Pantera Capital: Why Are We Heavily Investing in TON?

Title: “TON, Our Largest Investment Ever”

Authors: Dan Morehead (Founder of Pantera Capital), Ryan Barney (Partner at Pantera Capital)

Compiled by: Azuma, Odaily Planet Daily

Editor’s Note: This article is derived from the 100th edition of Pantera Capital's market commentary column, Blockchain Letter, primarily excerpting the analysis section regarding TON. The term "largest investment ever" originates from Pantera Capital founder Dan Morehead, who mentioned that he recently had lunch with Telegram founder Pavel Durov, and that Pantera recently made the largest investment in the history of the fund into Telegram's TON blockchain project. Additionally, most of the remaining content is written by Pantera Capital partner Ryan Barney.

Why Did Pantera Choose TON? (Dan Morehead)

Throughout my career, I have been on the lookout for exceptional investment opportunities.

My passion for Bitcoin and blockchain stems from my belief that it has the potential to change the world and have a tremendous positive impact on billions of people. Within this community, I have encountered many remarkable individuals who share a common mission and goal. It is truly inspiring.

I recently had lunch with Telegram founder Pavel Durov, and his unwavering beliefs are astonishing.

Telegram was founded by Pavel in 2013, with the platform's primary principle being "freedom." Telegram is a neutral social platform, impartial and not favoring any side.

At the age of 21, Pavel and his brother Nikolai founded VK, known as the "Russian version of Facebook," which was also excellent and not under the control of Russian media. The Russian opposition widely used the app to organize large-scale protests in Russia, for which the government attempted to force Pavel to censor and ban some opposition communities, but Pavel refused.

Pavel stated at the time: "Neither I nor my team will participate in political censorship. We will not ban Navalny's anti-corruption community or the hundreds of other communities that have been ordered to be banned. Freedom of information is an inalienable right in a post-industrial society; without this right, VK has no meaning."

In 2013, Pavel permanently left Russia. He once again partnered with Nikolai to establish Telegram, with the principles of "freedom," "openness," and "expression."

Pavel expressed: "Every action in my life is for freedom. To the extent possible, my life's mission is to make others free as well. That is the mission of Telegram."

Pavel and his team ultimately chose to flee their homeland rather than abandon their principles, and we are honored to collaborate with someone who holds such steadfast beliefs—Pantera recently made the largest investment in the history of the fund in TON. In the following sections, my colleague Ryan Barney will provide a detailed analysis of this investment.

In short, when building a portfolio, it is best to find some distinctive qualities.

99.999% of blockchain projects attempt to build a community from scratch based on technological concepts. According to CoinMarketCap, there are currently over 23,000 cryptocurrencies on the market, and for most projects, starting from zero is a difficult road, while TON integrates blockchain technology into its existing community, which undoubtedly makes it easier to achieve.

Today, Telegram has begun rolling out wallet services to its 930 million users.

Overview of TON (All content authored by Ryan Barney)

TON is a Layer 1 network initially designed by Telegram and continued to be developed by the open-source community. Due to the widespread adoption of TON within the Telegram system, we believe it will drive further promotion and popularization of cryptocurrency. Telegram is a forward-looking, fast, and secure messaging platform with over 900 million active users, allowing users to communicate individually and in groups, build large communities, share content, and more.

Given Telegram's vast user base and seamless user experience, coupled with the vibrancy of the TON ecosystem itself, we believe TON has the potential to become one of the largest crypto networks.

Our confidence in TON stems not only from its strong promotional potential but also from Telegram's core values. During this year's Token 2049, Pavel specifically discussed these values in his keynote speech.

Telegram does not sell user data, and its viral growth is entirely based on its commitment to privacy. It is a neutral platform free from government interference and has been a hub for community organization of protests worldwide.

Telegram is also one of the fastest-growing and largest social platforms in the world. They spend zero on marketing, yet they can grow by nearly 2.5 million users every day. Currently, they have a total of 930 million active users, and Pavel remains the company's sole product manager, with only 30 employees.

Telegram's monthly downloads are nearly 10 times that of its closest competitor, Signal, with 36.7 million downloads just this January.

The Core Spirit of Web3

Telegram stands out not only because of its significant distribution capabilities but also because it inherently embodies the spirit of cryptocurrency.

At the Token 2049 conference, Pavel explained why TON and Telegram are a perfect match. Pavel said, "The reason I love blockchain is that it is a technology of freedom—it returns power to ordinary people." No other social application has the same positioning.

Telegram is currently the only major platform without regulatory barriers that can integrate the vision of Web3 and has already incorporated blockchain. While Messenger attempted to integrate crypto payments through Libra, it ultimately faced regulatory hurdles in the U.S., leading to the complete shutdown of the project. WeChat tried to integrate central bank digital currency (CBDC) payments, but the system's application scope remains limited.

We believe that due to its combination of Web3's sharing spirit, Telegram has immense potential to promote cryptocurrency globally.

