Ryze Labs: The Open Network (TON) Research Report

Source: Ryze Labs

I. Summary

The Open Network (TON) combines a layer of blockchain with a series of network protocols to form a decentralized platform similar to the Internet. Originally developed by Nikolay Durov and advanced by a community of open source developers, TON supports a variety of applications, including digital finance and decentralized storage. Its architecture uses a main chain and multiple work chains, enhancing scalability and supporting large-scale transactions and complex operations on the network.

TON development includes the Fragment platform, a decentralized marketplace that has processed more than $350 million in transactions, demonstrating the network's functionality and economic capabilities. Integration with Telegram promotes new methods of content monetization and user interaction, leveraging the platform's widespread use. Recognition in the UAE and partnerships with major technology companies further expand TON's global influence.

As TON continues to develop, its role in driving users' transition to decentralized networks becomes increasingly important. The TON network’s ability to handle a large number of transactions and support a variety of applications gives it the potential to take a leading position in blockchain innovation. Through ongoing strategic initiatives and growing adoption, TON aims to improve the efficiency and security of digital transactions around the world and contribute to the widespread use of blockchain technology.

II. Introduction

The Open Network (TON) is a decentralized computer network consisting of a layer of blockchain (the TON blockchain) and a series of network protocols (the TON network) that support the blockchain and can also serve as a standalone decentralized network. It was originally developed by Nikolay 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 way to communicate that can be used worldwide." Prior to Telegram, they were widely known for founding VKontakte (VK), a Russian social media platform similar to Facebook. Pavel Durov was the CEO of VK, who was forced to resign in 2014 after investors claimed they were under pressure from the Russian government to provide user data and censor political content. The brothers subsequently left Russia to focus on developing Telegram, emphasizing user privacy and security.

Due to its advantages in speed and security, Telegram quickly gained popularity, with more than 200 million monthly active users by March 2018. Prior to this, Telegram was primarily funded by Pavel through his Digital Fortress fund. In order to raise external capital while maintaining the independence of the platform and free from external influence, the Durov brothers explored a variety of financing methods. In 2018, they launched Telegram The Open Network (TON), which aims to create a decentralized blockchain platform and launch its cryptocurrency Gram. TON's initial coin offering (ICO) raised $1.7 billion from private investors. However, the U.S. Securities and Exchange Commission (SEC) intervened in October 2019 and sued Telegram for conducting an unregistered securities offering. The lengthy legal battle that followed led Telegram to abandon the TON project in May 2020 and agree 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 open sourced, and the remaining testnet tokens were sent to smart contracts, enabling anyone to participate in future mining. Subsequently, a small group of open source developers led by Anatoly Makosov and Kirill Yemelyanenko resumed the development of the project. The project was renamed Toncoin and eventually evolved into TON, with the full support of Pavel Durov.

3. Components of TON

The Open Network consists of network and storage components, which is itself a powerful decentralized network and web technology stack. The Open Network includes the following core components:

1. TON Blockchain: A blockchain of blockchains - including the main chain, work chain, shard chains and vertical blockchains.

2. TON Network: A P2P network used to communicate/access the network.

3. TON Proxy: A network proxy/anonymity layer similar to TOR/I2P that hides the identity and IP address of nodes.

4. TON DNS: Maps human-readable domain names to accounts, smart contracts, services and network nodes through smart contracts.

   Used to register and manage .ton domain names.

5. TON Sites: Allows users to build decentralized websites that can be accessed at example.ton and are compatible with TON DNS domain name lookups.

   Similar to hosting an NGINX web server on an AWS instance.

6. TON WWW: Protocol that allows users to access TON Sites via .ton domains in a browser.

7. TON Storage: Decentralized file storage and sharing using torrent-like technology over the TON network.

8. 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 lookup and retrieval.

9. TON Services: A service platform, accessed via the web and proxies, supporting interactions similar to those of a browser or smartphone app.

10. TON Services: A service platform, accessed via the web and proxies, supporting interactions similar to those of a browser or smartphone app.

11. TON Services: A service platform, accessed via the web and proxies, supporting interactions similar to those of a browser or smartphone app.

12. TON Services: Can be on-chain, off-chain, or hybrid, used by human users or other applications/bots.

13. TON Services: A service registry and the nodes that run them.

14. TON Payments: A network of micropayment channels for fast off-chain value transfer, similar to the Bitcoin Lightning Network.

Here is a simplified overview of how it all fits together from a user perspective.

