What Is TON and Toncoin?
TON (The Open Network) is a blockchain designed for scalable cross-chain interoperability, originally developed by Telegram, but is currently developed by the TON Foundation. Toncoin is the native token of TON and can be used for network operations and other transactions for applications built on TON.
Telegram also recently announced the integration of a self-custody TON-based wallet (TON Space) into its messaging application.
Key Takeaways
-
TON is short for The Open Network. TON is developed by the TON Foundation with recorded affiliation to the popular messaging application – Telegram.
-
According to its design, TON takes a divisional approach to blockchain scalability. It rations the network’s workload across different subchains that work in synergy with a master chain. It claims that this strategy keeps the network light and efficient.
-
Toncoin is the native token of the project and is used for governance and other network operations for apps built on TON.
On September 13, 2023, Telegram announced the integration of a self-custody TON-based crypto wallet. The wallet – TON Space – will be directly integrated into the messaging application to allow users to access financial services built on top of the TON network. With over 800 million people using the popular messaging application, Telegram hopes to scale the adoption of decentralized financial solutions while boosting the usage of its affiliated blockchain network –TON.
"Telegram’s mission has always been to enable freedom of speech, but speech is so much more in this digital age. We believe users have the right to own their identities and assets. With TON Space, users now have the technology to make that convenient. With this announcement, we are putting digital ownership rights in the hands of our entire user base. While also giving TON projects the tools to reach our audience in the largest Web3/Web2 integration there has ever been."
- John Hyman, Telegram's Chief Investment Officer
Prior to the rebrand to The Open Network, TON’s development had started earlier, as the Telegram Open network, launching its testnet in 2019. However, due to regulatory friction, the development came to a halt and resumed later on as The Open Network (TON); it retains this name at the time of writing.
Built to handle financial operations from an excess of 800 million users, TON is poised to entertain a significant usage, but what is TON and how does it work?
Introduction to TON
The Open Network (TON) is a decentralized Layer 1 smart contract network built for routine and specialized financial applications. It supports the creation of fungible and non-fungible tokens; over a million NFTs have been minted on the network.
TON is a Proof of Stake (PoS) network with a focus on delivering a scalable network for financial activities and a medium for diverse users to interact over an immutable financial infrastructure. By adopting the PoS consensus algorithm and an overall flexible design, The Open Network hopes to develop a blockchain network that can be used by billions of users without breaking down or losing significant efficiency. The switch from Proof of Work (PoW) to Proof of Stake consensus is in line with this goal and also an attempt to adopt a more environmentally friendly consensus system.
TON runs a virtual machine that manages the state of the network and allows external applications and contract accounts to communicate with the network. Decentralized finance projects are able to deploy their solutions on the network. Official sources report over 3 million accounts created on the network at the time of writing (a 143% growth from the previous year) and over 700,000 active accounts. TON has seen some significant usage; this could be influenced by its affiliation with Telegram.
TON and Telegram
The idea behind TON is to create a connection between the everyday internet user, blockchain technology, and cryptocurrency. This intention was clearly stated in the whitepaper published initially in January 2018 by Telegram co-founder Nikolai Durov. Nikolai Durov, along with his brother Pavel Durov, had created a successful messaging application and planned to leverage the application’s success to introduce the masses to cryptocurrency.
The whitepaper detailed the structure of the blockchain network known then as Telegram Open Network with a native coin known as GRAM. The GRAM coin would embody the infrastructure being developed on TON and become a borderless medium for routine P2P transactions. Nikolai Durov undertook the development process while Pavel Durov became the face of the project.
Telegram Open Network was a PoW Layer 1 network capable of executing smart contracts. The whitepaper also shed light on the TVM, a virtual machine similar to the EVM developed on the Ethereum network. This will allow developers to deploy smart contracts and automate financial activities on the network. The testnet for TON launched in early 2019 with the mainnet scheduled for launch later the same year. However, the private sale, subsequent funding programs for the GRAM token and other operations of the Telegram Open Network team caught the attention of regulators and were subject to regulatory friction between the team and SEC. The GRAM token brand name was also used in numerous scams, fake token launches and deceptive airdrop programs.
The TON team had taken in over $1 billion in multiple funding programs, offering GRAM tokens at different prices in each sale. After deliberations with the SEC, the TON development and the scheduled launch were halted and the project repaid investors’ funds received through the funding program. Telegram also distanced itself from the project.
TON was later relaunched as The Open Network (TON) using the source code for the Telegram Open Network. Subsequent developments were pioneered by the TON Foundation, the native token was renamed to Toncoin and the consensus algorithm changed to POS. TON remains in development under this arrangement at the time of writing.
