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$236.7M
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What is the Open Network? TON Explained

Inside the TON ecosystem

TON stands for the Open Network; this project is a Layer 1 blockchain that has been characterised as a decentralised blockchain with high-performance capabilities. It is based on the Proof-of-Stake (PoS) consensus model. TON’s developers say it is able to process millions of transactions per second.

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Wondering what a consensus mechanism is and why blockchain projects like TON use Proof-of-Stake? Take a look at this article: 'Proof-of-Stake vs Proof-of-Work: Is PoS better than PoW?'.

Similar to its competitors on the crypto market, the TON network aimed mainly to provide a wide range of decentralised services, such as decentralised storage, a domain name system, instant payments, rapid transaction processing, and a privacy network.

55,000 tps
The world record of transactions per second for blockchain networks, set by TON in September 2021.

Toncoin (TON) is the native cryptocurrency that is used within the Open Network blockchain. It is mainly used as a tool for handling the requirements of a broad user base and enabling them to conduct transactions seamlessly.

History of the TON network and Toncoin (TON)

Initially created by two brothers, Nikolai and Pavel Durov, this crypto project was meant to be a Proof-of-Stake (PoS) protocol that utilises sharding to solve scaling issues found on most blockchains.

In 2018, the messaging platform Telegram released a white paper for the Telegram Open Network, a Layer 1 blockchain. The launch broke records after managing to raise approximately $1.7 billion in a token sale, becoming the second-largest Initial Coin Offering (ICO) in history, just behind EOS which managed to raise $4 billion. 

The launch hit headlines but only two years later, Telegram cancelled the project due to regulatory issues. At the time, this meant that it was all over, but a bunch of developers and crypto enthusiasts recognised the project’s potential as being open-source and available on GitHub.

TON got a second chance due to the TON Foundation, an independent community that continued developing the project. A group of independent community developers decided to pick up where Telegram left off and build something new.

Accordingly, the name changed to the Open Network (TON). The current network was developed by Anatoliy Makosov, a software developer, and Kirill Emelianenko, a developer with a PhD in Physics and Mathematics.  

The TON mainnet launch happened in May 2021 after its decentralised community voted on that decision. The network’s native token was renamed from Gram to Toncoin.  

You probably wonder which regulatory issues could be big enough to cause such problems. Let’s take a look.

TON's early fall

TON’s founders, along with Telegram’s team, had brought this crypto project right to the verge of completion when the US Securities and Exchange Commission (SEC) got into the middle. 

Telegram never intended to stray away from compliance with US regulations as its time has been working with regulators on the token release, yet the problem was that the SEC saw investors as underwriters. Therefore, Telegram’s token release was viewed as an unregistered distribution of securities.

Accordingly, the SEC prohibited Telegram from issuing Grams to investors by submitting a claim to the competent court. That resulted in the project being put on hold.

The SEC sued Telegram in 2019 over the amount raised via the project’s ICO and the release of Gram tokens. The alleged offering of unregistered securities resulted in Telegram settling with the SEC to pay an $18.5 million fine and pay back investors any unspent funds.  

Before the settlement, Telegram tried to fight, but in 2020, Pavel Durov announced that Telegram was leaving the project. Then the community jumped in to give the project another try and TON was reborn.

The connection between TON and Telegram

Telegram is basically a message application that is cloud-based, encrypted, and globally accessible. The application is known for offering end-to-end encrypted chats, video calls, file sharing and many other features.  

The centralised solution went down the decentralised road with the TON project. As mentioned above, Telegram jumped ship when things went south.  

But this wasn’t the end for Telegram and the TON network. In 2023, Telegram decided to integrate the TON blockchain and the TON wallet.  

With a renewed deal between these two companies, the TON Foundation intends to build the Web3 infrastructure on the Telegram platform. Despite no longer having financial nor development links, Telegram boosted the performance of Toncoins as the cryptocurrency was made available to the Telegram community of approximately 800 million users across the globe.

How does TON work?

The TON ecosystem uses a sharded, PoS consensus mechanism. In other words, TON can process transactions in a parallel manner, and provide a better transaction speed. The team behind TON states that it can process millions of transactions as an improvement from 2021 when it was able to process 55,000 transactions per second.  

Secondly, TON encompasses a number of decentralised services such as TON Proxy as a decentralised VPN service, TON storage, and the TON naming system. Users pay with services using the Toncoin cryptocurrency. Any holder of the TON currency is enabled to pay for transaction fees or can stake the currency and secure the network operations to receive block rewards afterward.

As for decentralised applications, the TON blockchain provides its very own app store that also utilises the Toncoin cryptocurrency.

How to earn passive income on the TON network

Passive income on TON is pretty straightforward – you can be a validator or a nominator. 

Given that it is a PoS network, validators earn interest by verifying transactions and creating new blocks. There is a particular downside to becoming a validator though – apart from the need to have highly performing hardware, one needs to stake 600,000 TON. 

