Interpreting the History of The Open Network: From Defeat to Rebirth

Author: Graham, TONversation

The announcement of the formal collaboration between TON and Telegram has once again pushed this long-silent public chain into the spotlight of market attention. In fact, TON is not a new project; it has been in development since 2017, almost concurrently with Ethereum. Therefore, TON gives a sense of mystery, but once you peel back the layers, you will find that TON is a story of rebirth in Web 3.

The Fall: The End of a $1.7 Billion ICO

At the end of 2017, during the first bull market in the crypto market—when the price of Bitcoin soared from about $800 to nearly $20,000—countless projects were preparing for ICOs with grand stories. It was at this time that Telegram announced it would develop its own blockchain platform—Telegram Open Network (TON). From its inception, TON was highly anticipated and completed two rounds of ICOs in February and March 2018, raising a total of $1.7 billion, setting a historical record for ICOs.

(Source: CoinMarketCap)

In May 2019, TON's testnet was launched as scheduled, and the newborn king was on its way to the promised land. But at this moment, the U.S. Securities and Exchange Commission (SEC) suddenly intervened, marking the first hurdle for the new king. The SEC believed that TON had sold 2.9 billion tokens to early investors, of which 1 billion were sold to U.S. investors, and deemed this a violation of U.S. securities regulations. Consequently, the SEC took swift action to impose restrictions on TON.

(Source: SEC official documents)

Stephanie Avakian, then head of the SEC's enforcement division, stated: "Our emergency action today is to prevent Telegram from selling what we believe to be illegal digital currency, thereby stopping the illegal currency from circulating in the U.S."

The SEC's crackdown directly led to the postponement of the TON mainnet, which was originally scheduled to launch in October 2019. Despite the TON team's efforts to appeal, the SEC's decision could not be changed. After multiple failed negotiations, TON proposed a refund plan for investors. By this time, the collaboration between TON and Telegram seemed to have come to an end.

Telegram's founder, Durov, expressed regret in his personal channel and officially announced the end of the partnership between Telegram and TON. However, Durov also used cautious language to describe the relationship with "a possible new TON": "While a network based on our TON technology may emerge, we will not have any affiliation with them, nor will we likely support them in any way."

(Source: Durov's personal channel article)

The new king returns defeated, but the strong never complain about their environment.

In June 2020, internal personnel at TON reached a consensus, led by core developer Tolya, to decentralize the entire organization and launch the testnet from the Telegram era as the mainnet, hoping to truly realize Durov's vision for the Web3 world.

This decision marked the beginning of a new chapter for what we now know as TON (The Open Network). In June 2020, after community deliberation, TON decided to adopt a more traditional PoW model for initial token distribution. This was a bold decision, as TON had always been designed with PoS as its underlying consensus. To achieve this goal, the core team embedded the "Giver contract" into TON for this distribution.

Under this mechanism, the total amount of tokens distributed through PoW would account for 98.55% of the total supply, while the remaining 1.45% would be held by the core development team. It is worth noting that the TON core development team and the TON Foundation are two independently operating organizations. Two years later, in June 2022, the last TON token from the total supply of 5 billion was successfully mined, marking the completion of TON's initial token distribution task.

The Heir: The Legitimate Struggle Between TON and FreeTON

The community governance plan for Telegram Open Network (TON) did not receive unanimous support from all community members. Before TON decided to decentralize, developer Ron Millow had already hard-forked Telegram Open Network and named it FreeTON, later renamed EverScale.

According to its official chat group, the history of FreeTON can be traced back to May 7, 2020. On that day, Ron Millow announced the official launch of FreeTON in the group. Notably, FreeTON fully adopted the TON white paper written by Telegram founder Durov. From then on, a fierce debate began between the two projects over "which is the real TON."