Now how does The Open Network work?
How Does TON Work?
A blockchain network created for the purpose that is defined for TON must be flexible, fast, and cost-effective. TON’s ability to appeal to millions of users depends on how easily they can use it and how much cost it saves them, compared to traditional financial facilities. Messaging applications are meant to be light as well, therefore, applications integrated into them should be able to work without significantly increasing the total demand on the device they operate on. TON developers also identified these factors and structured the network to achieve these.
First a relatively lightweight consensus algorithm, a scalability work through – sharding – and a virtual machine (TVM).
Proof of Stake Consensus
Consensus is how nodes on a network reach agreement on the current and valid state of the network. For a network to stay in unity, every (or a majority) of the nodes on the network must agree on a uniform state after each run. Initially, TON adopted the Proof of Work consensus algorithm, which is similar to that used by Bitcoin and earlier blockchain networks.
PoW’s approach to network consensus requires significant resources from the devices connected to the network and is a heavyweight consensus system. In addition, it requires significant electrical power. By ditching the PoW algorithm and adopting the PoS consensus, TON hopes to avoid these issues. TON runs the BPoS (Block-Proof of stake) consensus algorithm, a Byzantine Fault-Tolerant variant of the PoS algorithm.
The nodes in a PoS consensus network are run by validators and not miners as seen on the PoW network. Instead of running complex mathematical procedures, validators in a PoS network are required to lock up their assets to the network as a form of commitment to their roles. Validators are selected to screen and approve new blocks before they are hashed into the blockchain. A validator's chances of getting selected for this role depend on the number of tokens locked in their nodes. The more tokens locked in a validator’s node, the higher their chances of getting selected. The security and decentralization of a PoS network are relative to the validator count and the number of tokens locked on the network. An attacker must control at least 51% of the assets locked on the network to be able to influence the network (known as a 51% attack).
At the time of writing, there are over 340 validators on TON, these validators are located in 24 countries. Over 488,000,000 native tokens are locked on the network. As a reward for their role, validators receive Toncoin for every block they validate. Other holders can also contribute to the network’s security and benefit from the supply swell by staking their tokens to validator nodes. TON’s BPoS ensures that the network continues to run even when about 1/3 of the validators are not available to participate in the consensus.
Sharding
Sharding is a novel approach to blockchain scalability. Networks like Zilliqa and Near Blockchain have adopted the sharding technology, Ethereum developers also plan to implement a similar technology as part of the Ethereum 2.0 upgrade.
Put simply, sharding splits a blockchain network into autonomous, yet interconnected pieces. Each piece is known as a shard and is capable of executing regular commands on its own. On TON, work-chains are split into multiple shards. Each shard is tasked with different roles and they maintain a global state. The global state removes the need for the network nodes to process every transaction, making for even more efficient transaction processing.
The TON Virtual Machine (TVM)
A virtual machine is a software version of the regular computer processing unit (CPU). The CPU receives and executes commands from applications on the device. For virtual machines on decentralized networks, these applications are contract accounts and user account.
On TON, the TVM plays a similar role to the EVM on Ethereum and EVM networks. The TVM computes commands from contract applications on the network and changes the state of the network after each execution. Like a vending machine, it controls variables on the network. Using the TVM developers are able to create applications that automate processes like asset transfers, minting of assets, and signing messages on the network.
Here’s how TON puts these together to function;
The Open Network is a blockchain of blockchains; it consists of two major chains, the masterchain, and workchains. The masterchain is the coordinator of the network, it manages validator nodes, assets staked to the network, and the synchronization of different components within the network.
Meanwhile, the workchains handle requests from smart contracts and decentralized applications. workchains are divided into multiple shardchains. Each shardchain processes transactions in parallel, contributing to overall efficiency. Thanks to workload splitting, sharding, and parallel transaction execution, TON claims that it is able to support millions of users and process an impressive amount of transactions per second, charging cheap fees for each transaction.
The TVM receives requests from the shardchains and processes the state changes while network validators reach consensus on the current state through the BPOS consensus mechanism. This process is coordinated by the masterchain. TON claims that the network creates and maintains an effective communication path between the masterchain and workchains. This communication path creates a medium for the exchange of resources between decentralized applications on the network.
What Is Toncoin?
Toncoin (TON) is the native and utility token of TON. It is used to pay fees for transactions performed on the network. TON embodies the technology of The Open Network. It also furnishes the consensus system and the TON ecosystem as a whole. Validators and stakers on their nodes, stake TON to protect the network. As a reward for this role, they receive a distribution of TON for validated blocks. In addition, TON is used in the governance of the TON blockchain.
