What is The Open Network (TON)? Tokenomics and Ecosystem
An analysis of The Open Network, a Layer 1 blockchain founded in 2019 by the creators of Telegram. Its goals, strengths, and weaknesses.
The article provides an overview of the analysis of the project: The Open Network. We'll begin by looking at what The Opera Network is and we'll focus on the key aspects: Tokenomics and the distribution of the TON coin, often referred to as the Telegram token.
- What is The Open Network (TON)?
- How Does The Open Network Work?
- Tokenomics and Token Distribution
What is The Open Network (TON)?
The Open Network is a Layer 1 blockchain, like Ethereum, founded in 2019 by the creators of Telegram under the name of GRAM. However, the SEC (Securities and Exchange Commission) halted the project due to the unauthorized sale of GRAM, which the US entity considered a Security. The ICO had raised $1.2 billion mainly from Russian investors, and after the SEC's blockade, the creators of Telegram, the Durov brothers, had to pay a fine to the SEC and reimburse their investors.
At that point, the Durov brothers had no choice but to abandon the direct development of the blockchain and make its source code open source. This allowed various communities to pick up where they "had failed" and continue development from a solid starting point. Thus, two different projects were reborn:
TON: The main project between the two, which continued the "collaboration" with Telegram, taken over by the Community and started by Anatoliy Makosov and Kirill Emelyanenko.
Everscale: Another Layer 1 PoS (Proof of Stake) blockchain, which did not continue the "collaboration" with Telegram, thus reducing its user base.
TON changed its name and also its objectives, becoming "The Open Network". Its native coin was no longer GRAM, but TON, and its goals was to create an open network to the world that can leverage Telegram as an interface for its multiple features.
The TON network switched from PoW validation to PoS validation during Q2 of 2022. During this phase, 99.85% of the coins are mined, and once the network switches to PoS, it will aim for a reward for the validating nodes of 0.6% per year, making the current token inflation very low compared to other chains. You can stake on a full node with a stake of at least 10k TON, while you can delegate a minimum of 50 TON to existing nodes to participate in network validation.
On the official website, there is still the possibility to mine through the so-called: Infinity TON Mining Pool, the mining process by which, through software downloadable from the official website, a miner can mine Bitcoin and Ethereum, and these are automatically converted into TON without commission.
Indeed, although the project was abandoned by its creators and co-founders of Telegram after the lawsuit with the SEC, the TONCoin currency is 100% integrated on the messaging platform. In fact, through Telegram, it is possible to install a bot that allows you to have a wallet inside, exchange coins between users (p2p), and even exchange coins through integrated DEXs.
What is TON Coin?
TON is the governance, fuel, and stake token of the "The Open Network". It can be used as gas within its network to carry out transactions and smart contract approvals and also as a token to participate in voting and network validation through the DPOS (Delegated Proof of Stake) validation mechanism. Therefore, we will be rewarded in TON tokens for locking our TON in a node that will then validate the network.
How Does The Open Network Work?
One of TON's key features is its ability to work with Telegram. This popular app, used by over 700 million people, lets users trade tokens created on TON.
Telegram - 700M Monthly Active Users (Source: Statista)
Marketing is also carried out directly on the native platform, and it offers DNS, Proxy, and Storage support that can be used to host Web3 sites. TON's blockchain also uses a mechanism called "multi-blockchain", allowing the network to operate through three main chains and work according to specific purposes.
The MasterChain is the main chain (or Layer-0). Every time an operation is performed, it is executed on this chain.
Workchains, on the other hand, are "working" chains, usually built on top of Layer-0 (thus L1). These chains can, in turn, contain a group of secondary chains with different consensus rules among them. Additionally, they can contain various address and transaction formats, virtual machines for smart contracts, and tokens.
This provides complete autonomy to developers to create the workchain that best suits them. Moreover, despite all this, they are still compatible with the MasterChain and can interact with each other through a mechanism called Instant Hypercube Routing. The number of workchains that can be created and can work simultaneously is 2^32.
Then there are the Shardchains, necessary for the network's scalability and usually built on top of the Workchains. However, their operation is different from a classic Layer 2. They can be seen as logical subdivisions of a workchain into subparts, called shards. Their task is to divide the work and "parallelize" it.
How The Open Network Works. (Source: LiteFinance)
Thanks to this system, we have an infinite sharding paradigm, which seems to make TON the most scalable chain. The number of Shardchains that can be created and can work simultaneously is 2^60.
The masterchain and workchains can be divided into shards dynamically if the workload increases, and then return without shards when the workload decreases. Therefore, shardchains can be defined as a network organization model rather than another type of chain or an additional layer.
