23 MARCH 2022

The Open Network | TON

Investment Summary

  • The Open Network (TON) is a fully decentralized layer-1, Proof-of-Stake blockchain with smart contract capabilities including DeFi dApps, NFTs and payments.
  • TON boasts best-in-class throughput of over 1m transactions per second with near zero fees. Its flexible architecture lets it grow and grow, with no loss of performance.
  • TON stands apart from other blockchains given its open-source development and underlying principles of decentralization and censorship resistance. This means that the network will be always-on for applications to run freely and transactions that will never be stopped.
  • TON is more than just another blockchain. It is a whole ecosystem that has all of the components and services to lay the foundation for the next-gen internet - a real Web3 solution.
  • We expect the ecosystem to grow rapidly supporting thousands of projects spanning DeFi, NFTs, payments, and more.
  • The blockchain has the ability to onboard billions of users. There is already a growing TON Community with around 180k followers on Twitter, 106k subs on Telegram and over 200k followers of Toncoin on CoinMarketCap. The number of wallets created on TON has grown to over 350k.
  • Toncoin has a FD market cap of $9.1b versus Solana ($36b), Avalanche ($34b), Polkadot ($22b)

Project Overview

What is The Open Network (TON)

The Open Network is a blockchain-based ecosystem that enables cheap and fast transactions, with the goal to unite other blockchains and the internet.

TON is running on proof-of-stake consensus and is being developed by an open-source community. TON's overarching aim is to create a true Web3 Internet with decentralized storage, an anonymous network, instant payments, and other decentralized services.

At its core, TON provides:

Speed and scalability to handle millions of transactions per second, accommodating an unlimited number of users and managing an array of applications. Traditional financial networks, like Visa and Mastercard, can handle around 65,000 transactions per second, which is similar to the current highest performing blockchains like Solana. The significantly higher speed and low cost of TON will revolutionize DeFi and other Web3 projects.

Intuitive user interfaces to help everyone buy, store and transfer assets in a convenient, safer and familiar way. One of the most frustrating aspects of crypto can be its inaccessibility for the lay user. TON aims to change that by, for example, removing the need for third-party extensions and wallets, allowing users to transact with each other and bots through simple messaging platforms like Telegram.

Decentralization to deliver a reliable, stable, and secure network for a self-governed world. TON will give developers the confidence to build for the long-term without compromising security or censorship. TON’s key components, from its layer 1 blockchain to its payment network and its suite of services lay the groundwork for a genuine Web3.

The History of the TON blockchain

In 2018, Pavel and Nikolai Durov, the brothers behind Telegram, designed a blockchain to process millions of transactions per second. The original project was called "Telegram Open Network" and a private coin offering ("Gram") raised $1.7b to fund the development of the blockchain.

The Gram token offering ran into problems with the US Securities and Exchange Commission (SEC), in what was a very complicated ruling. Telegram had built an operational network, made good faith efforts to comply with the federal securities laws in raising funds to build that network, and engaged extensively with the SEC staff. Telegram's counsel argued that Gram was a digital currency (not a security) that could be used to purchase and sell goods and services on the Blockchain. However, the SEC claimed that Gram constituted an investment contract under the securities laws and the Court agreed.

Despite Telegram’s best efforts to prove that the ICO was not a sale of unregistered securities, the ruling meant that Telegram could not deliver any Grams to any purchaser anywhere in the world. As a result of preventing the tokens from reaching the intended users, Telegram was forced to abandon its fight with the US regulator and shut down the project (incidentally, without admitting any wrongdoing).

A few members of the SEC's own board dissented from this ruling:
“This willingness of the SEC to ask for, and of the district court to grant, such sweeping injunctive relief against a non-US company, in a case where one-quarter of the funds came from US investors, reasonably might raise some concerns among our international colleagues”. https://www.sec.gov/news/speech/peirce-not-braking-and-breaking-2020-07-21

Developers who wanted to see the blockchain succeed took it upon themselves to continue the project on a testnet. While there were different teams formed, the Newton group, which adhered to the original principles laid out in the whitepaper, ultimately received the blessing from the legacy team who handed over the naming rights and source code repository. Following the completion of the testnet, it was necessary to conduct tests on the mainnet, and the Newton team was renamed to The Open Network Foundation, a non-profit community contributing the development and completion of the TON Blockchain and its native token Toncoin.

As of today, over 40 independent non-incorporated developers from various geographies work on the project as part of the Foundation funded by donations.

With the SEC struggles now firmly in the past, the TON Foundation is about to launch the DeFi and Developer Programs, to encourage builders to develop an ecosystem that can flourish in the world of Web3.

The TON Blockchain

According to the White Paper, TON is a fast, secure and scalable blockchain, capable of handling millions of transactions per second. It has been designed to be accessible and friendly to both users and service providers. In some ways, TON is a huge superserver, intended to host and provide a variety of services for the next generation of the internet.

