Have you come across names like BananaGun, Unibot, BONKbot, and more during the memecoin frenzy? Or perhaps have been tapping away on your phone to mint more Notcoin? The common denominator is that you interact with all these applications through Telegram itself.

If so, you might have heard of the TON blockchain or come across $TON (difficult to ignore with the price having risen 3x since the start of this year). TON, also known as The Open Network, is a blockchain that was designed by the founders of the messaging app, Telegram.

Ever since the formal endorsement by Telegram, TON has been rapidly developing its ecosystem through incentive programs, hackathons, and reward programs. Web3 applications in the realm of DeFi, NFTs, and GameFi have been delivered into the hands of users through the seamless integration with Telegram, allowing users to transact with cryptocurrencies without having to go through tedious onramping. In certain Telegram mini-apps, the experience is so abstracted that users might not even know that the application lives on a blockchain.

This report serves to help you understand everything there is to know about TON, its growth, architecture, ecosystem, and most importantly, how you can start getting exposure to this booming blockchain.

Exploring TON’s explosive growth in activity

TVL

TON has been experiencing explosive growth in the first half of 2024, with its total value locked (TVL) having ripping up by 14.5x from $13.51 million on 1st January 2024, to $208.94 million on 6th May 2024.

Monthly Active Wallets (MAUs)

The above-shown TVL growth is likely attributed to an increasing number of users being onboarded onto TON, apparent from the spike in MAUs shown below.

Note: Wallets are considered active if they have sent 1 transaction within a 30-day window

With this impressive growth, there’s got to be something attracting both users, as well as developers to build on TON, right? The next sections aim to answer this question by dissecting TON’s architecture, competitive edge against other blockchains, and a deep dive into its robust ecosystem.

Understanding TON’s unique architecture & tokenomics

Infinite Sharding Paradigm (ISP) - Blockchain of blockchains

TON achieves high scalability and performance capabilities through sharding. Let’s break down the architecture to understand how it is achieved.

Sharding refers to blockchain data being broken down into smaller portions, known as shards. In traditional blockchains like Bitcoin, each transaction that takes place on the blockchain is processed and validated by every single node within the blockchain. This limits the blockchain scalability as the time taken for transaction validation increases linearly as the transaction count increases. This is an existing problem faced by Ethereum, and to tackle this, Ethereum has included sharding as one of the future upgrades.

We can think of sharding as jobs that are being allocated in a restaurant. There are specific roles like the cashier, chef, waiter, and dishwasher. Each employee works on the task they are assigned and thus can focus and complete that task efficiently.

TON’s sharding architecture brings about a ‘blockchain of blockchains’ concept, with these three key elements:

1. Masterchain: Stores overall state of TON Network

Quantity: 1 Masterchain

There is one single Masterchain that is responsible for enforcing consensus across the TON blockchain. A new Masterchain block is created when it receives the hashes of completed transactions from the Shardchains, allowing it to constantly update the network status.

2. Workchain: Carry out transaction execution

Quantity: Up to 2^32 Workchains

The TON Network can have up to 2^32 Workchains, each of which can be use-case specific. Does this sound familiar to you? Yes, it’s similar to the app-chain narrative that has gained popularity in the earlier part of 2024. In addition, Workchains are customizable, with these parameters being configurable - account format, virtual machine, consensus mechanism, and others. This concept has also been seen in existing solutions the likes of EigenLayer (e.g. use a different consensus mechanism while building on Ethereum).

Each Workchain can be further split into 2^60 Shardchains, with each Shardchain containing a portion of the Workchain state.

3. Shardchain: Dynamic number of Shardchains based on Workchain’s transaction volume

Quantity: Up to 2^60

When a Workchain experiences increased transaction volume, more Shardchains are spun up to distribute the transactions. Since each Shardchain has their own set of transactions, they can carry out executions in parallel, contributing to higher network capacity. Upon execution completion, the outcome is communicated back to the Masterchain.

If certain nodes go offline, the transactions are re-allocated to other newly spun up Sharchains. This allows the network to continue functioning and improves the network resilience.

Consensus mechanism

TON uses a Byzantine Fault Tolerant (BFT) consensus mechanism known as Block-Proof-of-Stake (BPoS). This is considered more secure than the PoS consensus used by other Layer 1s (L1s), the network is still able to achieve the correct consensus even if there are faulty nodes. This is true as long as a supermajority (more than two-thirds) of the network is honest.

Nodes can stake $TON on the network to participate in block creation and validation, and are rewarded with $TON for the propagation of the network. Should there be malicious nodes, their staked $TON will be lost.

Each Shardchain is allocated a validator set. These validator sets are rotated periodically to ensure fairness and prevent collusion within the set.

To further enhance the integrity of the network, TON’s consensus mechanism introduces the ‘Fishermen’ role.

