The Open Network (TON) blockchain ecosystem is experiencing a surge and is seen as a new land for mining opportunities. To better understand TON and Telegram, let’s compare it to the largest social application in China, WeChat.
WeChat is primarily a social platform that has built a vast application ecosystem by integrating WeChat Pay and WeChat Mini Programs. However, WeChat’s biggest problem lies in the control it has over user data and assets, lacking privacy and freedom.
On the other hand, Telegram can be seen as the Web3 version of WeChat. Telegram is an encrypted communication tool that prioritizes privacy. With the introduction of TON blockchain (financial infrastructure comparable to WeChat Pay) and its Bot capabilities (similar to WeChat Mini Programs), Telegram is building a more open, free, and autonomous Web3 application ecosystem.
Therefore, TON blockchain is a unique existence backed by Telegram, a globally popular encrypted social application with over 900 million monthly active users. Among various public chains, TON stands out with clear use cases and a massive user base.
This article provides an in-depth analysis of TON blockchain, delving into its current ecosystem and future development trends, helping us seize new opportunities in this emerging ecosystem.
01 Introduction
1.1 Starting with Telegram
To analyze TON blockchain, we must start with Telegram. Telegram is an encrypted communication application that supports end-to-end encryption and does not censor content. With its servers distributed across multiple countries globally to avoid the influence of any single government, Telegram carries the label of “freedom” strongly.
Founded in 2013 by a Russian entrepreneur, Telegram was initially created to serve the cryptocurrency industry. From the start, Telegram has been associated with the cryptocurrency industry, making it a platform born for encryption.
Currently, Telegram has over 900 million monthly active users worldwide and generates approximately $4.56 billion in advertising revenue. Telegram is another social application giant alongside WeChat, Facebook, and WhatsApp. What sets Telegram apart is its approach to content. While other social applications heavily censor content, Telegram prioritizes user privacy and focuses on encrypted communication, serving as a complementary platform to other social applications.
For instance, Facebook had over 7,500 content reviewers in 2023, while Telegram had only around 50 core employees. Telegram is widely used in the Web3 industry for community operations. Another commonly used community tool in the Web3 industry is Discord, which originated from gaming communities before expanding into the Web3 industry. However, Discord’s feature-rich nature makes it complex to use, while Telegram provides a simple and lightweight user experience, creating a more free and powerful application ecosystem through its Bot capabilities (similar to WeChat Mini Programs). Telegram is further integrating with the cryptocurrency industry and transforming into a Web3 application. Building a blockchain closely integrated with its own application is a crucial part of Telegram’s ecosystem.
1.2 TON’s Development Journey
The development journey of TON blockchain has been tumultuous. In 2019, Telegram attempted to launch the Telegram Open Network (TON) blockchain. However, during the Initial Coin Offering (ICO) phase, the project faced intervention from the U.S. Securities and Exchange Commission (SEC). After a series of legal disputes, the project was canceled in 2020.
Although TON is not directly related to Telegram, Telegram’s official platform and its founder, Pavel Durov, have supported the project multiple times in recent years, emphasizing the business connection between Telegram and TON. Therefore, TON can be considered as the only public chain officially recognized by Telegram, giving it legitimacy.
1.3 TON’s Goals and Vision
TON’s recent goal is to attract 30% of Telegram’s users to join TON by 2028. This means TON needs to onboard 300 million new users into the Web3 world. TON’s vision is to create a Web3 Mini Program ecosystem based on TON within Telegram. Decentralized applications built on TON blockchain can be seamlessly integrated with Telegram’s ecosystem through its Bot technology (similar to WeChat Mini Programs).
Currently, most decentralized applications exist in the form of web-based versions, which often result in poor user experiences and lack of smoothness. Telegram’s Bot, on the other hand, provides a user-friendly application form that can be directly used within Telegram, offering a consistent experience similar to mobile apps. This allows Telegram users to easily transition to the Web3 world.
Unlike WeChat Mini Programs, which are suitable for online and offline integrated applications such as ordering food, e-commerce, delivery, and transportation, Telegram’s Bot ecosystem is more suitable for purely online scenarios such as gaming and finance. This natural alignment with Web3 applications’ online attributes strengthens the compatibility between Telegram and TON blockchain.
The Web3 industry is currently filled with speculation, with only a few projects having a solid foundation. The foundation lies in user scenarios. Only high-frequency and practical scenarios can attract billions of users to the Web3 industry. Regardless of Web1, Web2, or Web3, the fundamental aspect of internet business has always been “starting from traffic, ending with transactions.” Telegram has the traffic and now needs TON blockchain to bring in transactions. This is something other social application giants like WeChat and Facebook cannot achieve due to regulatory constraints, preventing them from entering the Web3 industry. Telegram, being born for encryption and naturally aligned with the cryptocurrency industry, needs a key to unlock the treasure trove of its massive native encrypted users, and TON blockchain is the key to that treasure trove.
