More than just mini-games: In-depth analysis of TON’s “ambitions” in the payment track

Author: Satou

In the field of blockchain, The Open Network (TON) has gradually emerged in the payment track with its unique advantages and deep user base. In 2024, the TON ecosystem has shown strong growth momentum in many aspects. According to the latest data, as of July 21, 2024, more than 730M USDT has been issued on the TON network, becoming an important driving force for the development of the TON payment ecosystem. In addition, TON game platforms such as Notcoin, Hamster Kombat and Catizen have also achieved remarkable achievements, attracting 35 million, 230 million and 25 million users respectively.

As the TON ecosystem continues to mature and expand, its application prospects in multiple fields such as DeFi, GameFi and SocialFi are becoming clearer. The CGV research team deeply analyzes TON's "ambition" in the payment track and explores how it can use its own advantages to overcome challenges and achieve long-term development in the field of crypto asset management and DeFi.

TON's unique advantage: backed by Telegram's large user base

According to Statista data, as of April 2024, Telegram's monthly active users are 900 million, ranking eighth on the global social network list. In comparison, according to token terminal estimates, the public chain with the largest number of monthly active addresses is Solana, with 14 million monthly active addresses, less than 2% of Telegram users.

From the perspective of regional distribution of users, except for Russia and Ukraine, where Telegram software originated, and the United States with a diverse population structure, Telegram users are mainly distributed in developing countries such as Southeast Asia, Africa, and Latin America.

According to user portraits, Telegram has a large number of users, but the per capita income of users is low, which makes Telegram more suitable for carrying traffic-related businesses rather than serving high-net-worth individuals.

Compared with other social network projects, Telegram launched its own encrypted public chain at a very early stage, and the public chain is strongly bound to the social network.

• In 2017, Telegram founders Pavel Durov and Nikolai Durov began developing a blockchain project called Telegram Open Network (TON) and planned to launch its native cryptocurrency Gram.

• In 2018, it raised about $1.7 billion through ICO, but at the same time attracted the attention of the U.S. Securities and Exchange Commission (SEC).

• In 2020, due to regulatory issues, Telegram announced its withdrawal from the TON project, and the development work was returned to the community and taken over by the TON Foundation. The project was renamed "The Open Network", and the token name was changed to Toncoin, and the ICO funds were also refunded.

After several twists and turns, in 2023 Telegram officially announced that it would use the TON blockchain as its first choice for Web3 infrastructure and planned to integrate it into the Telegram App interface. In contrast, the Libra (Diem) cryptocurrency network launched by Facebook announced that it would no longer be launched after two and a half years of setbacks and regulatory pressure.

In addition, Telegram's privacy protection and non-regulatory characteristics make it more friendly to cryptocurrencies. To a certain extent, it also carries gray industries that cannot pass regulatory review. These gray industries are precisely the widespread application scenarios of cryptocurrencies in the early days. Therefore, Telegram carries a large number of encrypted users.

In general, with the help of Telegram, the TON ecosystem has the first-mover advantage in developing cryptocurrencies from the beginning.

How to monetize traffic: Overview of the current status of TON mini-games

Compared with the popular [Halal] full-chain game (Fully Onchain Game) on Ethereum, the recent hot games on TON may be fully off-chain games (Fully Offchain Game), some casual (maybe even slightly younger) mini-games that attract users through economic incentives. Halal full-chain games use the grand narrative of an autonomous world to attract users through potential cultural identity, but they often fail to gain a large number of user adoption. Mini-games on TON are more pure. Turn on your phone, click the screen a few times, and then you can get 1 point, which can be exchanged for tokens with real value in the future.

Recently, the explosion of TON game projects seems to have made us see the unlimited potential of the industry.

• Notcoin is extremely simple to play. You can earn coins by clicking on the mobile phone screen. The coins are finally exchanged for Notcoin tokens. It has attracted more than 35 million game users and was launched on Binance and OKX. After listing, the price of the currency has been rising, and the market value has reached nearly 3B.

• Hamster Kombat also uses the Tap to Earn model. In addition, it also provides ways for players to obtain rewards such as purchasing/synthesizing cards, daily check-ins, social media tasks, and recommendations. It has gained more than 230 million registered users in less than four months.