In summary, in addition to its blockchain core, The Open Network has 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 grows, it could usher in a fully decentralized web ecosystem where websites will be censorship-resistant from the HTML code to the hosting and delivery infrastructure (including servers and proxies). In addition, through TON Services, TON Payments, and Telegram Mini-Apps, we look forward to seeing exciting new consumer applications and business models that are only possible on TON.

Fourth, Technical Architecture

The Open Network's technical architecture leverages a multi-blockchain framework designed to enhance scalability, ensure strong security, and facilitate seamless interoperability. This multi-layered structure enables TON to efficiently manage a large number of transactions and interactions.

Multi-blockchain Design

TON's architecture is built around a central main chain and multiple work chains, each of which can be further subdivided into shard chains. This hierarchical structure enables TON to scale and manage different types and numbers of transactions in the network.

1. Main Chain: At the top of the hierarchy, the main chain plays a key role in maintaining the overall integrity and continuity of the TON network. It acts as the main ledger, records and verifies major network changes, coordinates the various work chains, and ensures that global consensus is maintained. The main chain is responsible for key functions such as transaction finality and checkpoints across workchains and shard chains, acting as the final arbiter in the network's multi-chain architecture.

2. Workchain: Independent blockchains that run in parallel under the supervision of the main chain. Each workchain is designed to meet specific needs or industries, such as different token economies, decentralized applications (dApps), or compliance requirements, allowing customization and flexibility within the network. Workchains can have their own transaction formats, consensus protocols, and even rules for their virtual machines, allowing developers to adjust functionality to specific use cases.

3. Shardchain: To further enhance scalability, each workchain can be divided into multiple shard chains. This division is designed to distribute transaction load more efficiently, allocating a portion of the overall transaction to each shard chain. By processing transactions in parallel on multiple shard chains, TON has greatly increased its transaction processing capacity. Shard chains operate according to the rules of the workchain to which they belong, but are primarily focused on expanding transaction throughput. They synchronize and verify transactions with the help of the mainchain, which aggregates and finalizes transactions for the entire network.

This multi-blockchain approach enables TON to efficiently process various types and volumes of transactions by delegating tasks to different chains based on their specialization. This division not only optimizes processing speed and network response time, but also enhances the network's ability to dynamically scale based on load and demand.

Scalability through Sharding Chains

Scalability is a key aspect of TON's architecture, primarily achieved through its shard chains. Each shard chain processes only a portion of transactions, effectively spreading the computational and storage workload across the network. This approach reduces latency and increases throughput because multiple shard chains can run 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 volume. If a work chain becomes overloaded, it can be further subdivided into more shard chains, thereby distributing the load more evenly and maintaining the network's high performance

Cross-chain interoperability: facilitating inter-chain communication

Interoperability within TON is essential to 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 work chains and shard chains remain consistent and secure. This system allows for seamless interaction between different parts of the network, enabling complex operations involving multiple chains to be performed smoothly without user intervention.

Security: Proof of Stake and Nominator Pool

TON maintains its security through a Proof of Stake (PoS) mechanism, where validators secure the network by staking tokens. This PoS system is enhanced by the introduction of a nominator pool, allowing smaller holders to collectively participate in the validation process, thereby democratizing the security process and enhancing the robustness of the network. Validators are incentivized to remain honest due to the involvement of economic interests, while the nominator pool ensures that more holders are able to participate in network security.

TON's multi-blockchain architecture, through the division of main chain, work chain and shard chain, is a powerful model for achieving the scalability, flexibility and security required by modern blockchain networks. This design enables TON to efficiently manage a growing ecosystem of decentralized applications and services while maintaining high throughput and strong security.

V. Economic and Governance Model

Since its $1.7 billion ICO in 2019, TON has undergone significant changes, but has faced challenges due to regulatory obstacles. Revived by the TON Foundation in 2022, it has grown into a decentralized network with 5 billion tokens, growing by 0.6% (30 million tokens) per year. There are currently 2.5 billion tokens 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), and the remaining 1.45% were held by the development team.

In order to address the risk of centralization, a major proposal was passed in February 2023 to freeze inactive wallets for four years, affecting 21% of the total supply. This decision targets 171 wallets holding more than 1.081 billion TON coins, accounting for about 21% of the total circulation. This move aims to enhance liquidity and has sparked discussions about centralization and governance autonomy in the TON ecosystem, highlighting the delicate balance between regulatory actions and decentralized principles.