These are nodes in charge of monitoring the TON network for invalid blocks or malicious actors. Upon identifying such incidents, Fishermen nodes can submit fraud proofs to the network and will be rewarded with $TON upon verification. These nodes differ in the sense that they do not have to put up a stake (in $TON) to monitor the network.

This is similar to the optimistic rollups which have a 7-day challenge period. During this window, anybody can re-execute the transactions, and should they discover that the transactions were executed incorrectly, they can submit a fault-proof to dispute.

TON architecture components

More details on TON Proxy can be found here.

Tokenomics

Supply and distribution

Total $TON Supply: 5 billion

Annual Inflation Rate: 0.6%

Utility

$TON is used in a multitude of use cases

1. Participation in consensus via staking

Validators have to stake $TON to participate in the network’s consensus and will be rewarded with newly minted $TON and transaction fees paid to the network.

The current staking yield provided by the biggest liquid staking platform, Tonstakers, is 3.26% APY (annual percentage yield)  as of writing.

2. Transaction fees

Users are required to pay transaction fees in the form of $TON when they interact with TON-based apps.

3. Ton-based applications and infrastructure

$TON can be used to pay for TON’s architecture components. Examples include buying a domain name, paying for decentralized file storage and retrieval etc.

Telegram recently officially announced the use of $TON for ad payments. Advertisers who are looking to advertise on Telegram will pay for the campaigns with $TON. Payments received are then split between channel owners who help to market and Telegram themselves, in a 50-50 split.

This opens up the possibility for advertisers to market globally with a global, decentralized currency and can potentially achieve a flywheel effect of bringing on more advertisers.

Benchmarking TON’s performance capabilities

An analysis of TON vs competitors

Discover the TON ecosystem

Decentralized Finance (DeFi)

With native Tether integration, DeFi applications on TON have been gaining an increased amount of attention and usage.

This section highlights the key protocols within each DeFi vertical:

DEXs

Liquid staking

Lending & borrowing market

GameFi

TON-Telegram games are integrated into the telegram chat itself which allows users to access it easily. Most games also come with a leaderboard system, giving users the opportunity to compete with their friends.

Notcoin:

A TON-based memecoin that is built as a tap-2-earn Telegram mini-game, allowing users to mint Notcoin by simply tapping on the phone.

The game reached 4.1 million players within a week, a growth rate more rapid compared to StepN or Axie Infinity. This could have been attributed to the seamless onboarding through Telegram and strong support from noticeable firms like DWF Labs.

Notcoin also had a squad system integrated, alongside a referral program that further contributed to its virality. This is a more efficient way of mining as compared to mining individually - I can’t count the number of times I’ve been informed that my Notcoin has been burnt due to inactivity.

To learn more about the gameplay, refer to this blog article.

YesCoin:

A similar game to Notcoin, but the gameplay revolves around swiping coins instead of tapping. Similarly, the game experienced exponential growth, reaching over 2.5 million users within a month.

MomoAI:

Starting off as a web3 game publishing platform, MomoAI has established a strategic partnership with TON to build a web3 gaming growth platform which would utilize a proprietary AI-agent system to empower the TON gaming ecosystem.

They have achieved impressive growth since their launch in March 2024, with over 700,000 monthly active users.

Catizen:

A coin mining game where users generate cats that will distribute coins. Two equal level cats can be merged into a higher level cat, which will distribute a larger amount of coins.

There are pay-to-win elements in the game, where users can purchase higher level cats with $TON instead of spending time and effort to generate the cats. The process of cat merging can also be automated when users pay with $TON.

Phase 2 of Catizen sees the launch of their mining pool, where users can stake their in-game cats to mine $wCATI points. The team has hinted that the Catizen governance token will have an airdrop in the future, and a portion of that will be allocated to $wCATI holders.

The Pixels:

A social multiplayer game which requires users to gain territory by coloring a pixel on a canvas every 7 seconds. Based on the territory gained, users will be rewarded with $PXL tokens, which can be used to purchase boosts to allow multiple pixels to be coloured at once (accelerating the pace of territory gain).

The game has over 2.3 million players and sees 37,000 daily active users.

Community Apps:

Telegram allows channel admins to create an in-Telegram quest platform for channel subscribers to complete tasks and earn rewards straight into their wallet.

NFTs

Telegram sticker NFTs:

Telegram has previously experimented and achieved success with tokenization of the Telegram user namespace, generating $350 million in sales.

The next step on their roadmap is to create Telegram sticker NFTs, as indicated here. This will allow sticker creators to monetize their creations, and receive payment directly into their TON wallet. With  over 730 billion stickers being used, the familiarity conveyed by stickers has the potential to onboard an exponential number of users who might not be familiar with web3 native NFT marketplaces.

GetGEMS:

This is the largest NFT marketplace on TON, featuring over 4,000 NFT collections. Users are able to launch their own NFT projects with less than 10 cents worth of gas.

