TON – the next $100 billion blockchain?

PLUS: Will $TON outperform $ETH and $SOL this cycle?

June 29, 2024

GM! Welcome to Milk Road PRO – your weekly crypto boost that's as refreshing as a splash of cold milk on a hot day. 🥵

Speaking of heat, today we’re diving into perhaps the hottest ecosystem in crypto right now. 

TON – the blockchain powering Telegram, the world's 4th largest messenger app, with over 900 million users. 🚀

Its recent surge has caught everyone's attention. And we are no exception. 

TON's growth is evident across all onchain metrics like $TON holders, active addresses, price or TVL all reaching all-time highs.🚀

The hype is real, and a TON of people are buying this coin… But should you? 

[

Source: CryptoQuant

Today, there are over 32 million holders of the underlying blockchain token $TON, and the number keeps climbing. 📈

The recent explosion in TON holders suggests something big is brewing. We're here today to dive into this new phenomenon and uncover some key insights. 

What's driving this surge? Has something significant happened recently? Is it worth our investment? 

Let's find out. Here’s the outline for today's report. 

1. What is the TON blockchain and what makes it unique?

2. What is driving this crazy growth? And is it sustainable?

3. Should we invest in $TON?

4. 2 ways to capitalize on this opportunity

Ok, let’s start with a quick introduction into this new blockchain. 

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Okay, back to TON. ⤵️ 

WHAT THE HELL IS TON? ⛓️

Let’s start with the history of TON. 📖

Telegram Open Network (TON) was originally developed by Telegram, the popular messenger app. 

However, due to legal issues with the SEC in 2020, Telegram had to step away from the project. 

Fortunately, the open-source community picked up right where Telegram left off, continuing development under the name The Open Network (TON). 

This new iteration has retained the original vision and technology but now operates independently of Telegram.👏

Telegram endorsed TON in September 2023, saying the blockchain and associated token would be its "official web3 infrastructure". 

In other words, TON received direct & exclusive access to Telegram’s 900 million users.

TON is built on core principles like high-speed, scalable transactions, smart contracts, and a user-friendly interface, all powered by a Proof of Stake consensus. 

Now, let’s take a high-level look at how TON stacks up against other leading blockchains such as Ethereum and Solana. 

Let's walk you through this table and provide comments for TON:

• Minimum Stake: Validators need to stake 300,000 $TON tokens (equivalent to $2.5 million at current prices) to validate blocks. This substantial barrier limits the entry of new validators into the network.

• HW requirements: Validators can validate the blockchain with a regular computer.

• Validators: There are about 350 validators across 30 countries.

• Block Time: Transactions take up to 5 seconds to be confirmed.

• TPS: The TON blockchain can process 160 transactions per second.

Currently, TON doesn't excel in any of these metrics, but we believe it doesn't need to; it just needs to provide a good enough blockchain that can eventually scale to the masses. 

Let's elaborate on this further. ⤵️

Decentralization: With 350 validators across 30 countries, TON might already have enough decentralization. Or what is the threshold here? 🤔

High Entry Barriers: The high barriers to becoming a validator on TON might not be a real issue because we don't foresee a future where everyone runs their own validator at home anyway. So as long as there are economic incentives ($TON emissions), there will always be some people or companies with enough capital willing to run these validators.

Consumer-Facing Stats: Block time and TPS are crucial. People expect things to happen instantly, and a 5-second block time is on the edge of providing a great user experience.

While we would prefer something below 2 seconds, TON likely has good reasons for setting the block time at 5 seconds.

TPS (Transactions Per Second): TON currently handles around 60 TPS, which is much lower compared to blockchains like Solana with 1200 TPS.

However, the TON Foundation has run tests and claims to have achieved 104K TPS. This impressive number was tested and verified by the auditing crypto firm, Certik.

Scaling: The TON blockchain plans to scale through sharding, a solution also on Ethereum's roadmap. However, we have yet to see any blockchain successfully take off using this scaling method.

That being said, we think TON is not aiming to be the best in these blockchain metrics above but is instead focused on leveraging its unparalleled competitive advantage: access to 900 million users.

To capitalize on this opportunity, TON only needs to optimize for scaling the blockchain to hundreds of millions of users. 

While they are not there yet, we believe they will be able to deliver such a scalable blockchain.

This is a great segue to discussing TON's mission.

WHAT IS THE GOAL OF TON? 📌

Simply put, to scale the TON blockchain to the masses. 

[

Source: TON

Their goal is to have 500M monthly active users by the end of 2028 – today they have 3.5M (MAUs). 

Is this actually possible, or just clever marketing?

That's exactly what we're diving into.