Validators in the TON network play a vital role in maintaining its integrity, and if they perform their duties conscientiously, such as signing all blocks, staying online, and avoiding invalid block signatures, they can earn up to 10% of their staked amount per year. This reward system is sufficient to compensate validators, allowing them to invest in better hardware to manage the growing volume of transactions. On average, it is expected that no more than 10% of the total supply of TON coins will be locked in validator stakes at any time, resulting in an annual inflation rate of approximately 2%. This inflation is viewed as a payment from the community to validators for their services in maintaining network operations.

Conversely, if validators behave badly, some or all of their stake may be confiscated as a penalty. A large portion of the confiscated stake may be destroyed, creating a deflationary effect on the total supply of TON coins. A small portion of the fine may also be awarded to validators or "fishermen" who provide proof of malicious validator behavior, further enhancing the integrity of the network by incentivizing monitoring of validator activity.

TON's fee mechanism differs significantly from Ethereum's user-pays model. Instead, TON adopts a developer-pays model. Unlike Ethereum's synchronous smart contracts, both Dfinity and TON leverage an asynchronous actor architecture to enable parallel computation.

TON's transaction fees consist of several components: storage fees, message input and output fees, routing fees, and computation fees. On average, transaction fees are around 0.005 TON, but this value can be adjusted by validators as needed. The purpose of transaction fees is to discourage malicious actors from overloading the network. In addition, half of the fees collected 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. In addition, most of the malicious validator funds that are sacked are also destroyed. This destruction mechanism helps reduce the circulating supply and enhances the overall economic stability and deflationary nature of the TON network. TON can also be purchased directly through the Telegram wallet for anonymous accounts, advertising, and buying stars in the Fragment market.

Governance in the TON community

TON uses a decentralized voting platform, TON.VOTE, where token holders can influence the development of the project and major policy decisions. This participatory approach ensures that the community is at the heart of the ecosystem's evolution.

TON.vote Platform

Major Investors and Partners

TON’s institutional adoption has been significantly enhanced by major investments from renowned firms such as Pantera Capital and Animoca Brands. Pantera Capital has demonstrated a high level of confidence in TON’s potential in the crypto market by launching a dedicated investment fund to raise capital to purchase TON tokens. Animoca Brands, known for advancing digital property rights in gaming and the open metaverse, has become the largest validator on the TON blockchain, supporting various GameFi projects and integrating TON-based applications in Telegram. These strategic investments and partnerships highlight the strong institutional endorsement of TON’s capabilities and its future potential in the blockchain space.

Staking and its impact on decentralization

TON adopts 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 a reward. To participate, validators need advanced hardware and a large amount of Toncoin to stake for a fixed period. High hardware requirements, such as a 16-core CPU and high-speed internet, usually limit this role to people with a lot of resources, potentially concentrating control in the hands of wealthier participants. Not only do validators receive rewards from transaction fees and new coins generated during the validation process, with an average daily income of about 120 Toncoin, they also face strict penalties for non-participation or malicious behavior, ranging from fines to complete confiscation of stakes. This structured incentive and punishment system is designed to ensure the health and integrity of the network. The validator position is highly competitive, and at least 300,000 Toncoins must be staked to enter the election. Successful candidates will validate blocks throughout the validation cycle.

TON's token economics are designed to balance the incentives of validators, ensure network security and maintain economic stability. The combination of a proof-of-stake consensus mechanism, a robust staking system and a transaction fee structure consistent with network usage ensures the sustainability and scalability of the TON blockchain.

VI. Current Status of The Open Network (TON)

The Open Network has shown measurable growth and activity, as can be seen from a number of financial indicators and user engagement statistics. This part of the report provides an overview of TON's current statistics, highlighting key aspects of its ecosystem.

Total Locked Value (TVL): TON's TVL is approximately $919 million. Below we will discuss which applications have the most TVL.

Stablecoins: The market value of stablecoins on TON is $619 million, and USDT is the only stablecoin available. TON accounts for approximately 0.38% of the total stablecoin market cap.

USDT integration is particularly notable, especially in transactions conducted through Telegram.

Users can bridge USDT to the TON network through platforms such as Symbiosis and Layerswap, thereby promoting the use of stablecoins in 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 of the network is as follows:

• On-chain Activated Wallets: There are over 12 million activated on-chain wallets, a significant increase from approximately 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 operating DEXs making significant contributions to the ecosystem. In 2024, on-chain data showed a significant upward trend in transactions and daily active users, mainly driven by the Open League program and USDT native integration. Among these platforms, DeDust and STON.fi stand out for their significant trading volume and TVL.