02 Technical Analysis
2.1 Overall Architecture
TON currently consists of four main components: TON Blockchain, TON Payments, TON Proxy, and TON Storage (decentralized storage).
(1) TON Blockchain is a general-purpose blockchain that includes a standard execution layer, allowing permissionless transactions.
(2) TON Payments is a low-cost micropayment platform that enables instant and fast payments between users. It can currently be accessed through the Wallet bot on Telegram, benefiting from in-app convenience.
(3) TON Storage allows for storing and distributing files on TON, similar to a decentralized Dropbox.
(4) TON Proxy ensures censorship resistance by allowing users to run websites on the .ton domain independent of fixed IP/centralized domains.
Here, we will primarily analyze the TON Blockchain itself.
TON blockchain architecture consists of three layers: the Masterchain (main chain), Workingchains (work chains), and Shardchains (shard chains). The Masterchain serves as the central coordinator, acting as the brain, while the Workingchains and Shardchains handle specific transaction processing, providing high performance and scalability.
TON’s most distinctive and competitive technology is its sharding technique. While Ethereum, the king of layer one networks, has been discussing sharding for a long time, the progress has been slow. Currently, it has achieved some level of sharding and modularity through Layer 2 solutions, but it is still far from achieving sharding at the network’s base layer. On the other hand, TON blockchain has made greater progress:
TON blockchain consists of one Masterchain and up to 2^32 Workingchains. Each Workingchain is an independent chain with its own rules. Each Workingchain can be further divided into 2^60 Shardchains or sub-shards, which contain a portion of the Workingchain’s state. Currently, TON only has one Workingchain running, called the basechain.
2.2 Fee Mechanism
The transaction fees paid by users mainly serve the purpose of acquiring block space for storing transactions. In essence, the blockchain’s business model revolves around leasing block space.
For most public chains, including Ethereum, it follows a permanent lease model where users pay a transaction fee, and the transaction is permanently stored on the blockchain.
TON blockchain, however, operates differently. Firstly, the block fees are not paid by users but by each smart contract. This means that each smart contract needs to pay for the resource costs it consumes. Each smart contract holds a balance of TON tokens and uses this balance to pay rent. If a smart contract runs out of funds, it will eventually be deleted (though it can be restored).
Therefore, in TON blockchain, the cost of storing data on the chain is not one-time; it is ongoing rent for block space. If you only store data for a period of time, the cost you pay will significantly decrease. This fee economic model aligns with the costs incurred by nodes, making it easier to scale.
2.3 Address Mechanism
In most public chains, wallets are implicit, meaning you can generate a public key from a private key and derive an address from the public key. As long as you keep the private key safe, you can use the wallet.
However, in TON, wallets are not implicit. To obtain a wallet, you must deploy an independent smart contract like any other smart contract. The address is composed of the wallet contract’s code and various initialization parameters, such as the user’s public key. This means that users can deploy multiple wallets, each with its own address.
This also implies that in TON, even if users know their private keys, they must remember their wallet addresses. The wallet’s usage mechanism is also different: in Ethereum, for example, when you use an application (i.e., a smart contract), you sign a message with your private key and send it to the application. In TON, however, the transaction is not sent directly to the application’s smart contract but to the user’s wallet contract, which then forwards the message to the application’s smart contract.
2.4 Development Language
TON’s smart contract programming languages consist of three: Fift, FunC, and Tact. Tact is a new statically typed high-level programming language introduced by TON, aiming to reduce the difficulty of developing smart contracts and improve security.
Tact possesses two important features. Firstly, it supports asynchronous calls, enabling parallel execution of smart contracts without waiting for other contracts to complete, thus enhancing TON blockchain’s performance and responsiveness. Secondly, it follows a message-oriented programming approach, eliminating coupling between callers and receivers. Objects can easily subscribe to and unsubscribe from messages, making dependency management and updates between objects easier.
While new programming languages can bring many features and fully leverage technological advantages, they hinder developers’ entry, ultimately affecting the speed and prosperity of the ecosystem’s development. Introducing a separate programming language creates an invisible barrier during the initial stages of a new ecosystem. Although the new programming language may be more robust and advanced than Solidity in Ethereum’s ecosystem, Ethereum already has a relatively mature developer ecosystem. Therefore, it is challenging to directly and quickly migrate these developers and mature applications to a new public chain.