The network implements dynamic sharding in this sense, which can increase or decrease the number of shardchains based on the network's needs, allowing it to expand or contract as necessary.
Ton Payments represents the true Layer-2 of this chain, although very different from those seen on Ethereum. They are the "payments", and the mechanism designed by TON is similar to Bitcoin's Lighting Network, a kind of open channel between two entities that allows very rapid exchanges without burdening the blockchain and keeping commissions to a minimum.
From an even more technical point of view, TonChain could be considered the only "2D" blockchain, meaning it doesn't just add its blocks "horizontally", but also "vertically" following any corrections due to past mistakes, replacing or adding a block above the previous one. To allow all these networks to communicate with each other, it uses a solution called Instant Hypercube Routing.
Since a very high amount of computing power would be needed to connect each shard to all the others, the technology bases the connection of one shard to its adjacent shards. This is a communication system that allows data to be passed through the chain using two different methods simultaneously:
The first is the slow method: the message is forwarded from shard to shard through the network until it reaches its destination, with a lower computational power cost and a longer execution time.
The second is the fast method: the message is retransmitted directly to the destination shard without going through the intermediate shards, with a higher energy cost and a shorter execution time (a maximum of 5 seconds, which is the block creation time).
The operating mechanism of Ton, being a "modular" blockchain, is very different from traditional monolithic blockchains like Ethereum or Solana. It also operates differently compared to the Cosmos ecosystem, which consists of independent blockchains that communicate with each other using the IBC protocol.
Difference between Monolithic and Modular Blockchains. (Source: Celestia)
The project most similar to TON in terms of architecture, with L-0 and L-1 subdivisions, is Polkadot. Its parachains are very similar to TON's workchains, even though their number is much smaller compared to the value of generable workchains: 2^32.
TON also has token standards similar to those we see daily on Ethereum:
- Jettons: Fungible token (standard TEP74)
- NFT: Non-fungible-token with their standard TEP62
- Soul-Bound token: Non-transferable Token/NFT (standard TEP85)
- NFT Royalty: Earnings due to the patent of a work (standard TEP66)
Tokenomics and Token Distribution
While conducting in-depth research to write this report, many doubts arose regarding the actual tokenomics and distribution of TON tokens within its community.
These doubts arose after this official communication from the Ton Foundation. The communication is a proposal made by the foundation asking the 204 INACTIVE wallets that mined TONCoin during its PoW phase and hold almost 20% of the total Supply (1.08B Ton) to move their funds by the end of 2022 to demonstrate that the wallets are not inactive but merely stationary. This is done to inform the community and external aggregators like CMC and Coingecko about the real number of dormant, inactive, or non-circulating coins.
From here, the proposal was revisited, and the terms within were modified, revealing a much more incisive new proposal. In fact, in this proposal, the owners of the previously mentioned wallets are asked to "activate" through a vote; anyone who doesn't will have their funds "frozen" for the 48 months following the end of this vote.
This proposal split the community in two, and two well-known members, Tal and Vudi, spoke out, writing two different articles about the vote. Through this message, we can notice the real problems of the network and, above all, the clarity of the information. Here are some key points:
- Why do aggregator data from Coinmarketcap and Coingecko regarding circulating and total supply differ from those that emerged in various TON Foundation communications, and why do they take data from unofficial sources, such as Ton.cx, compared to "partially" official sources like tontech.io? (currently, for these aggregators, the Circulating supply of TON is 1.2B, clearly false)
- Why hasn't the network status on the official ton.org site been updated for 3 years, and the alternative and more recent TON Footstep is offline?
- Why are there multiple explorers in which the data related to circulating and total supply differ from each other?
Unfortunately, in the weeks leading up to the drafting of this report, no answers were found to any of these questions because there were no direct responses from the TON Foundation.
As of February 23, 2023, the proposal was approved. Many inactive wallets stayed that way, leading to 20% of TON's total supply being locked for the next four years. This has greatly reduced the available supply. Now, the next step for the TON Foundation will be to notify various aggregators to inform them of the new Circulating Supply, effectively changing TON's rank position.
Outcome of the Proposal. (Source: Ton Vote)
TON Ecosystem (Source: Ton App)
There are more than 551 apps within the TON Ecosystem. Below, we'll highlight some of the most notable ones in each category.
- Ton Wallet: Browser extension wallet with DNS support.
- Ton Keeper: Mobile wallet that supports various features within the network.
- TonHub: Mobile wallet that also allows staking.
- Ton Bridge: The official bridge that allows transfers of TON to and from the BSC and Ethereum networks.
- Orbit Bridge: An unofficial bridge that also allows transfers of other tokens.