(Chat records from the creation of FreeTON, source: Telegram group)

Although FreeTON attracted some community attention due to its rebellious nature and received some funding and traffic support, in the eyes of most, FreeTON was merely an ordinary fork project and did not establish a true ecological connection with Telegram. Due to the limited number of developers in the FreeTON community, its development progress was relatively slow, and many features mentioned by Durov in the white paper, such as cloud storage and privacy gateways, had yet to be realized. Therefore, FreeTON's reputation in public opinion was not favorable.

In contrast, TON exhibited signs of legitimacy from the very beginning of its rebirth. The most representative example is the official channel of TON Community. This channel was not newly created after TON's decentralization; it had existed since mid-2018 when Telegram was still leading the development. Currently, this channel has attracted over 350,000 followers.

Moreover, insiders revealed that the leader of the TON core development team, Tolya, was already a key figure during the Telegram Open Network era, thus The Open Network has a deeper technical lineage with Telegram Open Network.

More importantly, VK, known as the "Russian Facebook," is also led by Telegram founder Durov. Its former CEO, Andrew Rogozov, announced on January 21, 2022, that he would join the TON Foundation, which many viewed as a confirmation of TON's legitimacy.

However, even before Andrew announced his joining the TON Foundation, the FreeTON team had already realized the changing situation. In October 2021, they decided to undergo a "rebranding" of the project. After a community vote, FreeTON was officially renamed EverScale. Thus, the year-and-a-half-long legitimacy struggle of TON finally came to an end.

The Fog: Who Holds TON?

Although TON completed its initial token distribution using the PoW mechanism, its token distribution strategy has always been a focal point of investor attention. Statistics show that there are a large number of whale addresses on TON, holding hundreds of millions of TON, but these addresses have not engaged in any trading activities for a long time, suspected to be in a dormant state.

TON Foundation, the non-profit organization currently leading the development of TON, has an unclear exact establishment date. However, based on mainnet data, its wallet address became active starting April 1, 2021. Undoubtedly, the main source of funding for TON Foundation seems to be related to the "original addresses" from Giver contract mining. Shortly after the establishment of the foundation's wallet, these addresses transferred all their funds to the public address of TON Foundation.

(Large sums of funds transferred to the TON Foundation address, one of the "ancient wallets," data from: Tonscan)

To enhance transparency and address community concerns, TON Foundation proposed several initiatives. On February 15, 2023, the foundation proposed a token economy optimization proposal in the community channel, aiming to freeze early miner wallets that had not engaged in transactions for a long time, with a freeze period of 48 months. This proposal received widespread support from the community a week later and was successfully deployed on the TON mainnet. According to statistics, approximately 194 wallets were frozen, involving a total of 1.1 billion TON.

(Frozen list, from TON Foundation statistics)

Although this measure effectively reduced the circulation of TON, there were still many opposing voices within the community. The main points of contention focused on two aspects:

• First, there were questions about the scope of TON Foundation's authority, arguing that it had no right to freeze any wallet funds, which could lead to centralization issues.
• Second, there were doubts about the source of the frozen funds, suggesting that these funds might be related to TON Foundation or Telegram.

Undoubtedly, the dissenting voices continued to rise within the community, but from a data perspective, the circulation of TON had significantly decreased to 3.4 billion. This meant that its circulating market value had dropped by 20% from its previous peak of over $10 billion, undoubtedly bringing greater potential value to mid-term investors.

However, the circulation of 3.4 billion does not dispel all investors' concerns. There are still voices in the market suggesting that TON's market value is overestimated and may require a long-term price adjustment process.

On July 28, 2023, TON enthusiasts from different linguistic backgrounds jointly established TBF (TON Believer Fund). This organization launched a special smart contract, dividing the interacted funds into two parts: donations and deposits. All donations would be directly distributed as additional rewards for deposits, while deposits would undergo a complete lock-up period of 24 months, after which they would enter a linear unlocking phase of 36 months.

