TON and Telegram: A New Narrative and Investment Opportunity Towards Mass Adoption

What is Telegram?

Telegram is a cloud-based free instant messaging software, founded in 2013 by the Durov brothers, Nikolai and Pavel, who are the founders of VK (one of Russia's mainstream social media). Currently, Telegram servers are distributed globally, with its operational center and development team located in Dubai, UAE.

Telegram has a huge and globally oriented user base, with rapid growth in recent years. It is reported that as of now, Telegram's monthly active users (MAU) are close to 900 million, with registered users exceeding 1.3 billion.

Interestingly, Telegram is an "important stronghold" for Crypto. More than half of the channels and groups with the highest subscription/member counts are related to Crypto content. Almost all Web 3.0/Crypto projects have Telegram communities to facilitate community communication, project updates, and promotions.

Additionally, it is interesting that many cross-border e-commerce sellers drive traffic from public domains (like TikTok) to Telegram for transactions; Telegram is also a marketplace for e-commerce transactions.

What is TON?

TON is a project initiated by Telegram in 2018, but it was later accused by the U.S. SEC of illegal fundraising. Therefore, in May 2020, founder Pavel Durov announced the end of Telegram's involvement in blockchain development. However, after Telegram abandoned the project, it was accepted by the community to continue development, and the project was renamed from "Telegram Open Network" to "The Open Network," issuing the TON Token.

TON is a massive ecological project, not just a public chain, but also includes a P2P network (currently supporting settlements between Fiat and Crypto) and a stack of service technologies, such as TON Proxy (to hide IP and information) and TON Storage (a distributed storage launched by TON).

The Tech Stack currently provided by TON aims to solve the difficulties users of all social products, including Telegram, face when using blockchain or distributed services.

The TON Blockchain is a public chain based on the PoS consensus mechanism and TVM smart contract computation. It theoretically supports millions of on-chain transactions, and with enough validators, it can support up to 2^92 shards. Currently, due to the limited total transaction volume (at present), there has been no opportunity to verify its stability and security under high TPS, with TPS consistently maintained below 60,000.

The core feature enabling such high TPS is that the TON Blockchain itself supports parallel transaction computation and validation, as well as asynchronous processing of smart contracts. Its architecture is mainly divided into Masterchain, Workchain, and Shardchain: it can support the registration and operation of up to 2^32 Workchains, with each Workchain supporting 2^60 shards and corresponding Shardchains.

Each Shardchain can be understood as a ledger for one or more accounts, constructed and validated by a group of validators; in the next time slot of the Workchain, all validators of the Shardchains under that Workchain perform PoS again to obtain block rewards. The states of all Workchains and Shardchains will be updated to the Masterchain. Logically, there are five important points:

Shardchain and Workchain both support parallel computation
TVM can support asynchronous computation
Supports instant cross-shard communication
The ledger has multiple copies, thus requiring higher storage
Two PoS processes are needed to ensure the decentralization of Shardchain and Workchain

The first three points form the theoretical basis for TON's high TPS.

Interesting Connection between TG and TF

TON is currently mainly driven by the TON Foundation. The TON Foundation has a team of over 40 people, with more than half coming from countries and regions such as Russia and Ukraine, most of whom have work experience with VK and TG.

One of the core founding members of the TON Foundation, Andrew Rogozov, is the former CEO of VK.com.

TON Ecosystem Landscape

1. Validator

TON is a PoS-based public chain, so the scale of validation nodes can ensure its decentralized and stable operation. TON currently has 342 validation nodes, with a staking amount of 490 million TON, a staking ratio of 9.6%, and an APY that can be consistently maintained around 5.5%.

The conditions to become Validation Nodes are as follows:

Stake at least 300k TON tokens
Meet hardware requirements

Regarding the Slash mechanism, TON is still continuously optimizing. Currently, validators can earn block rewards and user transaction fees (Gas), but if a validator behaves improperly, a portion or all of their stake will be reduced, and an equivalent amount of TON tokens will be burned.

2. Dev Community

As of July 2023, there are 6,793 full-time developers across the network, with 21,338 monthly active developers. Among them, there are 39 full-time developers on TON, with 174 monthly active developers.

In terms of technical development, the TON Foundation is actively expanding and supporting the developer community, and is helping developers familiarize themselves with new languages and deploy blockchain projects in parallel computing environments through continuous improvement of developer documentation (parallel computing may lead to greater development volume and management costs). After this conference, there has been a significant increase in attention, and some projects have begun to launch on TON.

