The Open Network (TON) Research Report
The Open Network (TON) combines a layer of blockchain with a series of network protocols to form a decentralized platform similar to the internet.
Abstract
The Open Network (TON) combines a layer of blockchain with a series of network protocols to form a decentralized platform similar to the internet. Initially developed by Nikolai Durov and advanced by an open-source developer community, TON supports various applications, including digital finance and decentralized storage. Its architecture employs a main chain and multiple working chains, enhancing scalability and supporting large-scale transactions and complex operations on the network.
The development of TON includes the Fragment platform, a decentralized marketplace that has processed over $350 million in transactions, showcasing the network's functionality and economic capability. The integration with Telegram has facilitated new methods for content monetization and user interaction, leveraging the platform's widespread use. Recognition in the UAE and collaborations with major tech companies further expand TON's global influence.
As TON continues to evolve, its role in facilitating the transition of users to decentralized networks becomes increasingly important. The network's ability to handle a large volume of transactions and support various applications positions it to lead in blockchain innovation. Through ongoing strategic initiatives and a growing adoption rate, TON aims to enhance the efficiency and security of global digital transactions, contributing to the widespread application of blockchain technology.
Introduction
The Open Network (TON) is a decentralized computer network composed of a layer of blockchain (TON blockchain) and a series of network protocols (TON network) that support the blockchain and can also function as an independent decentralized network. It was initially developed by Nikolai Durov, who co-founded Telegram with his brother Pavel Durov in 2013.
History of Telegram and TON
The Durov brothers founded Telegram in 2013 with the mission of "providing a secure communication method that can be used globally." Prior to Telegram, they gained attention for founding VKontakte (VK), a Russian social media platform similar to Facebook. Pavel Durov was the CEO of VK but was forced to resign in 2014 due to investor claims of pressure from the Russian government to provide user data and censor political content. Subsequently, the brothers left Russia to focus on developing Telegram, emphasizing user privacy and security.
Due to its advantages in speed and security, Telegram quickly gained popularity, surpassing 200 million monthly active users by March 2018. Before this, Telegram was primarily funded by Pavel through his Digital Fortress fund. To raise external capital while maintaining platform independence and avoiding external influence, the Durov brothers explored various financing options. In 2018, they launched Telegram's The Open Network (TON) with the aim of creating a decentralized blockchain platform and launching its cryptocurrency, Gram. The initial coin offering (ICO) for TON raised $1.7 billion from private investors. However, the U.S. Securities and Exchange Commission (SEC) intervened in October 2019, suing Telegram for conducting an unregistered securities offering. This prolonged legal battle led Telegram to abandon the TON project in May 2020, agreeing to return $1.2 billion to investors and pay a $18.5 million fine.
However, this did not mark the end of TON. The code was separated from Telegram and made open-source, with the remaining testnet tokens sent to smart contracts, allowing anyone to participate in future mining. Subsequently, a small group of open-source developers led by Anatoly Makosov and Kirill Yemelyanenko resumed the project's development. The project was renamed Toncoin and eventually evolved into TON, receiving full support from Pavel Durov.
Components of TON
The Open Network consists of network and storage components, forming a powerful decentralized network and web technology stack. The Open Network includes the following core components:
TON Blockchain: A blockchain of blockchains—comprising the main chain, working chains, shard chains, and vertical blockchains.
TON Network: A P2P network for communication/access with the network.
TON Proxy: A network proxy/anonymity layer similar to TOR/I2P, used to hide the identity and IP address of nodes.
TON DNS: Maps human-readable domain names to accounts, smart contracts, services, and network nodes through smart contracts. Used for registering and managing .ton domain names.
TON Sites: Allows users to create decentralized websites accessible via example.ton and compatible with TON DNS domain lookups. Similar to hosting an NGINX web server on an AWS instance.
TON WWW: A protocol that allows users to access TON Sites via .ton domain names in browsers.
TON Storage: Decentralized file storage and sharing using torrent-like technology through the TON network.
TON DHT: A distributed hash table—a decentralized data structure for storing key-value pairs, with each node managing a portion of the overall data, supporting efficient and resilient lookups and retrievals. Used for the "torrent tracker" in TON Storage, the "input tunnel locator" in TON Proxy, and the service locator for TON Services.
