Not just mini-games: A deep dive into TON's "ambitions" in the payment track

Author: Satou, CGV Research

In the blockchain field, The Open Network (TON) is gradually emerging in the payment sector with its unique advantages and strong user base. In 2024, the TON ecosystem shows strong growth momentum in multiple areas. According to the latest data, as of July 21, 2024, over 730M USDT has been issued on the TON network, becoming an important driving force for the development of the TON payment ecosystem. Additionally, TON gaming platforms such as Notcoin, Hamster Kombat, and Catizen have also achieved significant success, attracting 35 million, 230 million, and 25 million users respectively.

As the TON ecosystem continues to mature and expand, its application prospects in various fields such as DeFi, GameFi, and SocialFi are becoming increasingly clear. The CGV research team deeply analyzes TON's "ambitions" in the payment sector, exploring how it leverages its advantages to overcome challenges and achieve long-term development in crypto asset management and DeFi.

TON's Unique Advantage: Backed by Telegram's Large User Base

According to Statista, as of April 2024, Telegram has 900 million monthly active users, ranking eighth among global social networks. In comparison, the current public chain with the most monthly active addresses is Solana, with 14 million monthly active addresses, which is still less than 2% of Telegram's users.

From the perspective of user distribution, besides Russia and Ukraine, the birthplace of Telegram, and the diverse population structure of the United States, Telegram users are mainly distributed in developing countries such as Southeast Asia, Africa, and Latin America.

In terms of user demographics, Telegram has a large user base, but the average income of its users is relatively low, making it more suitable for businesses related to traffic rather than serving high-net-worth individuals.

Compared to other social network projects, Telegram launched its own crypto public chain early on, and the public chain is strongly integrated with the social network.

• In 2017, Telegram founders Pavel Durov and Nikolai Durov began developing a blockchain project called Telegram Open Network (TON) and planned to launch its native cryptocurrency, Gram.
• In 2018, it raised approximately $1.7 billion through an ICO, which attracted the attention of the U.S. Securities and Exchange Commission (SEC).
• In 2020, due to regulatory issues, Telegram announced its withdrawal from the TON project, returning development work to the community, which was taken over by the TON Foundation. The project was renamed "The Open Network," and the token name was changed to Toncoin, with ICO funds refunded.

After several twists and turns, in 2023, Telegram officially announced that the TON blockchain would be its preferred Web3 infrastructure and planned to integrate it into the Telegram App interface. In contrast, Facebook's Libra (Diem) cryptocurrency network announced it would not launch after two and a half years of various setbacks and regulatory pressures.

Moreover, Telegram's privacy protection and unregulated characteristics make it more friendly to cryptocurrencies, which to some extent also accommodates gray industries that cannot pass regulatory scrutiny. These gray industries were among the early widespread application scenarios for cryptocurrencies, leading to a large number of crypto users on Telegram.

Overall, the TON ecosystem has had a first-mover advantage in developing cryptocurrencies from the very beginning, thanks to Telegram.

Monetizing Traffic: Overview of TON Mini Games

Compared to the once-popular fully on-chain games on Ethereum, the recent hit on TON may be fully off-chain games, where some casual (and possibly slightly juvenile) mini-games attract users through economic incentives. Fully on-chain games adopt grand narratives of autonomous worlds to attract users through potential cultural identity but often fail to gain mass user adoption. The mini-games on TON are more straightforward; you open your phone, tap the screen a few times, and then you can earn 1 point, which can later be exchanged for tokens with real value.

Recently, the explosive popularity of TON gaming projects seems to reveal the industry's infinite potential.

• Notcoin features extremely simple gameplay, where users earn coins by tapping their phone screens, which are ultimately exchanged for Notcoin tokens. It has attracted over 35 million gaming users and launched on Binance and OKX, with the token price rising significantly post-listing, reaching a market cap of nearly $3 billion.
• Hamster Kombat also follows a Tap to Earn model and offers additional ways for players to earn rewards through card purchases/synthesis, daily check-ins, social media tasks, and referrals, gaining over 230 million registered users in less than four months.
• Catizen is a casual cat-raising game that combines game monetization with airdrops to establish cash flow directly, generating over $10 million in revenue and boasting over 25 million players, converting 1.4 million on-chain users.

