the OTC market to professional investors.

It has thus raised at least $24 million in this way, but the total is likely to be much higher.

Here are the officially announced investments:

• Runa Capital - $6 million (April 2021)
• DWF Labs - $10 million (November 2022)
• Mask Network, MEXC, Animoca Brands and Kucoin Ventures - undisclosed amounts (2023)
• Mirana Ventures - $8 million (March 2024)
• Pantera (March 2024)

It is noticeable that there is very little transparency on these investments, either in terms of amounts or vesting conditions.

Team 👾

The TON Foundation is a non-profit organisation based in Zug, Switzerland.

Steve Yun is the Chairman of the TON Foundation. He spent seven years with Inter CP, a voluntary organisation that helps ethnolinguistic minorities. From 2017 to 2020, he was director of operations at a crypto fund. He says he has contributed to the TON project since 2018 and became a founding member of the TON Foundation in 2021.

Anthony Tsivarev is the director of ecosystem development at the TON Foundation. He worked for six years as an engineer at VKontakte, a Russian social network. The Big Whale interviewed him this week.

Manuel Stotz, a board member of the TON Foundation, has almost 20 years' experience in the financial sector, having worked at Goldman Sachs and Blackstone among others.

Function ⚙️

The TON blockchain consists of a masterchain capable of holding up to 4.3 billion workchains (2 power of 32). Each workchain is a separate chain with its own rules and can be divided into 1152,921,504 billion shards (2 power 60), each containing a fraction of the workchain's state.

Currently, there is only one workchain called Basechain.

TON uses dynamic sharding: the number of active shards adjusts automatically according to activity on the network.

In theory, this should allow for huge scaling potential, but in reality, the TON blockchain sometimes suffers from congestion with relatively high latency times and fees. This was the case during the launch of Notcoin, a tap-to-earn game.

TON incorporates three other major features: TON Proxy, TON Payments and TON Storage.

TON Proxy allows you to host your site in .ton, the eventual aim being for all applications built on the TON blockchain to have their site in .ton.

TON Payments opens up an exchange channel where TON tokens can be exchanged free of charge. This concept is inspired by the way Bitcoin's Lightning Network works.

TON Storage allows you to store your files on the TON blockchain in a decentralised way.

The TON token 🪙

There are currently a total of 5.11 billion TON tokens, of which 2.41 billion are in circulation.

The TON token is used to pay transaction fees on its network.

The TON token can be staked for a current annual return of 3.7%. Staking causes an annual increase of 0.6% in the total amount of TON.

Currently, 11% of the total amount of TON is staked by 334 validators in a balanced manner, although we cannot guarantee that these validators are different.

There is also a "burn" mechanism that destroys half of the TON tokens used for transaction fees. Around 11,000 TON are destroyed every day, but this still doesn't make up for the 37,000 tokens issued daily by staking.

The strange distribution of the TON token 🤔

The initial allocation of the first TON tokens was done through token mining. The TON Foundation presented this as a fair means of distribution to decentralise the governance of the project.

However, 96% of the total amount of TON was distributed in just two months (between July and August 2020), although the distribution took 2 years in total. In addition, at least 85% of the total amount of TON was mined by 248 addresses strongly linked to the TON Foundation.

In February 2023, TON validators voted to freeze the accounts of miners who had become inactive for 4 years, representing around 20% of the total amount of TON.

About 26% of all TON are locked in a smart contract called the "Believers Fund" until 12 October 2025. From that date, the tokens will be released progressively each month for 3 years on a straight-line basis. The total includes approximately 1 billion TON locked by users and 284 million TON donated as rewards.

The Believers Fund was opened at the end of July 2023 until the end of October 2023 to allow users who so wish to deposit TON into it, indicating their intention to keep them long-term or donate them. Donations, which represent 21% of the smart contract tokens, will be redistributed in the form of rewards to holders.

Ecosystem 💪

The TON Foundation strives to play a crucial role in the development of the TON ecosystem. For example, it has launched The Open League programme, which distributes TONs to the most active users and applications in the ecosystem.

Tonstakers is the application with the highest locked-in value in the TON ecosystem ($237 million). It offers liquid staking capabilities similar to Lido on Ethereum.

StonFif is a decentralised exchange with a locked value of $216 million. The protocol has its own token (STON), the price of which increased 20-fold between March and April before correcting.