WHAT MAKES TON SO ATTRACTIVE? 🌐

Before we dive in, let's explain what gives any blockchain its value.

For a blockchain to thrive, it needs:

1/ Developers: They build applications and use cases, forming the supply side of the blockchain. 

2/ Users: They access these applications, creating the demand.

People use Ethereum or Solana because they can make swaps, lend stablecoins, borrow assets, mint NFTs, and more. 

Without these applications, these blockchains wouldn’t have any users.

So, it all starts with the supply side. 

Blockchains need to attract developers to create useful applications. But developers always face a huge gamble: will users actually show up on that particular blockchain? 

With TON, this existential risk is a thing of the past.

Telegram already has access to over 900 million users. It is about 14% of the world’s population. 

Building on TON allows developers to tap into this vast market, providing a strong incentive to choose TON over other blockchains.

So let's see how many apps have been built on The Open Network. 👀

[

Source: Alexey Toropov

The TON ecosystem already has hundreds of apps. We can see a diverse distribution across different sectors such as Wallets, DEXs, Staking, Bridges, Games, Lending and more. 

We are going to introduce some of them at the end so stay tuned. ⏬

But TON offers more than just users—it delivers a seamless experience. 

No need for extra apps; everything is accessible right from the familiar Telegram interface using mini-apps. 

Let us show you just how easy it is to swap 2 tokens using the Ston.fi mini-app. 

1/ Select the App: Go to the "Telegram Apps Center," similar to the App Store or Google Play Store.

2/ Click "Launch App": Choose the app you want to use and click "Launch App."

3/ Connect Your Wallet: Make sure your wallet is connected to the app.

4/ Enter Tokens: Input the tokens you want to swap.

5/ Click "Swap": Finally, click the "Swap" button.

6/ Done!: Voila! It’s that easy. ✅

And there's more. It's not just about the users and the great experience – TON launched a new incentive program called The Open League.

MEET THE OPEN LEAGUE 🎮

The Open League (TOL) is a dynamic competition within the TON ecosystem, designed to motivate two key groups:

✅ Projects: Incentivized to develop more attractive and functional products, tapping into TON's massive audience.

✅ Users: Incentivized for actively engaging with TON projects.

It creates healthy competition among all participants, driving innovation and maximizing rewards.

“The hypothesis is simple – once the world sees how every project in The Open League can make millions of Telegram users go onchain; TON becomes the obvious choice for every mass audience consumer product on the planet.” TON Foundation

We support this approach and believe it has the potential to succeed.

TON uses simple yet highly effective incentives through the TOL program to bootstrap projects and users.

And since anyone can participate, the rules are straightforward and the user experience is great, it's working exceptionally well.

Here are the results of Season 3: 

• Daily active wallets (DAW): 568,000 (+1,403%)

• Weekly Active Wallets: 2.2M (+1,308%)

• Monthly Active Wallets: 3.5M (+775%)

• DeFi Total Value Locked: $320.2M (+1,298%)

• Overall Total Value Locked: $637.6M (+402%)

• Avg. Number of Daily Transactions: 4.2M (+372%)

Those are pretty impressive numbers, aren't they? And to be fair, there's a lot happening all the time. 

Here's some perspective on these incentive programs: Season 4, which ran from June 12th to June 26th, offered $1.2 million in $TON as rewards.

• Token Battle: $500k

• App Battle: $500k

• NFT Battle: $50k

• DeFi Battle: $150k

We don't see the astronomical figures found in some competing Layer 1s, where incentives can reach hundreds of millions or even billions of dollars. 

So the TON foundation is doing a great job and making these incentive programs well-coordinated and highly efficient.

If you want to learn more about the rules or how to participate, feel free to check more details here. 

The fierce competition among all participants (projects & users) across multiple seasons fuels the relentless growth of all key metrics for TON – users, TVL, transactions…

But it raises a question.

IS THIS GROWTH SUSTAINABLE? 🧩

We think it could be. Combine a 900 million user base with their highly effective incentive program, add great user experience and you've got a powerful flywheel in motion.

We believe this flywheel has started to turn and is rapidly gaining momentum. 

The TON blockchain is attracting more attention and eyes. As more people learn about it, they begin to build and use its applications, bringing in more liquidity. 

This cycle will continue to repeat, driving exponential growth. In fact let's have a look at some onchain data. 

[

Source: TON stat

This is the flywheel in action. All selected metrics have shown accelerated growth over the past year, reaching ATHs, and there's no clear reason why this momentum should stop.

Great, the bull case for TON blockchain seems pretty clear. What about $TON the asset, should I be buying it to capitalize on the upside? Let's figure this out. 

