Leveraging Telegram, Can TON Chain Stand Out in 2023?

Telegram and TON Chain - the Past and the Present

TON chain was originally named Telegram Open network and was developed by the Telegram team. It is a Layer 1 blockchain, the native token was originally named $GRAM. Telegram raised $1.7 billion through token sales in 2018, however, the ICO was later stopped by SEC and was deemed as an illegal securities offering.

By the SEC ruling, Telegram returned all raised funds to investors and dropped the project in May 2020. The blockchain was then handed over to the community developers and rebranded as The Open Network, the native token was renamed as $TON.

The Fastest Chain on the Market?

TON chain touted a transaction per second of over 1 million, making it probably the fastest chain in the market, even much faster than emergent new blockchains, such as Aptos and Sui, which both boast a TPS of less than 200,000.

The crazy 1 million TPS is made possible due to TON’s unique architecture. TON chain is made up of a masterchain with potentially up to 232 workchains. Each workchain can be further subdivided into up to 260 shards (Sharding refers to the splitting of a database horizontally. In the case of blockchain, it helps reduce network load). Masterchain is responsible for being a repository of the chain’s general information about validators, workchains, and their shards, while workchains contain information on events like smart contract transactions and value-transfer.

To make an analogy, though it may not be directly comparable, TON is like Ethereum with 232 Layer 2s, with each layer 2 having 260 shards. And this is what the 1 million TPS came up with.

However, blockchain always needs to consider the tradeoff between performance and decentralization. High performance is always at the cost of centralization. TON chain’s high speed means it needs to sacrifice decentralization. Being a validator for the TON chain requires a significant staking amount of money and higher hardware requirements.

To run a validator node, the minimum amount of TON needed to be staked is 350,000 unit, which equals to more than $700,000 at the current price. Hardware requirements are the highest among the five chains listed in the above table, 8 core CPU, 64GB memory, 1TB storage, and 1GB/s bandwidth. This requirement is significantly higher than those needed for running an Ethereum node (4-core CPU, 16GB memory, 1TB storage, and 25MB/s bandwidth). It is also higher than the emerging public chains such as Aptos and Sui. (Related Reading: Beyond Aptos, Sui & Canto | An in-Depth Guide to the Emerging Alt-L1s)

Higher requirements in value staked and hardware leads to higher performance of the chain, but fewer people can afford to become a validator, meaning higher centralization of validating power.

Utility of $TON token

Like all Layer 1 blockchains, the native token $TON is used as transaction fees and in staking and validating transactions, and new $TON tokens will be minted to reward validators.

$TON has an initial supply of 5 billion, the token is inflationary with no maximum cap, the inflation rate is set at 0.6% per year, and the current total supply is around 5.05 billion. If a validator is caught misbehaving when validating blocks, a part or all of its stake will be taken away as a punishment, and a large portion of it will be burned, thus reducing the total supply of $TON tokens.

Use Cases of $TON in Telegram Ecosystem

While the TON chain is now an independent blockchain, Telegram has shown its support for the chain and launched a number of interesting features on it.

@Wallet in Telegram

Telegram has a crypto wallet bot that enables users to transfer and buy/sell $TON inside the Telegram App. There is no transaction fee and no need to use the long public key as a wallet address. Instead, people can use the username in Telegram.

Mobile Number & Username Auction on TON Chain

To use Telegram messenger, you need to sign up and create a new account using your phone number. In many parts of the world, registering a phone number requires verification of real identity. This brings account safety and privacy concerns.

Telegram recently put virtual phone numbers up for bidding on the TON chain, through a marketplace built on top of it. Users can sign up for Telegram using these virtual numbers without needing a SIM card.

Telegram also put up some reserved usernames on the auction. These usernames and virtual numbers are digital collectibles recorded on the TON blockchain.

Both auctions require bidding in the $TON, creating demand and use cases of the token in the Telegram ecosystem.

Ecosystem

When the handing over to the community in 2020, TON chain doesn’t have many use cases. It is just another Layer 1 blockchain, and there are literally hundreds of Layer 1 chains on the market. A highly competitive sector. The potential of TON chains depends on 1) how to leverage Telegram's 700M monthly active users, and 2) how to bootstrap an ecosystem.

The current ecosystem is fairly new and being built as we speak. There are two bridges available to bridge liquidity from Ethereum and BNB chain, and you can find the list of dApps on the TON chain here. It is acknowledged that all of the dApps on the TON chain attract little traction.

Fortunately, TON is not short of funding to bootstrap its ecosystem. Throughout 2022, TON has announced several large-scale ecosystem funds to invest in and incubate projects within the TON ecosystem, including:

• $250M Ton Fund announced in April;
• $1 billion donation from TON holders in April;
• $90M Ton Alphanonce Vista Labs fund was announced in July.

This is enormous funding in a bear market, and they have not yet made any substantial investments. At the current stage of the bear market, they could invest in the best projects with the cheapest valuation.

Final Thoughts

The ultra-high speed of the TON chain looks impressive, but considering that the Visa network only processes 24,000 transactions per second and Ethereum developers are still debating whether more than 100,000 TPS is necessary, this performance advantage does not provide TON with a meaningful competitive advantage.

MetaMask celebrated 30 million monthly active users in September this year, and Binance's customer base is estimated to be around 30 million. These are admirable numbers, but nothing like the web 2 apps. Telegram has 700 million monthly active users this year, a 40% jump from 2021. If TON can leverage Telegram's user base and build an attractive ecosystem for them to use, there is huge potential.