- Megaton Finance: AMM that allows instant swaps (the integrated tokens are those generated by Orbit through a wrapping mechanism, effectively allowing the exchange of these assets).
- Cryptobot: A bot that can be installed on Telegram, allowing users to exchange crypto directly through the messaging application. It also offers an internal p2p exchange function.
DNS & Phone Numbers
- TonDns: An auction marketplace to purchase domains on the network (functionality).
- Fragment: Fragment is a free platform that facilitates the transaction of collectible items between users (created by the Durov brothers).
- Phone Numbers: The option to purchase, through Fragment, phone numbers that can be linked to your wallet, allowing you to log into Telegram without the need for a SIM card (no KYC).
- TONScan: Minimalist scan.
- TON.cx: Retro-style scan.
- TON Whales: Scan provided by the Whales Club (a strong community within the project).
- Ton tech: A more "official" version recognized by the TON foundation.
The Open Network (TON) Roadmap
Looking at the recent updates and roadmap from the TON Foundation, we see many well-organized details forming a clear big picture. We've split the TON roadmap into two main sections, each with its subgroups. This helps present a clearer view of the extensive work done by the developers.
Regarding the TON blockchain roadmap, it's clear from the start that the main developments relate to the integration of other coins: BTC, ETH, BNB, and Polygon, and the implementation of new functions for the network, such as updating the TVM and the possibility of integration with EVM, or the ability to create smart contracts equipped with Lockup and vesting for application development on its chain.
- Token bridge: A bridge that will allow transferring other native BSC and ETH tokens to TON. (Main reason: bring stablecoins within the network)
- Tokenomics Optimization Voting: Important vote to determine if the 171 wallets owning almost 20% of the supply will be locked or not.
- Decentralized Encrypted Messaging: Ability to transmit messages through wallets (chat)
- Tokenomics Deflation Mechanism: Proposal to burn a portion of the paid gas fees
- TVM Update: Development of the TON Virtual Machine and integration with EVM
- Lockup and vesting tools: Implementation of smart contracts that allow lockups or vesting, enabling more DAOs and dAPPs to develop on the chain.
- Wallet Pay: A payment system that allows users to purchase goods and services on Telegram using cryptocurrencies
- Ton Space: The self-custody wallet will give users complete control over their digital assets and allow developers to integrate their TON-based apps and bots into TON Space.
- Collator and Validator Separation: Separation of collators (those who generate subsequent blocks) and validators (those who validate and sign blocks) to increase network scalability
- Jetton Bridge: Ability to transfer Jettons (fungible tokens) created on the TON chain to other chains
- ETH, BNB, BTC & Matic Bridge: Ability to transfer TON coins to the mentioned chains
Roadmap for Other Developments
The second part of the roadmap moves away from the single development of the blockchain, although many of these features will be essential for the growth of the chain, focusing on other important points.
The idea seems to be to develop a network that first improves the part related to the proxy, i.e., the creation of websites, DNS (which were implemented in Q4 2022), and their ability to support the Ton Wallet, providing a real use case for the coins circulating on it. Then, it seems that the Ton Foundation is moving like other competitors such as BNBChain, Filecoin, or Matic by creating its decentralized storage solution on the TON Chain. According to the official website, this will allow the creation of solutions like:
- TON Torrents: File sharing
- Dropbox-like Apps: File storage
- TON Storage API: Ability for applications to communicate with each other
The payment part seems to be focusing on creating solutions that will allow transfer and payment through "channels", where it will be possible to execute transactions between two entities quickly and, above all, at ZERO FEES. The idea is similar to Bitcoin's Lightning network.
Combining all the puzzle pieces that we've revealed during the analysis of this blockchain and coin, the final image is a web3 solution that has solid foundations. These foundations are provided by a blockchain that, on paper, seems ultra-performant and by the integration of one of the most famous messaging apps in the world that needs no introduction.
It already has and is developing various bots integrated on Telegram that allow users to: buy/sell crypto, exchange coins in a P2P manner both outside and inside the blockchain, purchase domains and SIM cards usable for maintaining anonymity, making the interface increasingly useful and especially user-friendly. Moreover, TON's wallets are much more similar to smart contracts than to classic wallets, allowing for programmed operations, such as the ability to make recurring payments or payments at a specific deadline.
As for what they intend to develop, it seems that the project is moving across many different "sectors": Websites, storage, and payment. This allows the final project to function as an alternative to the internet where people can develop websites already compatible with TON wallets to have integrated payments. Components of storage, file and API sharing, and probably one day also Data Availability, thus creating a secondary business model, increasing and diversifying company revenues.