Notcoin has opened up the imaginative space of the sector, while Hamster Kombat has raced ahead in terms of traffic, and Catizen represents a more refined and sustainable future direction: it cannot just be about tapping; a cash flywheel needs to be established from day one.

On one hand, simple game design allows more users to participate, leading to better user data. On the other hand, due to the simplicity of the game design, the cost of artificially inflating numbers is low, which may lead to inflated data.

In the future, mini-game projects in the TON ecosystem will inevitably need to shift from competing on simple user traffic to competing on user traffic conversion rates. This will require not only higher-quality game design but also a sophisticated monetization system to generate sustainable cash flow and maintain the ability for sustainable development.

Insights into Development Focus from Official Channels

According to the TON official website, Mini Apps, GameFi, and DeFi are the key product types the official wants to onboard.

The TON Foundation's Grants program also explicitly mentions support for these categories and provides product examples for each category. Below are key excerpts.

• Telegram Mini Apps: Social Web3 Use Cases
• SocialFi: Creator economy
• E-commerce: Trade market for electronic or physical goods
• Utility: Everyday tools embedded with Web3 elements
• Community & Brand management: Tools for managing Telegram communities
• Onboarding platforms: Bringing new users to @wallet or sub-managed TON wallets through simple scenarios
• DeFi
• Lending protocols
• Derivatives DEXs
• DEXs with weighted pools (like Balancer.fi)
• Yield aggregators
• Liquidity layers
• Restaking
• GameFi
• We are always happy to support web3 games with easy onboarding, viral social mechanics, referral programs, elements of competition (squads, leaderboards, group challenges), and exciting gameplay.

Based on the above content, the Social Web3 use cases supported by the built-in Mini App in TG will be the focus of development; for DeFi, the TON ecosystem hopes to enrich the application types of the DeFi ecosystem; for GameFi, the TON ecosystem can assist games in user onboarding, viral social dissemination, invitation systems, and competitive social gameplay.

Predicting the Short-Term Future: The Red and Black of the TON Ecosystem

Why Not DeFi (for Now)

Whether the DeFi sector will explode is indicated by a key metric: TVL. From the current public chain data, Ethereum stands out with a DeFi TVL of $60 billion, surpassing the total DeFi TVL of all other public chains combined. This is partly due to the high value of Ethereum's native asset, ETH, which drives up DeFi TVL; secondly, the completeness of the DeFi ecosystem, where almost all DeFi innovations occur on Ethereum; thirdly, Ethereum has introduced a large amount of wBTC through Wrapped Tokens, which adds liquidity to DeFi; finally, the staking & restaking mechanisms introduced by Ethereum have led to the issuance of a large amount of LST/LRT, creating significant TVL.

For TON, the largest asset on the chain is Toncoin, with a market cap of about $17.5 billion, while the second-largest asset is USDT issued by Tether, which exceeded 730M on July 21, ranking fifth among all blockchains. According to DefiLlama, the current TVL of the TON ecosystem is $757M, indicating a clear shortfall.

The CGV Research team believes that the TON ecosystem's DeFi explosion still lacks the following conditions:

• Onboarding of assets like BTC and ETH: The most traded assets on CEXs are typically large-cap blue-chip assets like BTC and ETH. Therefore, it is necessary to rely on high-security, low-slippage, low-fee cross-chain bridges to bring a large amount of BTC and ETH into the TON ecosystem, while the current cross-chain bridge infrastructure on TON is still under construction.
• More diverse liquid staking products: TON transitioned from PoW to PoS, and the initial supply was allocated to miners and the team. This led to a situation where, after transitioning to PoS, it could only choose to inflate at a rate of 0.6% per year to reward PoS miners. Compared to other PoS public chains, TON's staking rate of less than 10% is not high, so more liquid staking products need to be launched to both increase staking levels and enhance chain security, as well as boost TVL.
• More secure wallet infrastructure: The built-in @wallet in Telegram is a custodial wallet, and due to Telegram's unregulated nature, large holders often do not trust the security of TON. TON needs to launch more secure wallet infrastructure, including MPC wallets, and undergo thorough audits to gain the trust of high-net-worth users.