TON Services: A service platform accessed through the network and proxies, supporting interactions similar to browser or smartphone applications. Can be on-chain, off-chain, or hybrid, used by human users or other applications/bots. Includes a service registry and the nodes running them.
TON Payments: An off-chain micropayment channel network for fast value transfer, similar to the Bitcoin Lightning Network.
Below is a simplified overview of how they combine from the user's perspective.
In summary, in addition to its blockchain core, The Open Network also possesses a comprehensive set of technologies, including a TOR-like network stack, decentralized and censorship-resistant DNS, decentralized storage, proxies for anonymous communication, integrated payments, and more. As TON evolves, it may pioneer a fully decentralized network ecosystem, with websites exhibiting censorship resistance across all aspects, from HTML code to hosting and delivery infrastructure (including servers and proxies). Furthermore, through TON Services, TON Payments, and Telegram mini-apps, we anticipate seeing exciting new consumer applications and business models that can only be realized on TON.
Technical Architecture
The technical architecture of The Open Network leverages a multi-blockchain framework designed to enhance scalability, ensure robust security, and facilitate seamless interoperability. This multi-layer structure allows TON to efficiently manage a large volume of transactions and interactions.
Multi-Blockchain Design
The architecture of TON is built around a central main chain and multiple working chains, each of which can be further divided into shard chains. This hierarchical structure enables TON to scale and manage different types and volumes of transactions within the network.
Main Chain: At the top of the hierarchy, the main chain plays a critical role in maintaining the overall integrity and continuity of the TON network. It serves as the primary ledger, recording and validating significant network changes, coordinating the various working chains, and ensuring global consensus is maintained. The main chain is responsible for key functions such as transaction finality and checkpoints across working chains and shard chains, acting as the ultimate arbiter in the network's multi-chain architecture.
Working Chains: Independent blockchains that run in parallel under the supervision of the main chain. Each working chain is designed to meet specific needs or industries, such as different token economies, decentralized applications (dApps), or compliance requirements, allowing for customization and flexibility within the network. Working chains can have their own transaction formats, consensus protocols, and even rules for their virtual machines, enabling developers to tailor functionalities based on specific use cases.
Shard Chains: To further enhance scalability, each working chain can be divided into multiple shard chains. This division aims to allocate transaction loads more efficiently, assigning a portion of the overall transactions to each shard chain. By processing transactions in parallel across multiple shard chains, TON significantly increases its transaction processing capacity. Shard chains operate according to the rules of their respective working chains but primarily focus on expanding transaction throughput. They synchronize and validate transactions with the help of the main chain, which aggregates and finalizes transactions for the entire network.
This multi-blockchain approach allows TON to efficiently handle various types and large volumes of transactions by delegating tasks to different chains based on their specialization. This division not only optimizes processing speed and network response times but also enhances the network's ability to dynamically scale according to load and demand.
Scalability Through Shard Chains
Scalability is a key aspect of the TON architecture, primarily achieved through its shard chains. Each shard chain handles only a portion of transactions, effectively distributing computational and storage workloads across the network. This method reduces latency and increases throughput, as multiple shard chains can operate simultaneously without overloading any single chain.
The dynamic configuration of shard chains also allows TON to adjust its scalability based on real-time usage and transaction volumes. If a working chain becomes overloaded, it can be further subdivided into more shard chains, distributing the load more evenly and maintaining high performance for the network.
Cross-Chain Interoperability: Facilitating Chain Communication
Interoperability within TON is crucial for maintaining smooth communication between its various blockchain components. The main chain achieves this by managing cross-chain transactions and data transfers, ensuring that operations across working chains and shard chains remain consistent and secure. This system allows for seamless interactions between different parts of the network, enabling complex operations involving multiple chains to be executed smoothly without user intervention.
Security: Proof of Stake and Nominator Pool
TON maintains its security through a Proof of Stake (PoS) mechanism, where validators protect the network by staking tokens. This PoS system is enhanced by introducing a nominator pool, allowing smaller holders to collectively participate in the validation process, democratizing the security process and enhancing the robustness of the network. With economic incentives at play, validators are motivated to remain honest, while the nominator pool ensures that more holders can participate in network security.