This has often been noted as a drawback when it comes to the TON ecosystem. However, these strict requirements are there to protect the network from malicious actors who may try to gain access and manipulate the system. If someone decides to do something bad instead of fairly validating transactions, they might lose the staked cryptocurrency.

The other way to earn passive income is to be a nominator. Nominators pool their assets and lend them to validators, enabling them to earn staking rewards. As soon as rewards are issued by the TON blockchain, they are fairly distributed among nominators.  

A system like this is based on the fact that tokens lent to validators are used for validation solely, and rewards are distributed evenly. Being a nominator is much more affordable for regular users because they don’t have to stake a big amount of the native currency.

Special features of the TON network

TON’s special feature is its multi-level structure based on the principle of sharding. In other words, the system utilises multiple subnets on the TON blockchain with each shard showing off a predetermined purpose.  

All shards on their own are unique and contain their own set of dates. The purpose of this system is to speed up the transaction process, reduce any latencies, and avoid the creation of unverified blocks. 

It has often been stated by the TON community that speed is the project’s other special feature. Allegedly, the TON network can process millions of transactions per second by using Turing complete smart contracts.  

To learn more about smart contracts, we suggest reading our 'What Are Smart Contracts?' article.

As stated by the team behind TON, the system encompasses another genuine feature known as the self-healing vertical blockchain mechanism. Self-healing blockchain mechanisms are used to treat sharding scalability issues among crypto projects based on settling payments within the blockchain ecosystem.  

For example, think of a metro station in a big city. A self-healing system simply means that depending on the number of people and peak hours, the number of trains available and their frequency change accordingly to provide a smooth output.

TON Tokenomics

The TON cryptocurrency is the native currency of the TON network. Let's find out more about it.

TON coin price, total supply, circulating supply, and market conditions

Toncoin (TON) has a total supply of 5 billion TON. If you want to know how many Toncoin coins are currently in circulation, you should be aware that the circulating supply is a changeable number. At the time of writing in October 2023, around 3.4 billion Toncoins are considered to be in circulation.

The highest price paid for Toncoin (TON) was recorded on 12 November 2021.

The TON Foundation has created an inbuilt annual inflation rate of 0.6%. In October 2023, TON coin price stood at $2.12 with a market cap of $7.29 billion. Remember that these numbers are changing fast in the volatile crypto market. 

Main utilities of Toncoin (TON)

Being the native currency of the TON ecosystem, TON coins are used for paying transaction fees when conducting payments or executing smart contracts on the TON blockchain. With TON coins users can also pay for services provided by decentralised applications (Dapps) accommodated on the network. However, The native currency of the TON ecosystem includes a few other applications.

a. Governance token

Since the TON project was saved by an independent community that joined forces under the umbrella of the TON foundation, it is evident that a decentralised governance mechanism was set in place.  

Toncoins are used as governance tokens. Any TON holder can participate in the governance system to vote on proposals regarding future upgrades and influence how the network develops in the future.

b. Staking Toncoin

Since TON is based on Proof-of-Stake, users can stake TON tokens. By staking tokens on the blockchain, users can become eligible to assume the role of validators, produce new blocks, and earn passive income while doing it.

c. Trading Toncoin

Similar to other crypto assets, Toncoins can be traded against other cryptocurrencies to make the most of fluctuating market conditions. Users can choose to trade TON or hold it long-term if they believe that the TON project has a big future potential. 

Trading crypto assets might present a challenge for beginners. Check our simple guide to learn more: 'Simple trading strategies'.

Can you mine Toncoin (TON)?

It is not possible to mine Toncoin since all the coins were already minted before the mainnet launch. The TON coins minted were locked in 20 Proof-of-Work Giver smart contracts for security purposes.

Even though you can forget about mining Toncoins, the network is based on the PoS consensus mechanism so staking tokens is an available option to invest and grow your holdings.

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The TON wallet

The network provides a Toncoin wallet, either custodial or non-custodial, to easily transfer funds and enable users to interact with all the services provided by the platform.  

Non-custodial wallets are preferred by users who want total control over their assets. The custodial wallet, on the other hand, is a built-in option on the platform. 

Once a user creates their TON wallet, they can seamlessly receive and send tokens while interacting with applications. By using the TON storage services, users are allowed to secure their wallets using a private key that provides encryption.

Is Toncoin (TON) a good investment?

It is hard to tell whether something is a good investment or not, especially given the constantly changing crypto market conditions. TON managed to rise following a near catastrophe on launch. Uniquely, it launched right after the 2021 crypto market peak, so has yet to experience a bull market. 

From a technical perspective, it is an interesting crypto project that already won a speed contest and made improvements since then. Additionally, using the sharding technique and Turing complete smart contracts adds to its future potential.

According to the TON Developer Report for Q2 2023, the network has experienced continuous increases in developer activity.

Another interesting feature refers to its new arrangement with Telegram to lead the popular communication platform into Web3.

Due to the volatility of the crypto market, it is hard to predict a project’s future since many factors influence the price and overall success. As is often said on Learn Crypto, always do your own research before making any investment-related activities.