EVAA is the largest lending application on TON. The protocol is currently running a points campaign as part of its token airdrop.

Storm Trade is a decentralised derivatives exchange. The protocol is currently running trading competitions to win tickets to invest in the project's ICO.

These apps are all based on "Mini Apps" integrated into the Telegram app, which is particularly beneficial for gaming apps.

The best known is Notcoin, an initially tap-to-earn project that provided the NOT token with a total valuation of $2.1 billion. Notcoin has since evolved into an "explore-to-earn" model based on quests. NOT therefore straddles the line between a memecoin and a utility project, becoming one of the flagship tokens in the TON ecosystem.

A list of major games is available on the TON website.

Competition ⚔️

TON competes with other high-throughput, easy-to-access blockchains geared towards mass adoption.

Tron is a relatively old blockchain that keeps a low profile, but it has the second-largest locked value ($8.5 billion) behind Ethereum ($65 billion). It also hosts 57 billion USDT stablecoins, almost half of the USDT in circulation on all blockchains. Decentralised finance on it is underdeveloped, and its major use is for payments in developing countries.

Solana is the high-speed blockchain with the most activity. Decentralised finance on the network is booming and many payment giants such as Paypal, Stripe and Visa are exploring integrations with Solana.

Polygon is a blockchain that has long served to make the Ethereum ecosystem more accessible. Its business development team has managed to get giants from various sectors on board its network, such as Stripe and Disney. Polygon has fallen behind recently, but the arrival of its V2 and the development of activity around Polymarket, an app that lets you bet on all kinds of events, could give it new impetus.

TON is still behind these giants in terms of TVL and activity, however, the blockchain data set is growing faster than its competitors. It remains to be seen whether this momentum will continue long enough to catch up.

Regulation ⚖️

The settlement of the 2020 dispute between Telegram and the US regulator theoretically limits further lawsuits, as the company officially no longer has an active role in the development of the blockchain.

Effectively, the SEC was mainly blaming the project for the sale of unregistered financial securities to US investors, which have since been reimbursed.

However, with the many ambiguities surrounding the current project and the speed of its integration into the Telegram app, it is assumed that the teams of its CEO, Pavel Durov, still play a significant role.

It remains unknown how many TON governance tokens are held by the latter.

As the use of crypto wallets on Telegram is prohibited for US users, this could protect the project from further prosecution in the US.

Market analysis by Chadi El Adnani, Head of Content & Research at SUN ZU Lab 📈

TON is currently trading at $6.6, slightly below its all-time high of $7.2 set in April 2024. With a market capitalisation of $16 billion, it has been one of the 10 most capitalised tokens in the ecosystem since the beginning of April. Its performance in 2024 exceeds 160%, and daily volumes have risen sharply since the beginning of April, often exceeding the $100 million mark.

However, TON is absent from Binance, which is surprising for a token with such liquidity. According to DefiLlama data, the total value locked up (TVL) on TON has risen from less than $15 million at the start of the year to $330 million, an increase of more than 30 times in 5 months.

Where can you buy the TON token? 🛒

It's entirely possible to acquire directly via Telegram using the robot "Wallet" which you can find here. It's pretty simple to make a purchase (via credit card). If you prefer traditional exchange platforms, only OKX offers TON among the regulated companies in Europe.

It is also possible to acquire synthetic versions of TON on Ethereum via Uniswap.

The Big Whale's view 🐳

The ease of access and visibility offered by Telegram are undoubtedly TON's strengths.

In recent months, activity around TON has seen unprecedented growth after a long period of stagnation.

The adoption by highly influential players such as Tether, Pantera and Animoca Brands suggests that this is not just a passing fad, and that the development of TON could continue to accelerate.

The history of the project since its origins has been full of twists and turns, as well as unclear and opaque aspects that raise questions about its level of decentralisation.

The integration of TON with Telegram could eventually lead to a future where the project becomes a kind of WeChat with blockchain-based payments, although this is still some way off. TON could eventually eat into Tron's market share for simple and easy stablecoin payments.

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This content is part of the complete dossier produced on the TON ecosystem

> Investigation into the resurrection of Telegram's cryptocurrency

> Fundamental analysis of Notecoin (NOT)

> Video: Interview with Anthony Tsivarev, ecosystem director at the TON Foundation

> Video: Interview with Martin Masser, STONfi, the largest DEX of TON

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