Key Components

The Open Network is an ecosystem comprised of the following components:

  • TON is a layer-1 blockchain of blockchains, capable of processing millions of transactions per second, with Turing-complete smart contracts. It uses a Proof-of-Stake consensus and introduces some new and unique features, such as the “self-healing” vertical blockchain mechanism and “instant hypercube routing”, which enable it to be fast, reliable and scalable at the same time.
  • TON Payments is a revolutionary way for instant micropayments to be made among users, bots, and other services in an instant off-chain manner. Safeguards built into the system ensure that these transfers are as secure as on-chain transactions.
  • TON Proxy is a network proxy/anonymizer layer for TON nodes. Similar to I2P, it allows building decentralized VPN services and blockchain-based TOR alternatives to achieve anonymity and protect online privacy. Combined with the TON P2P Network and TON DNS, TON Proxy gives decentralized apps immunity to censorship
  • TON DNS makes blockchain mainstream by assigning human-readable names to accounts, smart contracts, services and network nodes. With TON DNS browsing blockchain becomes similar to surfing the World Wide Web.
  • TON Storage is a distributed file-storage technology accessible through the TON P2P Network. In other words, a better version of Dropbox. This torrent-like technology relies on smart contracts for availability and has the potential to store and exchange large amounts of data.
  • TON Services provides a versatile platform for third-party services. It enables smartphone-like friendly interfaces for decentralized apps and smart contracts, as well as a World Wide Web-like decentralized browsing experience. A full list of available apps and services can be found at ton.app

The TON Blockchain is at the core of the TON project, while the other components play a supportive role for the blockchain. When combined, they allow the platform to host more versatile applications than would be possible using a single blockchain.

The scalable and flexible blockchain

The TON Blockchain is actually a collection of blockchains (even a collection of blockchains of blockchains). At the heart of the platform is the unique Masterchain, which contains general information about the protocol, validators, active “workchains” and their “shards”. There are then several workchains, which contain the value-transfer and smart-contract transactions. Each workchain can in turn be subdivided into shardchains, responsible for a subset of accounts.

To achieve its bold promise of processing millions of transactions per second, the TON network employs an Infinite Sharding Paradigm, which allows the network to grow itself based upon the user traffic. Basically it can create over four billion work chains to perform its needed computations. Thus block generation speed remains unaffected by the transaction volume, no queues build up and costs remain low regardless of the demand.

As these shards are created, they need to send messages to one another and this is achieved via Hypercube Routing. Smart routing mechanisms ensure swift exchange between any two blockchains regardless of the network size. Given the logarithmic relation between data transfer time and number of blockchains in TON, scaling to even millions of chains is possible without impairing the processing speed.

TON relies on the advanced Proof-of-Stake consensus where validator nodes use deposit stakes to guarantee their dependability and reach consensus through a variant of the Byzantine Fault Tolerant protocol. This resource saving mechanism enables TON to focus nodes computing power on handling transactions and smart contracts further increasing speed and efficiency

To avoid unnecessary forks, TON can grow new valid blocks on top of any invalidated blocks. This “self-healing” vertical blockchain mechanism saves resources and guarantees that valid transactions are not discarded due to unrelated errors.

Economics and Supply

Toncoin, or TON, is the crypto currency that powers the TON blockchain.

During the development of the testnet a small fraction (1.45%) of the total 5bn coins were distributed to developers and testers. However, when the original Telegram development team was disbanded, the remaining coins (98.55%) of total supply were transferred to Proof-of-Work Giver smart contracts. The PoW Giver smart contracts were developed in such a way they were widely available to the community in order for them to mine coins and continue the development of the project as they deem fit. By the summer of 2022, the PoW mining will be exhausted. To support the ongoing operation of the network, the PoS inflation rate has been set at 0.6% per annum, with validator votes to change this as needed via consensus.

This Proof-of-Work distribution of coins in a Proof-of-Stake network is a unique phenomenon. Although it arose by accident, this distribution has obvious advantages - decentralization and equality of distribution.

Token Summary

Total supply: 5BN
Total Wallets: 350,000+
# of Validators: 161
Total Validators’ stake: 192M
PoW Givers’s stake: 28.6M
TON Foundation holdings: 74.9M

Toncoin Use Cases:

Within The Open Network, the Toncoin has four key use cases:

Proof-of-Stake: Stakes deposited by validators to be eligible to validate transactions and generate new blocks and coins. Nominators can also lend coins to a validator node and receive a percentage of the rewards in return.

Governance: Voting power to support or oppose changes in the parameters of the protocol.

Transaction fees: Income (gas) paid to validator nodes as reward for processing transactions and smart contracts under the PoS consensus.

Payment for services: payment for services provided by apps on TON Services, or to store data securely in a decentralized way on TON Storage. Payment for registering domain names on TON DNS and hosting sites on TON WWW. One of the first examples is the integration of $TON into the Telegram App, allowing users to subscribe for channels and send cryptocurrencies directly within the Telegram Web.

Roadmap and Updates

Q4 2021

  • TON Subscriptions, the decentralized subscription system, and technical integrations with the world’s top exchanges were launched.

Q1 2022

  • TON Developers Program - documentation, tutorials, improved APIs, SDK and development tools.
  • TON DeFi - standard smart-contracts for tokens, NFTs, liquidity pools on the blockchain.
  • TON Nominators

Q2 2022

  • TON Payments

Q3 2022

  • TON Proxy
  • TON Sites

Q4 2022

  • TON Storage

Further Reading

Disclosure: 3Commas Capital members may hold The Open Network (TON) and/or hold advisory roles. This statement is intended to disclose any conflict of interest and should not be misconstrued as a recommendation to purchase any token. This content is for informational purposes only, and you should not make decisions based solely on it. This is not investment advice.
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