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Analyst Coverage – The Rise of The Open Network (TON)

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This research piece has been authored by David Shuttleworth from Anagram.

David is a Research Partner at Anagram where he focuses on early-stage investments, liquid token strategy, and token engineering. Previously, David was a Managing Director at Binance Labs and Director of Token Engineering at Consensys. David’s background is in data science and behavioral economics, and he has developed AI/ML oncology models at GlaxoSmithKline and has conducted outcomes research at the University of Pennsylvania.

Anagram is a crypto holding company focused on deploying human and financial capital to advance the crypto ecosystem. They partner with entrepreneurs and build protocols in-house, building alongside their investments and investing alongside their own projects. The team consists of former founders, technical product leaders, and investors that understand the difficulties of navigating the early-stage landscape and have the expertise to create novel products at the frontier of technology.


Intro

The Open Network (TON) blockchain has gained considerable traction recently and has become one of the more interesting projects this year. From new user growth and network activity, to token distribution and trading volume, TON has achieved new all-time highs in many different areas, and continues to gain momentum. Part of this success has been driven by powerful ecosystem incentive mechanisms as well as the integration of Tether’s USDT, the network’s first native dollar-denominated stablecoin. Moreover, while TON operates independently of Telegram, it remains Telegram-adjacent. As such, the blockchain has different integrations and access to Telegram’s 900M+ users.

At a high level, the TON blockchain is a Layer 1 network that operates with a proof-of-stake (PoS) consensus mechanism. It was originally developed by Telegram as a high throughput blockchain network to handle Telegram’s hundreds of millions of users, but has since transitioned to become an open-source project managed by the broader community. Toncoin ($TON) is the native token of the TON blockchain. Its primary objective function is around utility and governance, enabling users to pay for network transactions, participate in securing the PoS blockchain, and contribute to shaping the future of the network through decentralized voting.


User Growth

Over the past year, TON has experienced considerable growth in many important areas. Last April, there were generally just 8,000 daily active users on the network. Fast-forward to today, and there are now more 160,000 users actively using the TON blockchain. So user growth has surged by over 1900% in the last year. Moreover, daily active users recently reached an all-time high of 371,000 in late March before stabilizing towards levels between 150,000-200,000.

To put this into perspective, leading Layer 2 Networks Arbitrum and Optimism peaked this past year with 390,000 and 190,000 daily active users, respectively. While the broader TON ecosystem is still very early and there are limited applications and protocols to use, especially in comparison with Arbitrum and Optimism, this signals that there is a growing interest in the potential of the network.

On a monthly basis, TON has shattered previous all-time highs. There are now more than 1.77M unique wallet addresses that have sent at least one transaction this past month. This is an increase of 2400% since April 2023 and is up 150% since last month.

Overall, more than 3.3M users have now used the TON network and this rate of new growth has accelerated considerably this past year, surpassing 1M users for the first time in December and then growing 232% since.


Token Distribution and Trading Volume

Yet as new wallets continue to emerge and users complete different on-chain activities, it’s important to take wallet activity with a grain of salt, as this sort of activity can be easily gamed. This is especially true if there is a financial incentive to do so, such as quests, ecosystem rewards, and airdrop farming. One of the more interesting metrics, however, is around token distribution. Since April 2023, more than 10.3M new unique wallet addresses currently hold $TON. This represents an increase of 468% on the year. So not only are new addresses continuing to emerge, but there is also a large cohort of new addresses that hold $TON as well. It is important to note that holding $TON in a wallet does not necessitate an active TON address: this requires at least one transaction completed on the network.

Zooming out, this makes TON the fifth fastest growing network or application in terms of token holder growth right now, trailing only BNB Chain, Ethereum, Tron, and Polygon (all within the top 20 in total marketcap). As the number of token holders continues to grow, this could further strengthen the network and help drive activity, either through direct usage (e.g. token holders using the token to pay for completing transactions) or indirect benefits such attracting more developers to build.

One of the more interesting aspects about this metric is that $TON is relatively difficult to acquire right now. The token is not available on major exchanges like Coinbase or Binance, which considerably limits user access, especially within the United States. In addition, $TON is not an ERC-20 token, so users that want to acquire it through decentralized exchanges like Uniswap must rely on wrapped versions. Again, this serves as an added layer of friction for end users and makes acquiring the token more complicated then acquiring ETH, BTC, SOL, or other large marketcap tokens.

While $TON was first listed on exchanges back in August 2021, it did not surpass $100M of daily trading volume until February 2024. Moreover, daily volumes were generally less than $10M from May 2023 to July 2023, which is exceptionally low for a token in the top 20 marketcap. This past month, however, $TON daily volumes reached over $1B for the first time ever and are up 900% on the year.

Moreover, weekly trading volume for $TON most recently surpassed $3.4B, making $TON the 10th most traded token in circulation and placing it ahead of popular projects like Chainlink, Polygon, Arbitrum, and Filecoin.

Overall, total $TON trading volume is roughly $24B year-to-date. This means that about 20% of the token’s entire yearly trading volume occurred within this past week.


Network Activity

Demand for the TON network has also increased significantly in the form of network fees. In terms of daily network fees, TON recently achieved an all-time high of $371,000 and since mid-March has generated over $50,000 of fees per day. While this may not appear significant at first glance, TON did not generate more than $50,000 of daily fees until December 2023, 28 months after the network first launched.