A Scalable Network for Hundreds of Millions of Users

The Open Network (TON) is a blockchain initiative developed by Telegram aimed at creating a decentralized network capable of supporting various applications by leveraging its extensive user base. TON has built a rich multi-component ecosystem, including the TON blockchain, TON storage, TON DNS, and TON services—all of which can be integrated to run seamlessly.

The TON blockchain is the backbone of this ecosystem. TON is positioned as a high-performance, scalable Layer 1 network that can quickly process transactions using a dynamic sharding mechanism. This architecture ensures that the network can handle millions of transactions per second and can effectively scale with the increase in users, making it an ideal choice for developers to launch various applications for hundreds of millions of users without compromising on speed or security.

A Simplified Onboarding Process

Generally speaking, getting users started with crypto applications can be quite challenging. New users need to remember a long string of keys and keep them secure, but what if you forget your private key? How can you send or receive money to other users? Copying and pasting public keys is not a good experience in itself.

Telegram simplifies many of these complexities through the Telegram wallet by Top.co, which allows users to seamlessly connect to various small applications, accessible directly through Telegram settings and personal chats, enabling easy buying, selling, or managing of tokens and NFTs within a single interface.

The Telegram wallet supports both custodial and self-custodial options, providing a simple onboarding experience for beginners while allowing experienced users to have complete control over their keys. With TON's self-custodial wallet, users do not need to remember a seed phrase but can simply use Telegram and email as backups.

The Magic of Mini Programs

The growing ecosystem of TON benefits from Telegram's innovative design and vast user base. Over 360 million users interact monthly with the so-called "mini programs" on Telegram, such as chatbots, mini-games, and more. For TON, we envision its crypto functionalities being integrated into these "mini programs," significantly enhancing the user experience for hundreds of millions. Currently, there are over 300 projects on TON, most of which have built mini programs on Telegram and can be accessed directly through the Telegram app center.

Earlier this year, we witnessed meme token trading tools like BonkBot generating tens of millions of dollars in revenue through Telegram's user interface. TON-based applications (like StormTrade) now also support users trading perpetual contracts, cryptocurrencies, stocks, and equities using the same interface. StormTrade handles over $10 million in daily trading volume, and we believe similar TON-native Telegram bots will become the preferred choice for many traders.

Telegram also provides a foundational platform for viral social and gaming dissemination. Early experimental Telegram games like Pixels and Fanzee Battles attracted millions of users within days, showcasing the platform's immense user engagement potential; Catizen, a mini gaming platform based on TON, now has over 4 million users, with daily active users exceeding 700,000; Notcoin is a TON-based social application where users can mine, and it has now attracted over 30 million users, marking one of the fastest growth rates ever recorded in the cryptocurrency space.

The TON Foundation recently announced their incentive program aimed at rewarding successful TON applications. We believe this will foster the creation of more new and exciting mini programs, thereby attracting more users.

New Revenue Models

TON also opens up many new paths for monetization, sharing, and business expansion for the Telegram community. As a decentralized marketplace based on TON, Fragment provides users with a trading platform where they can trade collectibles such as virtual phone numbers and custom Telegram usernames. Fragment has now facilitated over $350 million in total transactions, and this is just the beginning.

The Fragment platform also supports revenue sharing between content creators and channel owners, marking an important innovation that signifies a shift in traditional social media monetization models, allowing creators to earn directly from the advertising revenue of their channels. This approach not only incentivizes content creation but also strengthens the connection between the platform and users, promoting a fairer distribution of economic benefits within the digital ecosystem.

Payment Revolution

On April 19, 2024, Tether announced the deployment of its stablecoin USDT on the TON blockchain and Telegram wallet. This move signifies a significant advancement in the payment sector of the crypto industry, as it will allow hundreds of millions of users to seamlessly send and receive stablecoins through the Telegram platform, making payments as simple as using Venmo or Apple Cash.

With the robust scalability support of the TON network, user transaction fees are reduced to about $0.10, which is 66% cheaper than other mainstream cryptocurrency payment platforms. Additionally, Telegram provides built-in deposit and withdrawal channels (for banks or exchanges) to further facilitate user access.

We believe that stablecoin payments on the Telegram wallet are particularly important for individuals in developing countries, where people often lack access to comprehensive banking services. With the deployment of stablecoins on the TON network, cryptocurrency is moving closer to realizing the vision of "programmable peer-to-peer currency" and "globally accessible decentralized financial systems."

Conclusion: Still Early, Unlimited Potential

In summary, we believe that the TON network is still in its early stages, and we are very much looking forward to seeing the Telegram user base adopt its ecosystem and experience more new features that will be rolled out in the future.

Essentially, Telegram itself embodies the spirit of cryptocurrency—openness, freedom, and permissionless. The TON network has achieved a clever symbiotic relationship with Telegram, where scalable smart contract capabilities and a robust payment network enable breakthrough functionalities that are not possible in a Web2 environment. Given Telegram's vast user base, scalable infrastructure, thriving mini program ecosystem, and native stablecoin payment capabilities, TON has the potential to extract even more value from this "treasure trove" of 900 million active users.