3. TON's Application

The Web 3 part of the Telegram App ecosystem has already expanded into Wallet, Game, Social, NFT, DeFi, etc. The TON ecosystem is accelerating its development, but currently mainly consists of some wallet and DeFi projects:

a. Wallet

There are currently many To C wallet projects, but they are mainly integrated with TONSpace, and there is a possibility of other leading wallet projects like Metamask entering in the future.

Telegram Wallet (@Wallet)

Telegram Wallet is a centralized custodial wallet natively embedded in Telegram, where users can currently exchange TON, BTC, and USDT. Through the attachment menu bar in the chat interface, users can send and receive these cryptocurrencies with their contacts.

@Wallet supports importing fiat currency via bank cards or P2P markets, allowing users to choose the type of payment currency, and it also supports deposits of cryptocurrencies from other wallets. As of June this year, the number of registered users of Telegram Wallet has exceeded 2.5 million, and this user base is growing rapidly.

TON Space

TONSpace is a non-custodial wallet embedded in @Wallet, where users can import existing TON blockchain wallets using mnemonic phrases or create new TON blockchain wallets through mnemonic phrases. Users can also save the corresponding private keys using their Telegram account and email. Currently, TONSpace supports on-chain token transfers and related NFT operations.

In the future, users will be able to directly use some on-chain facilities and applications of TON through TONSpace, such as interacting with DeFi. This product's beta version was first announced at Token2049 and will launch the mainnet official version in November this year.

b. DeFi

Currently, the DeFi ecosystem is not yet mature, with only spot DEX and Liquid Staking available, but the pace of development is accelerating, whether on the developer side, user side, or with more bridges and token deployments.

Megaton Finance

Megaton Finance is an AMM-Based Spot DEX, developed over six months by the South Korean blockchain company OZYS, with a current total locked value (TVL) of $7.13 million.

The total supply of the token MEGA is 100 million, with a circulating supply of 5.14 million and a market cap of approximately $710,000. In March of this year, it completed a $1.5 million seed round of financing, led by TONcoin.Fund, with participation from Orbs, MEXC Ventures, and others.

Bemo

Bemo is a liquid staking project on TON, similar to the Lido mechanism, with a current TVL around $2.6 million and an APY around 5%.

4. TON Token

TON Token is the native token of the TON Blockchain. Currently, the supply of TON Token exceeds 5 billion, mainly supplied by the PoW mechanism of the early TON Blockchain, which was fully mined by June 2022. Additionally, the supply of TON Token is unlimited and will inflate at a rate of approximately 0.6% per year (about 30 million tokens).

The utility of TON Token is extremely differentiated. In addition to the investment attributes of mainstream currencies, gas payment utility, and BTC as an alternative large payment tool, the social scenarios of Telegram can sufficiently empower TON Token as a universal payment tool. Its broader application scenarios will include diversified social transfers, inflows and outflows, advertising payments, application payments (including Bots), and even product payments, providing users with a choice that exceeds the experience of WeChat Pay. Telegram is already working on providing a more user-friendly and convenient secondary payment method.

Currently, the average gas fee for each transaction on TON is around $0.1 to $0.5, far lower than Tron’s $1 to $2 and Ethereum’s $7.

TON's Comparison

The combination of TON and Telegram raises the ceiling of the entire ecosystem significantly. Currently, we have identified three important comparative dimensions: social platform comparison, blockchain development comparison, and product form comparison within the Telegram ecosystem:

1. Social Platform Comparison

Currently, the most mainstream form of social networking platforms worldwide is instant messaging, such as WeChat and WhatsApp. We believe that such projects have a very strong moat, mainly reflected in scale effects and network effects. With the continuous development of mini-programs, the transaction volume reached trillions in 2022, and the MAU has now reached 1.1 billion, with a large amount of value shifting to the built-in programs of apps, which all demonstrate that this integrated product form is more preferred by users.

Based on blockchain and distributed technology architecture, Telegram can leverage the new product form of Internal-Dapp to develop both physical and virtual economies in multiple countries and regions, significantly reducing transaction friction in cross-regional commerce. If we consider TON as a commercialization tool for TG, the story becomes very clear.

Of course, there is another perspective comparing TApp with Web 3 Social products. A more mature user base and a larger token usage scenario create a much better landing environment for TON's on-chain social products (including social games) than on other chains. Moreover, Telegram itself does not analyze user data, which I believe will attract a lot of attention from developers and entrepreneurs.

2. Blockchain Comparison

From a theoretical architecture perspective, the differences between TON and Ethereum mainly lie in the number of shards and cross-shard communication. Additionally, shorter block times, support for parallel computing, and asynchronous processing make the technical requirements for deploying TON projects more stringent, with higher security considerations.