• Catizen is a casual cat-raising game that directly establishes cash flow through the combination of game monetization and airdrops, and has more than $10 million in revenue, more than 25 million players, and has converted 1.4 million on-chain users.

Notcoin has opened up the imagination of the track, and Hamster Kombat has been far ahead on the road of traffic. Catizen is more refined and more sustainable, and also represents the future development direction: it cannot be just a little bit, but it is necessary to build a cash flywheel from the first day.

On the one hand, the simple game design allows more users to participate in the game, thereby achieving better user data. On the other hand, due to the simplicity of the game design, the cost of brushing is low, and the data may be highly inflated.

In the future, the TON ecosystem's mini-game project parties will inevitably shift from competing in simple user traffic to competing in the conversion rate of user traffic, which requires not only better game design, but also a sophisticated monetization system to obtain continuous cash flow and maintain sustainable development capabilities.

Peeking into the development focus from official channels

According to the TON official website page, Mini Apps, GameFi, and DeFi are the key product types that the official wants to onboard.

The Grants plan of the TON Foundation also clearly mentions the support of these categories, and also gives product examples for each category. The key sentences are extracted below.

• Telegram Mini Apps: Social Web3 Use Cases

• SocialFi: Creator Economy

• E-commerce: Trade Market for Electronic or Physical Goods

• Utility: Daily Tools with Embedded Web3 Elements

• Community & Brand management: Tools for managing Telegram communities

• Onboarding platforms: Bring new users to @wallet or sub-hosted TON wallets with simple scenarios

• DeFi

• Lending protocols

• Derivatives DEXs

• DEXs with weighted pools (like Balancer.fi)

• Yield aggregators

• Liquidity layers

• Restaking

• GameFi

• We are always happy to support web3 games with easy onboarding, viral social mechanics, referral programs, elements of competition (squads, leaderboards, group challenges) and exciting gameplay.

According to the above content, Social supported by TG's built-in Mini App Web3 use cases will be the focus of development; for DeFi, TON ecosystem hopes to enrich the application types of DeFi ecosystem; for GameFi, TON ecosystem can provide assistance to games in social gameplay such as user onboarding, viral social communication, invitation system, and competition system.

Predicting the short-term future, the red and black of TON ecosystem

Why [temporarily] not DeFi

Whether the DeFi track will explode, a key indicator is TVL. Judging from the current public chain data, Ethereum is far ahead, with a DeFi TVL of 60B, which exceeds the sum of DeFi TVL of all other public chains. First, the value of Ethereum's native asset ETH is high, which makes DeFi TVL rise; second, the DeFi ecosystem is complete, and almost all DeFi innovations occur on Ethereum; Ethereum also introduced a large amount of wBTC through Wrapped Token, which also supplemented DeFi's liquidity; finally, the staking & restaking mechanism introduced by Ethereum has led to the issuance of a large number of LST/LRT, creating a large amount of TVL.

For TON, the current largest asset on the chain is Toncoin, with a market value of about 17.5B, and the second largest asset should be USDT authorized by Tether, which exceeded 730M on July 21, ranking fifth among all blockchains. According to DefiLlama data, the current TVL of the TON ecosystem is 757M, showing obvious shortcomings.

In the view of the CGV Research team, the outbreak of DeFi in the TON ecosystem still lacks the following conditions:

• Onboarding of assets such as BTC and ETH: The largest trading assets in CEX are usually large-cap blue-chip assets such as BTC and ETH. Therefore, it is necessary to rely on high-security, low-slippage, and low-cost BTC and ETH asset cross-chain bridges to introduce a large amount of BTC and ETH into the TON ecosystem, and the current cross-chain bridge infrastructure on TON is still under construction.

• More diversified liquidity pledge products: TON is switching from PoW to PoS, and the initial supply is allocated to miners and teams. This means that after switching to PoS, the only option is to increase inflation at a rate of 0.6% per year to reward PoS miners. Compared with other PoS public chains, TON's pledge rate of less than 10% is not high, so it is necessary to launch more liquidity pledge products to improve the pledge level and chain security on the one hand, and to increase TVL on the other hand.