TON's multi-blockchain architecture, through the division of the main chain, working chains, and shard chains, is a powerful model for achieving the scalability, flexibility, and security required for modern blockchain networks. This design enables TON to efficiently manage an ever-growing ecosystem of decentralized applications and services while maintaining high throughput and robust security.
Economic and Governance Model
Since its $1.7 billion ICO in 2019, TON has undergone significant changes but faced challenges due to regulatory hurdles. Revived by the TON Foundation in 2022, it has evolved into a decentralized network with a total supply of 5 billion tokens, growing at a rate of 0.6% per year (30 million tokens). Currently, 2.5 billion tokens are in circulation, supporting transactions, staking, and governance within the network.
In the initial distribution, 98.55% of the tokens were mined through Proof of Work (PoW), with the remaining 1.45% held by the development team.
To address centralization risks, a significant proposal was passed in February 2023 to freeze non-active wallets for four years, affecting 21% of the total supply. This decision targeted 171 wallets holding over 1.08 billion TON tokens, accounting for approximately 21% of the total circulating supply. This move aims to enhance liquidity and sparked discussions about centralization and governance autonomy within the TON ecosystem, highlighting the delicate balance between regulatory actions and decentralization principles.
Validators in the TON network play a crucial role in maintaining its integrity. If they fulfill their duties diligently, such as signing all blocks, staying online, and avoiding invalid block signatures, they can earn up to 10% of their staked amount annually. This reward system is sufficient to compensate validators, enabling them to invest in better hardware to manage the growing transaction volume. On average, it is expected that no more than 10% of the total supply of TON tokens will be locked in validator stakes at any given time, resulting in an approximate annual inflation rate of 2%. This inflation is seen as compensation for the community for the validators' services in maintaining network operations.
Conversely, if validators behave maliciously, a portion or all of their stake may be confiscated as a penalty. A significant portion of the confiscated stake may be destroyed, creating a deflationary effect on the total supply of TON tokens. A small portion of the fines may also be rewarded to validators or "fishermen" who provide proof of malicious validator behavior, incentivizing the monitoring of validator activities and further enhancing the integrity of the network.
TON's fee mechanism is significantly different from the user-paid model of Ethereum. Instead, TON adopts a developer-paid model. Unlike Ethereum's synchronous smart contracts, both Dfinity and TON utilize an asynchronous actor architecture for parallel computing.
The transaction fees in TON consist of several components: storage fees, message input and output fees, routing fees, and computation fees. On average, the transaction fee is approximately 0.005 TON, but this value can be adjusted by validators as needed. The purpose of transaction fees is to deter malicious actors from overloading the network. Additionally, half of the collected fees are used to reward validators and nominators, incentivizing them to maintain the security and efficiency of the network.
Half of TON's transaction fees are burned, meaning they are sent to a black hole address and permanently removed from circulation. Furthermore, most of the funds confiscated from malicious validators are also destroyed. This burn mechanism helps reduce the circulating supply and enhances the overall economic stability and deflationary characteristics of the TON network. TON can also be purchased directly through the Telegram Wallet for anonymous accounts, advertising, and purchasing stars on the Fragment Market.
Governance in the TON Community
TON employs a decentralized voting platform, TON.VOTE, where token holders can influence the project's development and major policy decisions. This participatory approach ensures that the community remains at the core of the ecosystem's evolution.
TON.vote Platform
Major Investors and Partners
The institutional adoption of TON has been significantly enhanced by substantial investments from well-known companies such as Pantera Capital and Animoca Brands. Pantera Capital has shown high confidence in TON's potential in the crypto market by launching a dedicated investment fund to raise capital for purchasing TON tokens. Animoca Brands, known for promoting digital ownership in gaming and the open metaverse, has become the largest validator on the TON blockchain, supporting various GameFi projects and integrating TON-based applications within Telegram. These strategic investments and partnerships highlight the strong institutional backing of TON's capabilities and its future potential in the blockchain space.