Both DeDust and STON.fi have played an important role in TON's recent TVL growth, especially driven by Open League's enhanced liquidity pool program. The program, which offers TON rewards for participating in DeFi activities, has significantly driven TVL growth, especially during the first four seasons of the program. For Season 5, 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 well-known for its integration with the TON wallet, which simplifies the process of users exchanging tokens directly within the ecosystem, and it also allows users to become liquidity providers, with additional benefits for participating in staking and farming activities. Key statistics include:

• TVL: Holding $277 million in TVL.

• Strategic Development: STON.fi plans to evolve into a cross-chain DEX, which will introduce features such as order books and margin trading, significantly expanding its market appeal and functionality.

DeDust

DeDust runs as an automated market maker (AMM) on TON and is the second-largest application by TVL on the network. It seamlessly integrates a variety of asset types, including native tokens and tokens from other blockchains. According to the latest data:

• TVL: $258 million TVL.

• Staking and SCALE Tokens: It offers a staking program that converts exchange fees into SCALE tokens, which are used to reward users. This not only promotes liquidity but also stabilizes the ecosystem.

• Transaction Efficiency: DeDust is optimized for low gas fees and supports low-cost transactions. It supports stablecoin swaps and complex transaction types such as multi-hop transactions.

• Interoperability Features: An early-stage Ethereum bridge enhances the ability to manage wrapped assets (such as WBTC and stablecoins) and move assets across blockchain networks.

Comparison: DeDust vs. STON.fi

Swap.coffee: New DEX Aggregator on TON

The TON blockchain recently welcomed a new member to its DeFi ecosystem, Swap.coffee, a DEX aggregator that aims to enhance the user trading experience by providing the best exchange path. The platform stands out for its user-friendly interface, simplifying the trading process for users at all levels by automatically selecting DEXs and managing liquidity issues.

For experienced traders, Swap.coffee offers advanced settings that allow for custom trading strategies, providing significant savings opportunities for large trades despite the higher risk. This feature is specifically targeted at experienced users seeking more control and higher profit margins.

Liquid Staking with Tonstakers on TON

Tonstakers is the third-largest project by TVL, with $212 million under management.

Tonstakers introduces a dynamic method of liquid staking in the TON blockchain, providing users with the opportunity to earn returns under secure, equal and transparent conditions. The service is tailored for users who want to contribute to the security of the blockchain and earn rewards without sacrificing access to their staked assets.

Secure and Open Liquid Staking

Tonstakers works with TON core developers to ensure that the platform is robust and well-integrated in the TON ecosystem. It is built with transparency and security at its core, and its open-source protocol is available for review and contribution on GitHub. Additionally, the platform’s security measures have been audited by leading blockchain security firm Certik, ensuring it is secure to the core.

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 coins are staked, they are not held or controlled by Tonstakers, but remain in the hands of the user at all times.

Telegram Ads: Leveraging TON for Effective Marketing

One of the great benefits of TON’s partnership with Telegram is its ability to attract the Web2 talent pool. This appeal is primarily attributed to the familiar marketing and channel acquisition tools integrated into the Telegram platform.

Telegram Ads allow projects to purchase ads that are displayed at the bottom of Telegram channels. This feature has proven to be a very effective component of the go-to-market strategy for many Web3 startups operating on Telegram. These ads not only help to increase the reach and visibility of the project, but also facilitate direct engagement with the target user base.

A key aspect of Telegram advertising is its payment structure. Ads are purchased with TON, and it is worth noting that 50% of ad revenue is distributed to channel owners in the form of TON. This revenue sharing model incentivizes channel owners to actively participate in the ad network, enhancing the overall growth and engagement of the ecosystem.

Ads can be purchased through https://ads.telegram.org/ or https://fragment.com/ads.

TON's Growing Adoption in Asia

Interact and Trade with Telegram Mini Apps

Hamster Kombat is a click-to-earn game in which players take on the role of a CEO of a cryptocurrency exchange. By clicking on the hamster on the screen, players can accumulate game points and receive rewards in a variety of ways. The game combines a simple click mechanic, a passive income mining feature, and a card system to enhance its depth and entertainment. According to the official Twitter account, as of June 24, 200 million "hamsters" have participated!

In Tehran, Iran, taxi drivers, cyclists, and pedestrians frantically tap their phone screens at hot June traffic lights. Their target is an app called "Hamster Kombat" that they believe can make them rich.

Iran's Hamster Kombat craze is similar to the success of Axie Infinity in Southeast Asia. During a period of high unemployment in the Philippines, Axie Infinity players earned an average of more than $300 per month by playing the game.

Hamster Kombat is more than just a game; it is clearly driving mass adoption of Web3 and fostering community building.