The fund received strong support from TON Foundation on August 18. The foundation highly recognized this spontaneous token economy optimization behavior and publicly committed to donating 1 million TON as support in the subsequent community vote.

Thanks to such support, TBF's development momentum has been rapid. The latest blockchain data shows that TBF's contract address has locked up to 970 million TON, with an annual deposit interest rate exceeding 10%, nearly double the returns of other staking methods on the mainnet.

Excessive issuance and concentrated supply are currently among the core issues facing TON, which is also one of the historical burdens left over from the Telegram Open Network era. Nevertheless, we are pleased to see the foundation and the community striving to address this issue. The existence of TBF further reduces the circulation of TON, and it is expected that this number will increase before October 23. Overall, whether through official or unofficial actions, these two adjustments to the token economy have halved TON's circulation from 5 billion to about 2.5 billion, and the code of the locked contract indicates that this value will be maintained for at least two years.

(Actual supply should be based on CoinMarketCap; the foundation has verified the data from CMC, and the locked funds of TBF have not yet been updated on data websites.)

Ambition: The Determination to Serve 800 Million Users

If TON is the new king about to ascend, then Telegram Bot is the lion expanding its territory beneath the throne. As early as December 2021, First Stage Labs (now TOP) built the @wallet wallet within Telegram. At that time, the Wallet Bot stood out on Telegram, primarily a chat tool, as an experimental project. In its initial version, this bot only supported the transfer and receipt of TON and BTC, lacking the ability to send checks between friends and not yet added to the paperclip menu.

(Early version of Wallet Bot)

It wasn't until August 2022 that Wallet Bot released a significant update with version 2.0, perfectly integrating with Telegram in the form of a Telegram Web App. Notably, the update of the Wallet Bot "mini-program" version even preceded the official release of the Telegram Web App, raising speculation about the relationship between the Wallet development team and Telegram officials.

With its user-friendly interface, smooth interaction experience, and deep integration, Wallet Bot 2.0 became a milestone in Telegram's transition to Web3. Subsequently, a large number of Telegram Bots emerged one after another.

However, @Wallet is not the only innovation of TON within the Telegram ecosystem. Concurrently with @Wallet, TON announced a collaboration with Telegram Donate and launched a payment tool designed for private channels called @Donate. Through this bot, content creators can build private channels with interactive models similar to OnlyFans. As of June 15, 2022, @Donate had already served over 3,000 Telegram communities and channels.

At the same time, the TON Foundation launched an anonymous E-Sim card service called @mobile in June of the same year. Although this product ensured user privacy through cryptocurrency payments and direct binding of E-Sim cards, its pricing strategy faced some criticism. For example, in the United Arab Emirates (UAE), a 1GB 7-day data package is priced at $12.60, significantly higher than the market average.

From its inception, Durov pointed out in the white paper that TON is a public chain prepared for large-scale social applications. Perhaps in TON's top-level design, the crypto community is just a small part of its territory; what Durov has always wanted is a "super platform" that serves 800 million users. Born with a golden key, TON seeks a revolutionary new era.

Expansion: Fragment Begins to Shine

On October 28, 2022, Telegram officially launched Telegram Username NFTs based on the TON blockchain and simultaneously introduced an interactive platform that integrates auction and management—Fragment. To increase its appeal, Telegram specifically unlocked the creation rights for 4-byte Usernames on the Fragment platform (previously, Telegram usernames could only be up to 5 bytes).

According to publicly available data from Fragment, the auction prices for those top 4-byte Usernames with commercial potential far exceeded 100,000 TON, while the price of TON fluctuated between $1.6 and $2.0 at that time. Notably, the Username @news was sold for an astonishing 994,000 TON.

Even during the six months following the severe setbacks faced by the stablecoin project Terra and the turmoil of the well-known cryptocurrency fund Three Arrows Capital, the panic in the digital market did not affect the community's love for Fragment. Within less than a month of its launch, Fragment successfully sold Usernames worth over $50 million, achieving remarkable results.