Staking and Its Impact on Decentralization
TON employs a Proof of Stake (PoS) consensus model, where validators play a key role in maintaining network security, ensuring the validity of blocks, and earning Toncoin as rewards. To participate, validators require advanced hardware and a substantial amount of Toncoin for a fixed-term stake. The high hardware requirements, such as a 16-core CPU and high-speed internet, typically limit this role to individuals with significant resources, potentially concentrating control among wealthier participants. Validators earn rewards not only from transaction fees and newly minted coins generated during the validation process, averaging around 120 Toncoin per day, but they also face strict penalties for non-participation or malicious behavior, ranging from fines to complete confiscation of their stake. This structured incentive and penalty system is designed to ensure the health and integrity of the network. Competition for validator positions is fierce, requiring a minimum stake of 300,000 Toncoin to enter the election, with successful candidates validating blocks throughout the validation cycle.
The tokenomics of TON is designed to balance the incentives for validators, ensuring network security and maintaining economic stability. The combination of the Proof of Stake consensus mechanism, a robust staking system, and a transaction fee structure aligned with network usage ensures the sustainability and scalability of the TON blockchain.
Current Status of The Open Network (TON)
The Open Network has shown measurable growth and activity, as evidenced by various financial metrics and user engagement statistics. This section of the report provides an overview of the current statistics of TON, highlighting key aspects of its ecosystem.
Total Value Locked (TVL): TON's TVL is approximately $919 million. Below, we will discuss which applications have the highest TVL.
Stablecoins: The market capitalization of stablecoins on TON is $619 million, with USDT being the only available stablecoin. TON accounts for about 0.38% of the total stablecoin market capitalization.
The integration of USDT is particularly notable, especially in transactions conducted via Telegram.
Users can bridge USDT to the TON network through platforms like Symbiosis and Layerswap, facilitating the use of stablecoins within the TON ecosystem.
TON Token Metrics:
Current Price: $6.48
Market Cap: $16.3 billion
Fully Diluted Valuation (FDV): $33 billion
User Adoption
User engagement on the network is as follows:
On-chain Active Wallets: Over 12 million active on-chain wallets, a significant increase from about 1 million in January.
Monthly Active Wallets: The number of monthly active wallets is 4.2 million, up from about 300,000 in January.
TON DEX Ecosystem: DeDust and STON.fi
The decentralized exchange (DEX) ecosystem on the TON blockchain is characterized by its innovation and user engagement, with seven operational DEXs making significant contributions to the ecosystem. In 2024, on-chain data showed a significant upward trend in trading and daily active users, primarily driven by the Open League program and the native integration of USDT. Among these platforms, DeDust and STON.fi stand out for their significant trading volumes and TVL.
Both DeDust and STON.fi have played important roles in the recent growth of TON's TVL, particularly driven by the enhanced liquidity pool program of the Open League. This program offers TON rewards to users participating in DeFi activities, significantly boosting TVL growth, especially during the first four seasons of the program. For the fifth season, participants can explore enhanced pool options on DeDust and STON.fi.
STON.fi:
STON.fi is the application with the highest TVL in TON. It is known for its integration with the TON wallet, simplifying the process for users to swap tokens directly within the ecosystem, and it also allows users to become liquidity providers, participating in staking and farming activities for additional benefits. Key statistics include:
TVL: Holding a TVL of $277 million.
Strategic Development: STON.fi plans to evolve into a cross-chain DEX, introducing features such as order books and margin trading, significantly expanding its market appeal and functionality.
DeDust
DeDust operates as an automated market maker (AMM) on TON and is the second-ranked application by TVL on the network. It seamlessly integrates various asset types, including native tokens and tokens from other blockchains. According to the latest data:
TVL: $258 million in TVL.
Staking and SCALE Tokens: It offers a staking program that converts swap fees into SCALE tokens for user rewards. This not only promotes liquidity but also stabilizes the ecosystem.
Trading Efficiency: DeDust is optimized for low gas fees, supporting low-cost trading. It supports stablecoin swaps and complex trading types, such as multi-hop trades.
Interoperability Features: It has an early-stage Ethereum bridge, enhancing the ability to manage wrapped assets (such as WBTC and stablecoins) and move assets across blockchain networks.