（Notcoin VS Catizen ）

Integration with Bitget to Enhance Trading Convenience

Bitget quickly integrated the Telegram mini-app, providing features such as direct spot trading within Telegram. This integration allows users to easily trade cryptocurrencies without switching between different applications. In regions dominated by mobile-first strategies, the convenience of combining social context with cryptocurrency trading may significantly enhance user adoption and market penetration.

Bitget Telegram Mini Program

Game Development and GameFi on TON

Asian game studios dominate mobile gaming and will be a huge force on TON.

In addition, Hong Kong-based Animoca Brands, a key player in the GameFi space, has become the largest validator on the TON blockchain. This status highlights the importance of TON in supporting third-party games and GameFi projects. The TON Play platform provides developers with the tools to port existing online games directly to Telegram, leveraging its massive user base and promoting new forms of interaction through decentralized gaming.

Web3 Development Initiative

The TON Foundation, in partnership with Tencent Cloud and Chainbase, aims to further promote the adoption of Web3 technologies by streamlining the development process and enhancing developers’ deployment capabilities. By providing the necessary tools and resources, this initiative aims to make it easier for developers to create and publish applications on the TON blockchain.

Recognition and Adoption in the UAE

The United Arab Emirates (UAE), specifically the Dubai International Financial Centre (DIFC), has officially recognized the TON blockchain, alongside major cryptocurrencies such as Bitcoin and Ethereum. This recognition allows financial institutions in Dubai to use Toncoin for transactions, demonstrating TON’s growing acceptance and institutional trust in important 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

With the second-highest number of smartphone users in the world, India offers significant potential for smartphone penetration. The launch of Reliance Jio in 2016 revolutionized the telecom industry, leading to a massive increase in data consumption, jumping from an average of 400MB to 11GB per user per month, through data pricing that was significantly below market prices. Currently, while the average price of 1GB of data globally is $5.09, in India, the price is just $0.09.

This creates an ideal environment for Telegram and its ecosystem. With over 100 million downloads in India, Telegram is one of the most popular messaging apps. Integrating these users into the TON ecosystem provides a unique opportunity to monetize this large user base.

As Web3 becomes more mainstream, more apps will prioritize mobile-first UI/UX design to cater to the vast market of smartphone users similar to the Telegram Mini app model. India will be a key region in future consumer app development and user growth.

VII. Future Outlook

TON is strategically positioned to unlock numerous opportunities for the Telegram community to monetize, share, and grow their business. One prominent example is Fragment, a decentralized marketplace 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, demonstrating the potential of the platform. One promising upcoming development is the transformation of Telegram stickers into NFTs, which could significantly enhance engagement and revenue. Given that 730 billion stickers have already been sent, making them available as NFTs on the TON blockchain presents a huge opportunity.

Telegram is leveraging the TON blockchain to gradually transform its revenue model by integrating revenue sharing for content creators and channel owners through its Fragment platform. This shift away from the traditional social media model allows creators to profit directly from advertising revenue on their channels, promoting a more equitable distribution of financial benefits in the digital ecosystem. This approach not only rewards creators for their content, but also strengthens the relationship between the platform and its users. Additionally, 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 that lack banking services.

Telegram has become the first chat app to make a serious foray 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 have access to payment channels, decentralized storage for in-game assets, and smart contracts for secure and automated game mechanics, allowing them to efficiently distribute their content to a community of 900 million monthly active users.

TON differentiates itself from platforms like WeChat and other Western social apps by establishing Telegram as the primary gateway for Web2 users to transition to Web3. With approximately 900 million MAUs, Telegram represents one of the largest pools of “Web2.5 users” and has become a major distribution channel for major crypto markets. Unlike centralized exchanges like Coinbase and Binance, Telegram’s social nature makes it a better fit for applications that combine social features with financial incentives, providing better product-market fit for games and other interactive experiences.

Distribution has been key to TON’s recent success, highlighting the challenges Web3 game developers face in acquiring players. Growth programs, including grants, technical support, and marketing assistance, accelerate teams’ entry into the ecosystem. In the short term, many teams are likely to leverage TON’s current mindshare to attract users to their games or protocols. As developer tooling and support become more mature, games that take the lessons learned from platforms like WeChat and adapt them in a way that is native to Telegram will become important case studies.

Looking ahead, TON’s future looks bright, with huge potential for monetization, stablecoin integration, and a thriving ecosystem of mini-apps and games. By leveraging its massive user base, scalable infrastructure, and innovative revenue models, TON is poised to become a leading force in the blockchain space, driving significant advances in decentralized finance and digital content creation.