Currently, more than 80% of NFTs launched on TON are trading on GetGEMS. The platform is generating over $200,000 in monthly NFT trading volume.

TON Diamonds:

A highly curated marketplace for world-renowned digital artists to launch their NFT collections. It is also the first auction house that is selling one-of-one unique NFT art pieces.

As the NFTs are denominated in $TON, TON Diamonds has integrated a DEX aggregator to help users get easy access to $TON for payment.

Fragment marketplace:

A marketplace for users to trade virtual phone numbers and custom Telegram usernames and has already facilitated over $350 million in sales.

Proxying virtual phone numbers to the business phone number market, Fragment is en route to achieve greater access with the business phone market projected to reach a market size of $6.4 billion by 2028.

Infrastructure

Wallet:

The default self-custodial wallet for TON (native to Telegram) which removes the need for users to memorize seed phrases and also supports social recovery via email and Telegram accounts. Users can purchase cryptocurrencies (TON, USDT, BTC) directly with a credit card, which is deposited straight into the TON wallet, abstracting away the complexities of wallet interactions.

Ton wallet also serves as an encrypted text messenger. Users can include end-to-end encrypted messages with their transactions, these messages can only be read by the transaction sender and recipient.

NOWPayments:

Beyond just peer-to-peer transfers made in the Wallet mentioned above, NOWPayments make it possible for businesses to receive payments in cryptocurrencies, and allows users to pay from Telegram with low fees.

This is beneficial in onboarding more businesses and users into TON as well as increasing the wide-scale usage of the network.

TON Space:

Self-custodial wallet that allows users to interact with DeFi applications.

HumanCode:

An AI company that seeks to enhance digital identity verification within the TON ecosystem. This is achieved by scanning the user's palm as proof-of-humanity. With the launch of a $5 million incentive program in collaboration with TON Society, HumanCode is looking to empower Telegram users with secure digital identities, serving as a standard in the future.

Tonviewer:

This is the primary block explorer used in the TON ecosystem. It provides users with dashboards and APIs for data querying.

Tonstarter:

The first launchpad on TON, aimed at helping TON-native applications raise funds.

In order to incentivise users to participate in the launchpad, Tonstarter is running a Community Incentives Program to reward users with points.

Tokenova:

A self-launch platform that allows users to launch tokens on TON without having to write code.

This is similar to pump.fun, a memecoin launchpad that has recently gained significant traction, showcasing the product market fit (PMF) within this vertical.

Check out more than 700 apps within the TON ecosystem here!

A guide to embark on your TON journey

Getting started

Setting up a wallet

The first step in starting your TON journey is to set up a TON wallet. The native TON wallet on Telegram works great, you can search for it in Telegram by typing in ‘wallet’.

In addition to the default wallet, you can also create a TON Space wallet which is needed to access DeFi applications. Follow these steps to set up a TON Space wallet

1. Go to app.ston.fi and click on ‘Connect wallet’ on the top right corner
2. Select ‘Wallet on Telegram’
3. Click on ‘Start exploring TON’

Once the native TON wallet has been connected, you now have access to a TON Space wallet.

You can find a detailed onboarding guide here.

Purchase $TON

The $TON token can be purchased directly with a bank card in the native TON Wallet on Telegram. The TON Wallet also features a P2P Market which allows you to trade various fiat currencies for TON with other Telegram users at a rate that may be more favorable than with your bank card. However, you should check the seller’s history before performing any transactions.

If you already have funds on centralized exchanges, TON can be purchased on multiple popular exchanges, such as OKX, Kucoin, MEXC, Bybit, and others.

For crypto native users, TON can also be bought on Ethereum on DEXs like Uniswap and Pancake swap, before being bridged over to the TON network. You can also transfer some supported assets from Ethereum into your TON Space wallet.

Bridging into TON

The bridge fee is fixed at 1 $TON and a certain amount of Ethereum gas fee depending on Ethereum’s network congestion during transfer.

Note: A user will have to hold onto $TON in their TON Space wallet before being able to use the bridge function.

For more details, you can refer to this bridging guide.

Exploring the TON ecosystem

Not sure what application you want to use yet? Check out more than 700 applications at TON App, with various categories including DeFi, NFT, games and social apps.

In particular, if you would like to start with mini-games that are readily available on Telegram itself, check out the Telegram Apps Centre.

The Open League - Increasing DeFi adoption on TON

The Open League is an incentive program that aims to increase the number of traders on TON. Each season features a different theme and prize quantum, distributing $TON to participants. This current season is distributing a total of 30,000,000 $TON to users who participate in liquidity provisioning on DeFi apps built on TON. Do check it out here to learn how to qualify!