All these conditions are unrelated to Telegram's greatest advantage—user traffic—essentially giving up its biggest moat, which may lead to inefficiency.

Why Payments

The native USDT is being issued on the TON network at an extremely high growth rate. As previously mentioned, as of July 21, 730M USDT has been issued. Currently, the chain with the most USDT issued is Tron, with TRC20-USDT exceeding 60B. From Tron’s data, we can glimpse the vast potential of the stablecoin payment sector.

The TRON network has over 235 million users, with transaction volumes exceeding 7.8 billion, generating $450 million in annual transaction fee (network fee) revenue, and averaging 2-3 million user accounts transferring over $10 billion daily. Most USDT holders on Tron are "retail" or small holders, with 52.6 million holders having balances below $1,000, which even grew during the bear market of 2022. In contrast, the $1K-$10K group has 359,000 holders.

From on-chain activities, Tron’s on-chain transactions are primarily USDT transfers, with low DeFi adoption and almost no NFTs, while other public chains' popular LST/LRT and Memecoins are virtually absent, yet it still supports a transaction volume of 7.8 billion. It can be said that Tron is a public chain born for stablecoin payments.

The reasons for Tron’s large-scale stablecoin payment adoption are core to:

1. The transaction fees on the Tron network are lower than those on Ethereum, with faster speeds and higher TPS.
2. Early adoption triggered a Matthew effect, creating a dual flywheel of users and merchants.
3. Long-term stable services have earned user trust.

In comparison to Tron, TON has the following advantages in payment services:

• Higher TPS: After enabling sharding, it can support millions of TPS, with transaction fees cheaper than TON.
• Closer to users: The TON wallet is directly embedded in Telegram, making it more convenient to use and offering richer scenarios, comparable to WeChat Pay.
• More diverse on-chain activities: The TON chain has more application scenarios that deposit funds, rather than just simple movement of funds.

The TON Foundation is also actively promoting the application of USDT on TON:

• 5 million TON is allocated to reward the USDT Farming Pool, where depositing USDT can yield up to 50% APY in Toncoin.
• On July 1, Tether partnered with Web3 shopping and infrastructure company Uquid to allow Filipino citizens to pay social security funds with USDT on TON.
• Using the built-in wallet on Telegram for USDT transfers incurs no fees, is instant, and allows users to transfer USDT directly to friends without needing an address.
• Products such as subscriptions, VPNs, gaming platforms, and eSIMs on Telegram can directly use USDT for payment on TON.

At the same time, payments will serve as a key primitive to empower Telegram Mini Apps, catering to various types of Social Web3 use cases. For example, the creator economy (SocialFi) requires payments to complete subscription and tipping functions; e-commerce needs payments to complete product purchases. More importantly, Telegram Mini Apps are expected to become a Web3 version of the App Store, which requires payment functionality to manage paid applications. Telegram may follow Apple's model of taking a commission on paid services for apps logged into its App Store, further diversifying its revenue model.

Currently, TON has integrated multiple third-party payment service platforms, allowing merchants to accept payments in various ways.

Of course, compared to WeChat Pay, the payment business of the TON ecosystem still has risk points. The most critical is that Telegram's privacy protection and unregulated characteristics may prevent many physical businesses from integrating with TON payments due to compliance issues. However, the TON Foundation is actively seeking countermeasures, one indication being that the TON USDT Farming Pool requires KYC to receive rewards, suggesting TON's attitude towards compliance.

In summary, the CGV Research team believes that TON's rise in the payment sector is not coincidental but rather the result of its strong user base, technological advantages, and ecological strategy working together. Although it currently faces many challenges, such as regulatory issues and user trust, TON demonstrates strong growth potential through its innovative payment solutions and its closely integrated ecosystem with Telegram.

In the future, with the rollout of more quality applications and the conversion of user traffic, TON is expected to secure a place in the global payment market and become an important force in the blockchain payment field.