Of course, the benefit is that the theoretical TPS will be much higher; TON is about 100,000 times that of Ethereum. Compared to Solana, both virtual machines support asynchronous computing, and the blockchain supports parallel computing. However, TON is clearly more decentralized, and Solana does not have a shard design, so Solana's theoretically highest TPS (around 50,000) is also lower than TON's current TPS performance.

When we consider growth potential, we find that TON faces more intuitive growth points. Telegram is a mainstream social platform worldwide (along with VK.com traffic) and is the largest social platform for the crypto community, with many users having awareness of Crypto and Web 3.0, resulting in lower educational costs. This means that the user development of TON has relatively lower market risks.

With the empowerment of a giant social network, TON Token will have more payment utility, which means TON has a higher ceiling.

3. Telegram Bots vs TON App

Telegram Bots are a new way of interaction with blockchain, implemented by integrating various functions through the Bots module on Telegram, allowing users to execute these functions by sending commands to Bots, mainly related to trading. Here, the Bots projects refer to those that connect to non-TON chains like Ethereum.

In simple terms, the current differences between Bots projects and TON Apps are:

Bots have limited response speed, a single interaction method, and poor parallel interaction capability; however, TON Apps can better solve these issues. Bots struggle to provide users with payment and inflow/outflow solutions, while TON ecosystem applications can seamlessly connect to the corresponding infrastructure.
Bots charge additional fees on DeFi, while TON DeFi applications only have a lower fee layer.

As summarized earlier, both Telegram Bots and projects on TON can better face users, but the interaction form of Telegram Bots resembles a monotonous proxy page, while projects on TON are more functional, interactive, and composable apps. Moreover, projects listed in the APP Center can be connected by @Wallet (a collection of multiple TON wallets and Fiat-to-Crypto), thus the depth difference between TON and Telegram Bots projects is very significant.

The development of Bots projects also provides TON with a larger narrative space, as it can seek to convert existing crypto users while incrementally increasing traffic around Telegram. Therefore, in the future, we are uncertain whether these non-TON chain Bots face the risk of being blocked, but the TON Foundation is also fully motivated to extend an olive branch to good Bots projects, attempting to convert them to TON.

Conclusion

In the face of risks from technical architecture, economic models, teams, etc., TON is currently actively responding: including large-scale investments in community developers to provide a more stable and reliable technical architecture, investing in community funds to disperse the concentration of funds, and planning to redesign the economic model with institutions like DWF Labs.

The development of TON is backed by Telegram, and we attempt to outline a future blueprint: providing an on-chain low-cost, high-parallel transaction environment where users can experience various user-friendly "partially/fully decentralized" applications, possess a clear on-chain profile and social graph, and freely enter and exit the crypto world and the real world. This is a complete journey of a network user's life. Regarding future prospects, we may not be able to accurately imagine whether the new balance still tilts toward Web 2.0, but we can envision how future network users will smoothly use various trust or distrust tools to meet their needs. Web 3.0 may just be one option, but the new trend of balance is what we pursue.

Overall, the growth points of the TON Ecosystem are intuitive, and the ecosystem is accelerating its development. The projects currently deployed in the ecosystem are still in the early stages of development, but this also creates more investment opportunities, with odds and ceilings extremely suitable for venture capital firms to bet on. Additionally, for the new narrative that enters too early, there are potential influence gains for institutions.

However, unlike other public chains, the technical development of TON is currently mainly followed up by the TON Foundation and early developers involved, and there is significant uncertainty regarding opportunities for infrastructure development from other projects. It is relatively difficult to propose some forward-looking investment suggestions for Infra projects from a top-down perspective. The direction more suitable for institutions is to build as many connections as possible while understanding the movements of TON itself.

As for the development of decentralized finance (DeFi) projects within the TON ecosystem, the likelihood of leading projects migrating to TON is high, as these projects may already be relatively mature and have greater potential for ecological support. I believe there are also fewer significant investment opportunities.

In summary, based on the current development status of TON, I am optimistic about the narratives of "accelerating TON development," "Internal-App as the best product form," and "aligning with TG's new social paradigm to create new value circulation." Here are some reasonable and lower-risk investment and entrepreneurial directions:

Accelerate TON development
Dev Tools/Community
Social Payment and parallel payment infrastructure
Internal-App as a better product form
Real-Yield Aggregator
New value creation and circulation
Social Plus/Graph
Game and on-chain infra
Traffic distribution platform

Finally, thanks to Vivi, Howard, John from TON Foundation, Jerry from TONup, and my colleague Michael, along with many others for their assistance!

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