IS TON A GOOD INVESTMENT? 🌱

First, we need to understand the tokenomics to determine the supply and demand dynamics of the token. 

Let’s start by looking at inflation and figure out how many new tokens will hit the market every year. 

Similar to $ETH and $SOL, $TON does not have a capped token supply. The current total supply is 5.1 billion with a 0.6% linear inflation going to stakers. 

That's fairly low compared to other PoS blockchains.

Plus, holders can stake their $TON and earn 3-4% rewards (coming from 0.6% inflation) – currently, about 531 million $TON are staked, representing ~11% of the total supply.

But what about fees? Is the TON blockchain generating revenue from its users? And does that accrue back to token holders in any way? 

Fees are the north star for blockchains. The more users and activity, the more fees are generated. And that's exactly what you want from a blockchain.

So let's have a look at daily fees and compare TON with other blockchains. 

[

Source: Token Terminal

We see that TON currently sits in 6th place, generating over $100k in daily fees. Not bad, huh?

In terms of value accrual, $TON gains value as 50% of network fees are burned, reducing the supply and making it potentially deflationary.

[

Source: TON Stat

Does that sound familiar? Yes, Ethereum and Solana use the same burn mechanism. 

However, TON is not deflationary just yet. With 55k tokens minted and only 7k burned daily, more tokens are entering the market than being removed.

For TON to become deflationary, activity on the chain needs to increase by just 8x. 

Is it possible? Absolutely!

However, fees can sometimes provide a skewed picture. Some chains are more expensive than others or have only a few users generating high fees.

That's why it's crucial to also compare the number of active users on different blockchains. This gives us a clearer understanding of real engagement and activity levels.

[

Source: Token Terminal

TON has more than 5 million monthly active wallets, slightly less than Ethereum.

Solana and Tron boast around 14 million wallets. Is this feasible for TON as well? Definitely, considering 14 million is still just 1.5% of Telegram's total user base.

There is 1 last thing we really need to figure out. The valuation. We'll use Fully Diluted Value (FDV), which assumes all tokens are in circulation. 

Current FDV is $35B. Is that a lot? Or is it not much at all?

Let's compare TON’s FDV with some other blockchains. 

[

Source: CoinGecko

If we look at the current market data, it makes TON the 5th most valuable blockchain in the world, with about 45% the valuation of Solana. 

But what if we look into the future? Meaning, do we expect TON to only have 5 million monthly active users in 18 months?  

No, we foresee it growing from 5 to potentially 50 million within the next 18 months. And TON will become the most used blockchain by active users. 

Why? Because the flywheel effect will start to kick in:

• More apps lead to more users.

• More users bring in more liquidity.

• More liquidity attracts more attention.

• Rinse & repeat. 

As new use cases emerge for existing users, both activity and fees will skyrocket.

However, there are certain challenges that could impact our thesis.

TON KEY CHALLENGES 🚧

There are some challenges that TON must overcome to succeed.

1/ TPS

As we stated earlier, the current TPS of 180 is not enough to serve the masses. 

No blockchain using sharding as a scaling solution has truly taken off yet. Will TON be able to achieve this? Will TON truly be able to achieve 100k or more TPS? 

We believe this will be the key factor that determines whether TON succeeds or not. We plan to monitor the development closely and see how TON manages to increase TPS as more demand hits their blockchain.

2/ Decentralization

96% of TON allocation was distributed among 248 addresses, with at least 85.8% of the token supply held by a few groups of miners, likely connected to each other. 

There are 350 validators today. Do we truly know who controls this blockchain and to what extent?

This is no doubt a risk factor. 

While we don't foresee major threats to the blockchain itself, given the lack of incentives for big $TON holders to attack the network, regulatory and legal challenges are a concern. 

The initial highly concentrated distribution might not be viewed positively by regulators and other stakeholders.

3/ Telegram's dependency 

TON's popularity largely comes from its access to 900 million Telegram users. What assurances do we have that TON will remain Telegram's unique web3 solution indefinitely?

Given the history of the TON blockchain being initially developed by Telegram and their ongoing relationship, we believe the risks here are quite low. 

It's also likely that a significant portion of the initial distribution ended up in the hands of Telegram developers or core team members, further aligning the goals of these two projects.

4/ Programming languages

There are 2 tailor-made languages (Tact, FunC) for TON smart contracts. They have limited documentation, tooling and a small developer community.

Aren't these significant entry barriers for new developers wanting to build on TON?

We believe that as more tools are developed and the user base grows, these barriers will become minimal.

Those are the main challenges we see for TON. 

Considering the above, where do we foresee the price of $TON in the next 12-18 months?

TON PROJECTIONS 🧮

TON's vision to serve 500 million users on their blockchain by 2028 is ambitious but achievable. We believe $TON is still underpriced relative to its potential. 