The recent developments has also brought TON to a new six-month high.
Governance
The on-chain governance platform for TON is designed and managed by Orbs Network. The functionality of this facility is proposed in a lite paper delivered by Shahar Yakir and Ami Hazbany. Ton.vote is designed for proposals concerned with TON itself and applications in its ecosystem. The TON Foundation is one of the users of this platform.
On the platform, community members can submit improvement proposals for the network or concerned applications. A proposal can be about financial management or technological improvements. DAO members are holders of TON or any other token indicated for the voting event. Each holder is entitled to votes relative to the number of TON (or any other selected token) in their custody.
Orbs Network claims that this voting platform makes for transparency and anyone can audit the consensus process. The platform also allows the proposer to select multiple tokens for the voting procedure and define the most significant aspects of the voting process, including the duration of the voting process. A notable decision from the TON DAO includes the proposal to freeze over $2.5 billion worth of inactive Toncoin in the first quarter of 2023.
Tokenomics
Toncoin is the utility token of the network, apart from being used for transaction fees, validator, and stakers’ reward, and voting on proposals organized by the TON Foundation, it is also used for paying for facilities on the network like the TON proxy and TON DNS. Decentralized applications on the network are also integrating TON as their base currency.
The total supply of the Toncoin isn’t clear at the time of writing, however, information on CoinGecko places the circulating supply at over 3.4 billion, out of a total supply of just under 5.1 billion as of September 2023. The number of TON in supply is expected to increase over time as validators receive rewards. TON is tradable on centralized exchanges like Kucoin, and Huobi and decentralized exchanges like Uniswap. See active trading pairs for TON
Other Web3 Services on TON
In addition to offering decentralized financial services for messaging applications and providing a decentralized network where applications can be built, the TON network also offers some other facilities and services for developers and the everyday blockchain and internet user. Here are some of these services.
TON Storage
The blockchain is a store of data; the differences between it and traditional storage facilities are decentralization and relative flexibility. Several blockchain projects like Storj and FileCoin are focused on harnessing the potential of the blockchain as a means of storing data. TON also taps this potential for the TON Storage.
With the TON Storage, TON hopes to create a data approach system that can be accessed from anywhere in the world, at the same speed. TON Storage is based on torrents, a peer-to-peer file-sharing technology. TON claims that users can upload data and multimedia to the network and identify them with unique codes; these files can be retrieved by anyone using the file ID. Files stored on the network can be integrated with other TON components and contracts on the network, including TON NFTs.
TON DNS
TON Domain Name Service (DNS) lets you turn the long alphanumeric TON wallet addresses to human readable names like yourname.ton or any other names a user wishes to convert their wallets addresses to. Anyone can send funds to your TON DNS name. TON DNS converts the wallet names to smart contract addresses and addresses that can be used with other components like TON sites. The domains are implemented as NFTs and can be used as regular NFTs. TON domain owners can also create subdomains.
TON Proxy and Sites
The TON network holds data like a database and executes commands like a regular computer. It is both a data bank and a proper network, therefore developers building applications that interact with the network will need to perform CRUD (create, read, update, and delete) requests to the network.
TON Proxy creates a connection between these developers, their applications, and the TON blockchain. Applications that might need to interact with the network in this way include centralized exchanges and DeFi applications. Through TON Proxy, interested developers can obtain data from the network. Ton claims that TON Proxy is being optimized over different releases to ensure user privacy and also secure the network and the connections.
With the TON Sites, users can launch web servers with their websites and make them available on the TON network. That is you can host your website on TON. TON Sites use the TON DNS. TON claims to provide automatic security and privacy for TON sites through encryption and authenticity verification.
Final Thoughts
Compared to similar projects, TON started on a high note. The Telegram application has grown into one of the most used messaging applications, TON’s affiliation with a social application of this relevance is a huge boost in its goal of pushing the adoption of decentralized financial solutions. However, the chances of achieving this goal are dependent on the technology being built around The Open Network.
As the network continues to grow in user base, it will become clearer how efficient this approach really is. Wallet applications like @wallet that connect Telegram users to the TON network are already in use and users are exploring the idea of having a defined payment facility integrated into their routing messaging application. Having said this, it is important to fully understand how these applications work, and the provisions for custody and security. Also, note that this article is only for educational purposes and not financial advice.
Joel is deeply interested in the technologies behind cryptocurrencies and blockchain networks. In his over 7 years of involvement in the space, he helps startups build a stronger internet presence through written content. Follow the author on Twitter @agboifesinachi
Or check it out in the app stores