Participating in community programs

In addition to The Open League, the TON Foundation is also very active in expanding TON’s user base through active community engagement. These engagement efforts typically come in the form of incentive programs, with $TON or application tokens being distributed to participants. You can keep a lookout for these rewards either through their Twitter or blog!

Navigating the bull and bear cases for investing into TON

Having explored the TON ecosystem, and understanding the key differentiators of its architecture, here are some thoughts on whether $TON might be worth the investment here forth.

Bull thesis

1. The rise of a blockchain superapp

It seems that TON Network is well-positioned to become a SuperApp, with its unique ability to cater to diverse use cases. On top of web3 native applications within the DeFi and NFT verticals, users also get access to seamless payments infrastructure, e-commerce, and potentially even social events. Just imagine, being able to buy your memecoins, beautiful (highly subjective) NFTs, pay for monthly Spotify subscriptions, and buy synthetic grass (taking touch grass to the next level) straight from e-commerce sites. This is the future that TON could potentially deliver.

This is highly achievable, attributed to TON Network’s architecture, which offers high scalability and has built infrastructure the likes of TON Payment. With the recent announcements of Telegram sharing 50% of ad revenue (settled on TON Network) to Telegram channel owners, there is the possibility that TON Network usage will increase organically.

2. Tapping into a vast and growing global market

Applications built on TON Network have greater access to Telegram’s huge user base, which currently stands at 900 million users (2024). With only 1% of Telegram users playing games on the app, which is far lower as compared to other messaging platforms like WeChat and Facebook, the sheer number of users that can be attracted is huge and will be a contributor to user activity on the TON Network.

3. Seamless onboarding to empower developers and attract users

The barrier to entry for developers to build on the TON Network is significantly lowered with TVM, which allows developers to code in commonly used languages, making it possible for quick and efficient application deployment. The TON Foundation has also been advocating for developers to join the ecosystem by frequently organizing hackathons and launching incentive programs.

Traditionally, users are required to download an application before they are able to use it, with some even requiring users to sign up for an account. All of these serve as friction points that result in users dropping off. TON-based games are readily available as Telegram mini apps, which can be accessed with just one single button in Telegram, and rewards can be deposited into the user’s Telegram wallet with no fuss. It’s like finding money in your own pockets, it sparks joy.

4. Unlocking new horizons with Tether USDT integration

Native Tether integration is particularly important for DeFi protocols, as it is used as a medium of exchange. Users tend to hold onto USDT as well due to the stability (typically no volatility associated with stablecoins).

Tether is also one of the most liquid stablecoins in the market, giving TON applications the benefit of deep liquidity. In addition, the integration of a widely used stablecoin reduces the barrier for web3 users to onboard onto a new ecosystem.

With greater quality projects being built with foundation support and infrastructure integrations, coupled with the ease of onboarding available for a growing pool of users, a flywheel effect for TON usage seems imminent.

Bear thesis

Despite the rosy picture painted above, there are certain aspects that could cause the TON Network to be unsuccessful in gaining traction:

1. Regulatory uncertainties

There are two main areas that could potentially pose a problem.

The first is the U.S. Securities and Exchange Commission (SEC), which has previously sued Telegram over $TON and has been chasing the tails of multiple crypto protocols.

The second is the Apple App Store regulations, and in particular, the potential delisting of TON-based projects in the future.

The future landscape for these two aspects are uncertain and are subjected to change.

2. Highly competitive landscape

The TON Network faces a very high level of competition from other high-performance chains, especially those that have already established their ecosystem and garnered a loyal community. Examples include Arbitrum, Base, and many others. In addition, this current cycle has seen the rise of extremely strong ecosystems like Blast and Berachain.

TON will have to seek ways to differentiate itself sufficiently to attract both users and developers to build on them.

3. Adoption and user acquisition challenge

There might still be difficulties in onboarding non-web3 natives onto the TON Network. Some users might possibly be reluctant to hold cryptocurrencies or find it too troublesome to maintain the wallet.

It is thus extremely important to abstract as much of these friction points away, and also build use cases that will be able to attract users organically.

As of this current point, many users have surfaced that the TON user interface leaves more to be desired, with the main problem being the many touchpoints users have to go through before being able to interact with DeFi applications.

Are you ready for the TON era?

TON’s scalable architecture has been a crucial piece in attracting more developers onto the network, manifesting in the form of a growing DeFi and NFT landscape. The constant growth efforts from the TON Foundation through incentive programs and hackathons, as well as strong support from Telegram itself, have brought about use cases like paying for advertisements with $TON. With a strengthening adoption of $TON, and a rapidly growing Telegram user base, it is exciting to keep a lookout for what more TON has to offer.

In the meantime, get started by trying out applications within the TON ecosystem, and who knows, there might be future airdrops waiting! If you are looking for one particular app to try out, check out Catizen here, compared to just simply tapping or swiping, Catizen provides a less repetitive gameplay and uses levels to keep users engaged.