Considering that all the challenges mentioned above are being actively addressed by the foundation and continually improving, we believe it could achieve a Fully Diluted Valuation (FDV) of $300 billion within the next 12-18 months. 

That’s a 9x from today’s valuation. 🚀

The rationale for a $300 billion valuation comes from analyzing Ethereum's past performance. 

We used the Ethereum blockchain as our benchmark since it is the current leader among smart contract platforms.

We believe that TON has the potential to become one of the major players in the smart contract blockchain space, along with Ethereum and Solana.

[

Source: TradingView

We examined historical Ethereum FDV levels and found that the $300-400 billion range was quite common. It gives us some reasonable targets, which TON could eventually hit as well.  

Before TON reaches this target, we expect it will:

• Have the most active users across all blockchains.

• Attract thousands of developers building on top of TON.

• Attract thousands of content creators building on top of TON.

• Develop the most robust ecosystem of apps.

• Generate significant fees and transaction volumes.

TON will become the backend infrastructure for one of the world's most powerful apps, Telegram, enabling users to:

• Chat with friends

• Consume content

• Play games

• Make payments

• Manage finances

• And more…

Given our bullish outlook, here are some steps you can take today to capitalize on this potential.

Before we share this, we just want to make it clear that while we think $TON has potential to outperform $ETH and $SOL this cycle, it doesn’t mean it will. This goes back to understanding risk/reward and the risk is still much higher on $TON than any of the majors.

If you plan to allocate to $TON, we do not recommend making it a large part of your portfolio.

For this reason, the PRO team has also not allocated $TON to our PRO Portfolio (yet) as we feel confident in holding $ETH and $SOL this cycle for our L1 token allocations.

That said, for those looking for a bit more risk in their L1 sector allocation then $TON may fit that part of their portfolio.

2 WAYS TO CAPITALIZE ON THE OPPORTUNITY THAT IS TON

We are going to present you with two ways to profit from this, but we are sure there are many more:

1/ Participate in The Open League and take advantage of the current incentive programs to earn some $TON. 

Mine tokens: Complete easy tasks such as tapping or logging in daily, play fun games or invite your friends to earn tokens. 

Example: Catizen is a popular Telegram-based play-to-earn game. 

Objectives in the game: drag cats on top of each other to breed and increase their level, earn coins by catching fish, rise to the top or invite friends.

In this game, users earn tokens (which they can sell in the future), and they can farm for free or donate TON to level up faster.

Earn rewards for providing liquidity: Put your liquidity in a pool on a DEX and enjoy 100% APY. 

However, be aware that these are all new projects that carry high risks, including potential smart contract vulnerabilities. 

Therefore, we wouldn't recommend putting all your money into them. 

Instead, you can diversify your investments across multiple projects and strategies to spread the risk while still earning attractive rewards.

Example: Users can earn 133% APY for providing TON/USD on DeDust. 

[

Source: DeDust

To learn more about the latest rewards and opportunities, see the official website. 

If you believe in the potential of the TON blockchain but prefer not to be active in the ecosystem, we have a great option for you.

2/ Buy and stake $TON token as a long-term investment.

We've mentioned before that we believe $TON could reach a $300B valuation, which would mean a 9x price appreciation from current levels. 

This presents a compelling investment opportunity.

So how to invest in $TON? 

You can either buy $TON on some centralized exchange like OKX or you can buy it onchain. 

However, TON is still not available on major centralized exchanges like Coinbase, Binance, or Kraken. 

It is only available on some smaller exchanges – you can see the list here under 'Markets'. 

You might be able to buy $TON on different blockchains like Ethereum for example – but you won't have access to the staking yield. 

Therefore, we recommend you get some funds on the TON blockchain. There are multiple ways to do it:

1. Create your wallet: Add @wallet into your Telegram 

2. Open @Wallet and click on “Add Crypto” and then select from the available options: 

   • Bank Card

   • P2P

   • External Wallet

3. Once you have some assets there, use a DEX to swap your tokens. You can add STON.fi into your Telegram by opening STON.fi and making sure you select staked TON aka tsTON (you want the staking yield, don't you?). Then just click 'Swap'. 

Voila, you are all set!

You now hold staked $TON ($tsTON), earning staking yields on top of your $TON. 

Plus, you will be qualified for potential airdrops from Tonstakers, the liquid staking provider we use here.

Of course, you can choose another liquid staking provider, but we chose Tonstakers because they already have $250 million in Total Value Locked (TVL), giving us confidence in their contracts.

That's it for today, friends. 

Our goal today was to help you better understand the TON blockchain. We hope we achieved that.

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