Comparison: DeDust vs. STON.fi
Swap.coffee: A New DEX Aggregator on TON
The TON blockchain has recently welcomed a new member to its DeFi ecosystem, Swap.coffee, a DEX aggregator aimed at enhancing the user trading experience by providing optimal swap paths. The platform stands out for its user-friendly interface, simplifying the trading process for users of all levels by automatically selecting DEXs and managing liquidity issues.
For experienced traders, Swap.coffee offers advanced settings that allow for customized trading strategies, providing significant savings opportunities for large trades, despite the higher risks. This feature is specifically aimed at experienced users seeking more control and higher profit margins.
Using Tonstakers for Liquid Staking on TON
Tonstakers is the third-ranked project by TVL, managing $212 million.
Tonstakers introduces a dynamic liquid staking approach within the TON blockchain, providing users with the opportunity to earn rewards under secure, equitable, and transparent conditions. This service is tailored for users who wish to contribute to blockchain security and earn rewards without sacrificing access to their staked assets.
Secure and Open Liquid Staking
Tonstakers collaborates with TON core developers to ensure the platform is robust and well-integrated within the TON ecosystem. It prioritizes transparency and security, with its open-source protocol available for review and contribution on GitHub. Additionally, the platform's security measures have been audited by leading blockchain security firm Certik, ensuring its core safety.
Non-Custodial Staking
A standout feature of Tonstakers is its non-custodial staking approach. Users maintain full control over their assets without any intermediaries, meaning that while their TON tokens are staked, they are not held or controlled by Tonstakers but are always under the user's control.
Telegram Advertising: Leveraging TON for Effective Marketing
One significant advantage of the partnership between TON and Telegram is its ability to attract a pool of Web2 talent. This appeal is primarily due to the familiar marketing and channel acquisition tools integrated within the Telegram platform.
Telegram advertising allows projects to purchase ads displayed at the bottom of Telegram channels. This feature has proven to be a highly effective component of the listing strategies for many Web3 startups operating on Telegram. These ads not only help expand the reach and visibility of projects but also facilitate direct interaction with target user groups.
A key aspect of Telegram advertising is its payment structure. Ads are purchased with TON, and notably, 50% of the advertising revenue is distributed to channel owners in the form of TON. This revenue-sharing model incentivizes channel owners to actively participate in the advertising network, enhancing overall growth and engagement within the ecosystem.
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Growth Adoption of TON in Asia
Engaging and Trading through Telegram Mini Apps
Hamster Kombat is a click-to-earn game where players take on the role of a cryptocurrency exchange CEO. By clicking on hamsters on the screen, players can accumulate game points and earn rewards in various ways. The game combines simple click mechanics, passive income mining features, and a card system, enhancing its depth and entertainment value. According to the official Twitter account, as of June 24, 200 million "hamsters" have participated!
In Tehran, Iran, taxi drivers, cyclists, and pedestrians are frantically clicking on their phone screens at traffic lights in the scorching June heat. Their target is an app called "Hamster Kombat," which they believe can make them rich.
The Hamster Kombat craze in Iran is reminiscent of the success of Axie Infinity in Southeast Asia. During periods of high unemployment in the Philippines, Axie Infinity players earned an average monthly income of over $300 by playing the game.
Hamster Kombat is not just a game; it is evidently driving mass adoption of Web3 and fostering community building.
Integration with Bitget to Enhance Trading Convenience
Bitget has rapidly integrated Telegram mini-apps, providing features such as direct spot trading within Telegram. This integration allows users to trade cryptocurrencies easily without switching between different applications. In mobile-first regions, the convenience of combining social context with cryptocurrency trading could significantly enhance user adoption and market penetration.
Bitget Telegram Mini App
Game Development and GameFi on TON
Asian game studios dominate mobile gaming and are poised to become a significant force on TON.
Additionally, Hong Kong-based Animoca Brands, a key player in the GameFi space, has become the largest validator on the TON blockchain. This position underscores TON's importance in supporting third-party games and GameFi projects. The TON Play platform provides developers with tools to directly port existing online games to Telegram, leveraging its vast user base and fostering new forms of interaction through decentralized gaming.
