What is Telegram Open Network (TON)? A complete guide to the TON ecosystem

After Telegram officially backed off from its original crypto project, its legacy was picked by two separate startups, each rolling out its blockchain and its native token. Let’s explore both to see how they’re different.

TON project, originally known as Telegram Open Network, was founded by the Durov brothers in 2017. The idea of the project was to develop a blockchain that could host a suite of decentralized applications and onboard 500 million Telegram users to the world of cryptocurrencies. 

The innovative blockchain had all chances to reach mass adoption and succeed in the mass market. Its unique features — such as shardchains, self-recovery mechanism, decentralized data storage, domain name service, TON virtual machine, and built-in privacy tools — bode a promising future for Telegram Open Network. However, the project was meant to be very short-lived.

Telegram Open Network ICO fiasco

To fund the project development, Telegram held a private Initial Coin Offering of Gram, the network’s native token. The token sale, which took place in February-March 2018, was an enormous success — Telegram Open Network ICO raised a mind-blowing $1.7 billion from investors, including such heavyweight players as Silicon Valley-based Sequoia Capital, Google backer Kleiner Perkins, and Uber investor Benchmark.  

Yet, the loud ICO triumph was overshadowed by regulatory pressure. In October 2019, the U.S. Securities and Exchange Commission (SEC) sued Telegram, arguing that the company conducted an illegal securities offering through the sales of GRAM tokens. The agency maintained that the initial purchasers of Gram would be acting as underwriters while distributing unregistered securities. 

“We allege that the defendants have failed to provide investors with information regarding Grams and Telegram’s business operations, financial condition, risk factors, and management that the securities laws require,” SEC claimed.

On 11 June 2020, a six months legal battle ended with a federal court ruling that Telegram must abstain from issuing any tokens. The messenger agreed to pay $18.5 million in penalties and make all investors full within four years. 

“Imagine that several people put their money together to build a gold mine – and to later split the gold that comes out of it. Then a judge comes and says: ‘These people invested in the gold mine because they were looking for profits. And they didn’t want that gold for themselves, they wanted to sell it to other people. Because of this, they are not allowed to get the gold,’” Pavel Durov, the founder and CEO of Telegram, lamented on his channel. 

“If this doesn’t make sense to you, you are not alone – but this is exactly what happened with TON (the mine) and Grams (the gold). A judge used this reasoning to rule that people should not be allowed to buy or sell Grams like they can buy or sell Bitcoins,” he added.

Pavel Durov hands over TON to the community

Following the legal defeat, Telegram announced it will cease work on the TON network. However, before quitting, Telegram made the source code for the project publicly available on GitHub, encouraging the community to take over the failed network.  

"While networks based on the technology we built for TON may appear, we won't have any affiliation with them and are unlikely to ever support them in any way. So be careful, and don't let anyone mislead you," Durov said, distancing himself from TON’s possible successors.

In an update, the team announced it will discontinue its active involvement with the TON project, but mentioned that "some minor bug fixes and GitHub issue answers may occasionally appear if any of the members of the original team have the spare time and inclination to contribute to the community's efforts."

The technology behind Telegram Open Network

Although the initial vision for the TON project never came true, it gave birth to two competing networks. To understand their underlying technology, let’s first explore the original TON whitepaper. 

TON Blockchain 

TON Blockchain was designed as a backbone of The Open Network, being composed of three layers that ensured its mind-blowing transaction throughput — around million TPS, according to the whitepaper — and high scalability. The first layer called masterchain uses the Proof-of-Stake consensus and processes every computation on the network. The masterchain can support up to 2-to-the-power-of-92 accompanying blockchains dubbed workchains, each with its own set of supported cryptocurrencies, consensus mechanism, and virtual machine. Finally, on top of workchains there are shardchains that split and parallelize the workload, boosting the network’s overall scalability. 

TON self-recovery mechanism

Another major innovation of the TON blockchain is the self-recovery mechanism that allows TON to bill itself as the “network without hard forks.” Thanks to it, new blocks can be created over invalid ones to avoid unwanted network splits. This mechanism allows for saving on computational resources and reduces the overall risk of errors.

TON DNS

Similar to Ethereum Name Service, TON DNS assigns human-readable names to accounts, smart contracts services, and network nodes, in a bid to make blockchain infrastructure more approachable to crypto newcomers. With TON DNS, browsing decentralized services on a blockchain can be like “viewing a website on the World Wide Web.”

TON Proxy

Designed to protect online privacy, TON Proxy is an anonymity layer for TON nodes that allows to build decentralized VPN services and blockchain-based alternatives to Tor Project. Similar to the I2P (Invisible Internet Project), TON Proxy can be used to hide the identity and IP addresses of the network nodes. This privacy feature can come in handy for high-stake validator nodes willing to keep their exact IP address and geographical location undisclosed, or for nodes moving large amounts of funds. 

“Combined with the TON P2P network and TON DNS, TON Proxy gives decentralized apps immunity to censorship,” developers stated.  

TON Payments

TON Payments is a built-in payments processing network that can be used for instant off-chain money transfers between TON users, bots, and other services. According to the project’s website, “Safeguards built into the system ensure that these transfers are as secure as on-chain transactions.” 