(Data source: Fragment)

By the end of December, Telegram successively launched Anonymous Number and Premium membership services payable in cryptocurrency on the Fragment platform. Among these, Anonymous Number is particularly special; it is an identity verification system built on the TON blockchain. Users only need to hold an Anonymous Number NFT to register or bind a Telegram account without a phone number, greatly enhancing Telegram's anonymity and providing a safer login method for users with restricted access.

However, TonUP wants to emphasize that the space for Anonymous Number is certainly not limited to logging into Telegram; it is actually a DID built by Telegram on TON.

The launch of Fragment undoubtedly injected immense confidence into the TON ecosystem. In November 2022, even against the backdrop of the collapse of the top cryptocurrency exchange FTX, dubbed the "Lehman of the crypto world," the price of TON remained stable, even rising against the market's lowest point. By mid-December 2022, its price briefly touched a nearly two-year peak of $2.9.

(Source: CoinMarketCap)

The phoenix rises from the ashes, just as setbacks do not prevent the new king from ascending; they only make the songs in Valhalla more grand. The new era belonging to TON has just begun.

Coronation: The Long-Awaited Feast at Token 2049

Before we delve into Token 2049, let's take a moment to review some recent significant events. According to Reuters, on July 13, 2023, the well-known cryptocurrency project XRP achieved victory in its lawsuit against the SEC, providing key evidence that XRP is not to be considered a security.

This preliminary ruling indicates that the SEC does not have absolute jurisdiction over most cryptocurrency projects as they believed, making previous enforcement actions appear legally unfounded. Following the news of XRP's victory, stocks related to "previously sanctioned by the SEC" experienced a brief surge, and the market showed signs of a mini bull market.

As for TON, the three-year restriction order issued by the SEC in 2020 expired on June 25, and the SEC did not take any new restrictive measures, indicating that the legal sanctions against Telegram and TON had ended.

(Source: SEC enforcement documents)

XRP's victory increased confidence in the possibility of a reunion between TON and Telegram, while the expiration of the SEC's restriction documents provided practical operational space for this possibility. A series of signs seemed to indicate that this was a perfect timing of favorable circumstances.

Ultimately, on September 13, 2023, at the global top cryptocurrency summit Token 2049, Telegram's CTO John Hyman and TON Foundation President Steven Yun represented their respective teams in a joint presentation titled "Telegram's Entry into Web3 through Toncoin," marking the first public appearance of TON and Telegram together after three years.

During the event, John Hyman officially announced the collaboration plan with TON and shared Telegram's strategic blueprint in the Web3 field, while announcing the upcoming integration of the TON decentralized wallet TON Space. Steven Yun then looked ahead to the future of TON and made a widely discussed prediction: "We estimate that in the next 3-5 years, about 30% of active Telegram users will use the TON blockchain."

The throne in Valhalla always awaits its new king, even if the road is filled with obstacles and thorns. But rather than reminiscing about the hardships, it is more exciting to see how the newly crowned king will expand its territory and truly bring crypto into every household.

With the massive user base behind Telegram, will TON usher in a new peak? Will the market fully support Telegram in becoming a leader in SocialFi? How will Telegram lay out its strategy in the Web3 field? All of this remains unknown, and the story continues…

About This Article

This article is the first piece in the TONversation column under the Public Goods program of TonUP. TONversation is a column project launched by TonUP, aimed at bringing deeper insights into TON knowledge and ecological expansion perspectives to the community, exploring the rich ecosystem of TON together. TonUP is not only a leading launchpad on TON but also receives investment support from the TON Foundation grant and TONCoin Fund.

The authors of this article, Graham, Leo, and Freya, also contributed to this piece. This work ©2023 TonUP. All rights reserved, licensed under CC BY 4.0. Anyone can distribute, remix, adapt, and build upon this work in any medium or format, even for commercial purposes, as long as appropriate credit is given to the creator.