• More secure wallet infrastructure: Telegram's built-in @wallet wallet is a custodial wallet, and coupled with Telegram's unregulated nature, large users often do not trust TON's security. TON needs to launch a more secure wallet infrastructure including the MPC wallet and accept full audits to allow high-net-worth users to trust TON's security.

These conditions are not related to Telegram's biggest advantage - user traffic, which is equivalent to giving up its biggest moat, which may be twice the result with half the effort.

Why Payment

Native USDT is being issued on the TON network at a very high growth rate. As mentioned earlier, as of July 21, 730M USDT has been issued. Currently, the chain with the most USDT issuance is Tron, and TRC20-USDT has issued more than 60B. From Tron's data, we can glimpse the huge potential of the stablecoin payment track.

The TRON network has more than 235 million users, more than 7.8 billion transactions, and an annual fee (network fee) income of US$450 million. On average, 2-3 million user accounts transfer more than US$10 billion every day. Most USDT holders on TRON are "retail investors" or small holders. There are 52.6 million holders with a balance below $1,000, and the number is still growing during the bear market in 2022. In contrast, the $1K-$10K group has 359,000 holders.

From the perspective of on-chain activities, Tron's on-chain transactions are basically USDT transfers, DeFi adoption is low, and NFT is almost non-existent. Other popular public chains such as LST/LRT and Memecoin do not have any, but still support 7.8 billion transactions. It can be said that Tron is a public chain born for stablecoin payments.

The reason why Tron can obtain such a large-scale stable currency payment adoption lies in:

• The transaction fee of Tron network is lower than that of Ethereum, with faster speed and higher TPS

• Early adoption triggers the Matthew effect, a two-way flywheel of users and merchants

• Long-term stable service wins user trust

Compared with Tron, the payment business on TON has the following advantages:

• Higher TPS: After sharding is enabled, it can support up to one million TPS, and the handling fee is cheaper than TON

• Closer to users: The TON wallet is directly built into Telegram, which is more convenient to use and has richer scenarios, which can be compared to WeChat Pay

• More diversified on-chain activities: There are more application scenarios on the TON chain to deposit funds, not just the simple movement of funds.

The TON Foundation is also actively promoting the application of USDT on TON:

• 5 million TONs are used to reward the USDT Farming Pool. Depositing USDT can get the highest APY 50% Toncoin income

• On July 1, Tether cooperated with Web3 shopping and infrastructure company Uquid to allow Philippine citizens to pay social security funds with USDT on TON

• Telegram uses the built-in wallet to transfer USDT without fees and instantly, and can directly transfer USDT to friends without an address. Telegram subscriptions, VPNs, gaming platforms, eSIMs and other products can be paid directly with USDT on TON. At the same time, payment will also serve as a key primitive to empower Telegram Mini App and serve various types of Social Web3 Use Cases. For example, the creator economy (SocialFi) requires payment to complete subscription and reward functions; e-commerce requires payment to complete the purchase of goods. More importantly, Telegram Mini App is expected to become the Web3 version of the AppStore, and the AppStore needs payment functions to complete the management of paid applications. In the future, Telegram may follow Apple's example and charge a commission for the paid services of applications logged in to its AppStore, further diversifying its profit model.

  Currently, TON has connected to multiple third-party payment service platforms, allowing merchants to accept payments in various ways.

  

  Of course, compared with WeChat Pay, TON's payment business still has risks. The most critical is that Telegram's privacy protection and unregulated characteristics may cause a large number of physical businesses to be unable to access TON payments due to compliance factors. However, the TON Foundation is also actively looking for countermeasures. One of the manifestations is that TON's USDT Farming Pool requires KYC before receiving rewards, from which we can guess TON's attitude towards compliance.

  In summary, the CGV Research team believes that TON's rise in the payment track is not accidental, but the result of the combined effect of its strong user base, technical advantages and ecological strategy. Although it still faces many challenges, such as regulatory issues and user trust, TON has shown strong growth potential with its innovative payment solutions and its ecosystem closely integrated with Telegram.

  In the future, with the implementation of more high-quality applications and the conversion of user traffic, TON is expected to occupy a place in the global payment market and become an important force in the field of blockchain payment.