A prime example is Starknet, a ZK-based Layer 2 network in Ethereum’s ecosystem with substantial financial support and a highly skilled team. However, despite several years passing, the ecosystem remains impoverished. The most crucial aspect of a public chain is its ecosystem, and it is best to directly migrate existing applications and developers. The introduction of a new programming language creates an invisible barrier during the early stages of a new ecosystem.
03 Token Economics
3.1 Basic Data
TON token possesses several core data points:
(1) Initial supply: 5 billion tokens
The relatively high initial supply is why TON’s token price did not rise significantly in the beginning.
(2) Supply: No limit, increases by approximately 0.6% annually
TON token’s inflation rate is relatively low, even lower than Bitcoin and gold’s inflation rates. Bitcoin has an inflation rate of 0.85%, and gold has an inflation rate of 1.64%.
(3) Current supply: 5.1 billion tokens
Compared to other public chains, TON’s tokenomics is relatively stable with a slow increase in supply.
The initial supply of tokens has only increased by 100 million in the past four years. The current circulation is 24 billion, with a circulation rate of 47.61%. This rate is relatively low compared to the top ten tokens by market value, indicating that there is a relatively high short-term lock-up, which is conducive to price increases. However, in the long term, there is significant selling pressure.
As of June 9, 2024, the current price is $7 per token. In June 2022, the lowest price for TON was $0.73, but after a bear market, the price has increased sevenfold in the current bull market cycle.
The circulating market value is $17 billion, which is relatively small compared to the $70 billion circulating market value of the Solana public chain. The total market value of TON is $35.8 billion, and the ceiling for the full circulation market value of TON is still very high compared to the current $90 billion market value of SOL.
The distribution of TON tokens has had its ups and downs. Initially, some tokens were distributed through Initial Coin Offerings (ICOs). However, after regulatory intervention, the team used a more traditional Proof of Work (PoW) model for initial token distribution. The total amount of tokens distributed through PoW will account for 98.55% of the total supply, while the remaining 1.45% will be held by the core development team. In June 2022, the last TON token from a contract with a total supply of 5 billion was successfully mined, marking the completion of the initial token distribution task for TON.
Despite using a PoW token distribution model, the majority of TON tokens were mined by the project team in the early stages, resulting in a concentration of TON tokens in the hands of the project team. This has become one of the core issues facing TON, inherited from the era of Telegram Open Network. However, the TON Foundation and the community are working hard to address this issue.
On July 28, 2023, TON community members from different language backgrounds jointly established the TON Beliver Fund (TBF). This organization launched a special smart contract that divided interactive funds into two parts: donations and deposits. All donations would be directly rewarded as additional deposits, while deposits would undergo a 24-month full lock-up period, followed by a 36-month linear unlock. The TON Foundation strongly supported this initiative on August 18, 2023, and pledged to donate 1 million TON to support this self-initiated token economic optimization behavior.
Thanks to this support, TBF has seen rapid development. Recent blockchain data shows that TBF’s contract address has locked up as many as 970 million TON tokens, with an annual deposit interest rate exceeding 10%, nearly double the returns of other staking methods on the main network.
The application scenarios for TON tokens mainly consist of public chain transaction fees and Telegram service fees. Telegram has built a platform called Fragment, where users can purchase various Telegram services using TON, including usernames, phone numbers, memberships, and advertising services.
When it comes to the ecosystem analysis, wallets serve as the entry point, DeFi serves as the infrastructure, and games represent TON’s greatest advantage within the public chain. Wallets are crucial for user experience and serve as the first application users engage with when using the public chain. Telegram has deeply integrated a wallet bot called Wallet, which has become a milestone in Telegram’s transition to Web3. This integration has laid the foundation for various decentralized applications in the future.
DeFi has been rapidly growing in the TON ecosystem since March, with various initiatives such as the use of Toncoin for payments on the Telegram advertising platform, the distribution of 30 million TON tokens for liquidity incentives, and the launch of USDT stablecoin in collaboration with Tether on the TON public chain.
Games are an area where TON can truly leverage Telegram’s features. The TON Foundation is vigorously promoting a gaming project called Notcoin, which has attracted over 35 million users and has a daily active user base of over 5 million. This project, along with other similar games, represents the early stages of game development within the TON ecosystem.
Looking ahead, TON’s core advantages lie in its active promoters, strong infrastructure, and massive user traffic from Telegram. The main challenge for TON lies in transitioning these users into the Web3 world, which also presents the greatest potential for TON’s narrative.