Web3 Development Initiatives
The TON Foundation is collaborating with Tencent Cloud and Chainbase to streamline the development process and enhance developers' deployment capabilities, further promoting the adoption of Web3 technologies. By providing the necessary tools and resources, this initiative aims to make it easier for developers to create and launch applications on the TON blockchain.
Recognition and Adoption in the UAE
The United Arab Emirates (UAE), particularly the Dubai International Financial Centre (DIFC), has officially recognized the TON blockchain alongside major cryptocurrencies like Bitcoin and Ethereum. This recognition allows financial institutions in Dubai to conduct transactions using Toncoin, showcasing the growing acceptance and institutional trust in TON within significant financial markets. The official recognition not only enhances TON's credibility but also opens up numerous possibilities for its use in financial transactions and regulatory frameworks in the region.
India
India has the second-largest smartphone user base globally, providing significant potential for smartphone penetration. The launch of Reliance Jio in 2016 revolutionized the telecom industry, leading to a dramatic increase in data consumption from an average of 400MB per user per month to 11GB, due to drastically lower data pricing compared to market rates. Currently, while the average price of 1GB of data globally is $5.09, in India, it is only $0.09.
This creates an ideal environment for Telegram and its ecosystem. Telegram has over 100 million downloads in India, making it one of the most popular messaging applications. Integrating these users into the TON ecosystem presents a unique opportunity to monetize this vast user base.
As Web3 becomes increasingly mainstream, more applications will prioritize mobile-first UI/UX design to cater to the large smartphone user market similar to the Telegram Mini app model. India is set to become a key region in the future development of consumer applications and user growth.
Future Outlook
TON is strategically positioned to unlock numerous monetization, sharing, and business development opportunities for the Telegram community. A prominent example is the decentralized marketplace Fragment on the TON network, where users can trade virtual phone numbers and customized Telegram usernames. To date, Fragment has facilitated over $350 million in sales, showcasing the platform's potential. An upcoming promising development is the transformation of Telegram stickers into NFTs, which could significantly enhance engagement and revenue. Given that 73 billion stickers have already been sent, offering them as NFTs on the TON blockchain presents a massive opportunity.
Telegram is integrating revenue sharing for content creators and channel owners through its Fragment platform, leveraging the TON blockchain to gradually transform its revenue model. This shift from traditional social media models allows creators to profit directly from advertising revenue on their channels, promoting a fairer distribution of financial benefits within the digital ecosystem. This approach not only rewards creators for their content but also strengthens the relationship between the platform and its users. Furthermore, the gas-free transfer capabilities provided by built-in on-chain and off-chain channels (including bank transfers and exchanges) enhance accessibility and usability, particularly benefiting users in developing countries who lack banking services.
Telegram has become the first serious chat application to venture into gaming. Since integrating HTML5 compatibility for Telegram bots in 2016, the development of the TON blockchain aims to further reduce friction for users and developers. Through TON, developers can access payment channels, decentralized storage for in-game assets, and smart contracts for secure and automated gaming mechanisms, enabling them to effectively distribute their content to a community with 900 million monthly active users.
TON distinguishes itself by establishing Telegram as a primary gateway for Web2 users transitioning to Web3, unlike platforms like WeChat and other Western social applications. With approximately 900 million MAU, Telegram represents one of the largest pools of "Web2.5 users" and serves as a major distribution channel for leading crypto markets. Unlike centralized exchanges like Coinbase and Binance, Telegram's social nature makes it more suitable for applications that combine social features with financial incentives, providing better product-market fit for gaming and other interactive experiences.
Distribution has been key to TON's recent success, highlighting the challenges Web3 game developers face in acquiring players. Growth initiatives, including funding, technical support, and marketing assistance, have accelerated teams' entry into the ecosystem. In the short term, many teams may leverage TON's current thought leadership to attract users to their games or protocols. As developer tools and support become more mature, games that adapt to the Telegram-native experience, taking lessons from platforms like WeChat, will become important case studies.
Looking ahead, TON's prospects are bright, with immense potential in monetization, stablecoin integration, and the flourishing ecosystem of mini-apps and games. By leveraging its vast user base, scalable infrastructure, and innovative revenue models, TON is poised to become a leading force in the blockchain space, driving significant advancements in decentralized finance and digital content creation.