TON Storage

TON Storage is a distributed data storage network that strives to be a “better version of Dropbox,” boasting simplicity and reliability. The idea behind TON Storage is that each node of the network should be able to set up its own hard drive, where archive blocks and network snapshots can be stored, as well as any arbitrary files for users or TON DApps. Similar to Sia, IPFS, and Filecoin, TON Storage relies on TON smart contracts and torrent-like technology for exchanging large amounts of data.  

TON Services 

TON Services is a universal platform for third-party apps built on top of the TON blockchain that offers a browser-like experience for users exploring the TON ecosystem. Its friendly UI for DApps and smart contracts make TON services accessible to ordinary users rather than just to a handful of early cryptocurrency adopters.

The fight for TON legacy

Since Telegram announced it would be no longer involved with the project, two rival groups of developers and community members, Newton and Free TON, decided to keep running their own version of TON. As both claimed to be the only legitimate successor of the original Telegram Open Network, the conflict of interest was inevitable.

In June 2021, Newton, now rebranded to The Open Network, wrote an open request to Pavel Durov and Telegram team to hand over the original GitHub repository and ton.org domain. 

“We would like to highlight that our community is working on the original TON tech and the network that we are building is based on the testnet2 launched by Telegram in 2019. We updated it and turned it into the mainnet while preserving the original core technology and complying with all the principles laid out in the original documentation,” Newton’s leading developer, Anatoly Makosov, wrote in the appeal. 

Meanwhile, Free TON registered the right to the TON trademark with the European Commission and filed a complaint about the usage of the TON name in a wallet developed by the Newton team. Since rights to the trademark weren’t transferred yet and still belonged to Telegram, Durov threatened Free TON with legal action. Eventually, Free TON backed off the complaint and severed all ties with the original project, rebranding to Everscale in November 2021. 

“There are a lot of different "TON" projects around (and some of them are less than trustworthy). The community has deemed it necessary to both acknowledge that our project is something greater than what it started out as, and to distinguish ourselves from the plethora of projects looking to ride the coattails of the original TON technology,” Everscale wrote on Twitter, announcing its decision to move from TON legacy C++ code to Rust implementation. 

The Open Network wins the title of TON successor

Shortly after Free TON announced it is cutting all ties with Telegram, Durov officially endorsed Toncoin, The Open Network’s native token, in his Telegram channel. 

“When Telegram said goodbye to TON last year, I expressed the hope that future generations of developers would one day carry on with our vision of a mass-market blockchain platform,” Durov wrote. “So I was inspired to see the champions of Telegram’s coding contests continue developing the open TON project, which they rebranded to Toncoin.” 

“I'm proud that the technology we created is alive and evolving. When it comes to scalability and speed, TON is still years ahead of everything else in the blockchain realm. It would have been a shame to see this project not benefitting humanity,” he added.

Two blockchains, two tokens

Both projects, Everscale and The Open Network, have their respective tokens, EVER and TON. Curiously, for a certain period of time, the latter was mined through a Proof-of-Work algorithm, despite the entire network running on Proof-of-Stake. How did it happen?

In July 2020, when Telegram abandoned the TON project after hitting a regulatory brick wall, pre-mined Gram tokens were transferred to “testgiver” smart contracts that allowed anyone to set up a node and participate in mining. This approach dubbed initial proof-of-work (IPoW) provided immediate advantages to the project — attracted the organic user base to the blockchain and secured the network. 

According to The Open Network, users mined around 200,000 TON daily until June 28, 2022, when the last Toncoin was mined, marking the successful end to TON's initial distribution. TON is listed on a number of crypto exchanges, including Huobi, Kucoin, OKX, FTX, and Gate.io. Additionally, TON can be bought right in a messenger through Telegram bots or on decentralized exchanges. 

At the time of writing, TON is trading for $1.52, up 11% over the past 24 hours. 

TON/USDT Tradingview
Image: Tradingview

Everscale’s EVER token, initially called TON Crystal, is used to pay fees to validators, reward stakeholders and participants in contests run by the DAO management team, and performs a number of other important functions within the network. It is listed on Huobi, Gate.io, Kuna, and Kucoin. 

At the time of writing, EVER is trading for $0.045, down 0.11% over the past 24 hours. 

Everstake/Tether trading pair, candle chart from Tradingview
Image: Tradingview

The future of Everscale and The Open Network

Although Durov’s endorsement put the end to the informal rivalry between Everscale and The Open Network, it surely doesn’t mean that there can be only one winner. As Everscale departed from the initial TON vision, it now has to earn its name in the crypto market without relying on someone’s else legacy. Obviously, it can be challenging but also gives more space for creativity as there are no constraints or binding commitments. 

On the other hand, The Open Network may shoot itself in the foot with its close ties to Telegram. Although Pavel Durov emphasized that there’s no link between The Open Network and his messenger, regulators may question whether the TON team is truly independent in their actions. 

“The key question here is, whether the U.S. justice system would be willing to dig into the connection [between Telegram and Toncoin] and whether Durov would have enough time and money for a new round of fighting,” said Fedor Skuratov, a former community manager at TON Labs (aka Free TON), in an interview with CoinDesk