Since the start of the year, cumulative fees have increased more than 420% and in the past month alone have increased 118%. Overall, TON has generated $9.5M in total network fees. While this pales in comparison with other Layer 1 networks, it is a substantial improvement on TON’s previous fee market. As more users enter the space and more builders deploy meaningful applications on the network, this could help drive demand for TON blockchain space and subsequently TON network fees.

As more users enter the ecosystem and use the network, the other critical component is from the developer side. Without meaningful applications to use, user retention will suffer. Yet there has been a recent surge in developer activity. Currently, more than 14.7M total contracts have been deployed on the TON network, up 91% on the month and 250% year-to-date. This signals that more builders are entering the ecosystem and are beginning to deploy different applications on the network.

In fact, no network has had more contracts deployed over the last 30 days than TON (6.7M). So both user and developer interest in the network continues to gain considerable traction. Again, however, volume alone isn’t sufficient. Developers will need to build applications that are secure, efficient, and ultimately easy to use. This is the bare minimum, and without which, user retention could suffer.

One other area that is important to monitor here, especially with the recent spike in activity, is the cost of transactions. As more users begin to use the network and more applications are deployed, transaction fees can become costly as demand for blockspace increases. Yet despite the increase in network usage, the average transaction fee has trended downward. It currently costs about $0.02 to complete a transaction on TON.

Network speed during this time has remained performant, generally achieving speeds upwards of 32 transactions per second (TPS).

This is generally competitive with many popular Layer 2 networks, including Base, Arbitrum, and Optimism, all of which handle well over 500,000 transactions per day as of late.


Ecosystem Incentive Mechanisms and Integrations

Another interesting component of TON’s recent growth is the Open League, an ecosystem rewards initiative developed by the TON foundation. In short, the Open League functions as a long-term incentive program that is distributing 30,000,000 $TON ($180M) to different TON users, developers, and projects over the course of three months. The Open League officially launched on April 1st, and total value locked (TVL) within the TON ecosystem realized a 48% increase, achieving new all-time TVL highs of 26.7M $TON ($158M).

Ecosystem incentives can be a powerful driver of user adoption if designed correctly. But again, the challenge remains keeping users once they arrive. This requires a performant network, smooth user experiences, and useful applications, at the bare minimum.

One such integration that could help retain users, and bring new users into the system, is TON’s integration with Tether. This marks the first time that the TON blockchain has native access to a dollar-denominated stablecoin. Prior to native USDT, users and applications had to rely on bridged versions of USDT, USDC, and DAI. So stablecoin liquidity was constrained entirely to bridged version of stablecoins, which ultimately are inefficient and carry a higher risk profile.

Currently, just a total of $11M worth of bridged USDT, USDC, and DAI is available on the network. The launch of native USDT unlocks significant liquidity throughout the TON ecosystem and enables DeFi applications to scale and operate more optimally.

Perhaps just as importantly, this integration gives Telegram's 900M users access to cheaper, faster, and easier cross-border payments. Users can now simply add fiat to their Telegram Wallet to acquire USDT and then begin to send payments as easily as sending a message in Telegram. At the time of writing, and less than one week from USDT launching on TON, there is over $60M of USDT in circulation on the network.


What’s Ahead

TON has achieved considerable growth recently in many important areas, including network activity, developer activity, and liquidity. More daily users than ever are active on the network (160K), more daily transactions are being sent than ever (5.6M), more contracts are being deployed on the network (10.7M), and $TON distribution is becoming more heterogeneous (12.7M distinct wallets). Moreover, the network is now supported by ecosystem incentives to attract more users and stronger builders into the space, and the first native stablecoin has arrived. Seamless integrations with Telegram’s massive user base is also unlocked, especially in the former of borderless payments.

The stage is quickly being set after years of low activity. It will require thoughtful direction of these ecosystem rewards into the hands of strong builders that will create novel applications on the network, rather than simple re-iterations of what has already been built elsewhere. It will also require incentivizing users to use the network to complete meaningful transactions, such as cheap and global peer-to-peer payments, rather than simply spamming the network to farm rewards. The network has been able to achieve record activity while maintaining performance and liveliness, which will continue to be tested as more users move into the space. Much of the space is a blank canvas, but it is beginning to lay the key foundations that could further drive adoption if executed correctly. Excited for what’s ahead!


Analyst’s Disclosure: Author(s) may own cryptoassets named in this article.

The authors of this content, or members, affiliates, or stakeholders of Token Terminal may be participating or are invested in protocols or tokens mentioned herein. The foregoing statement acts as a disclosure of potential conflicts of interest and is not a recommendation to purchase or invest in any token or participate in any protocol. Token Terminal does not recommend any particular course of action in relation to any token or protocol. The content herein is meant purely for educational and informational purposes only, and should not be relied upon as financial, investment, legal, tax or any other professional or other advice. None of the content and information herein is presented to induce or to attempt to induce any reader or other person to buy, sell or hold any token or participate in any protocol or enter into, or offer to enter into, any agreement for or with a view to buying or selling any token or participating in any protocol. Statements made herein (including statements of opinion, if any) are wholly generic and not tailored to take into account the personal needs and unique circumstances of any reader or any other person. Readers are strongly urged to exercise caution and have regard to their own personal needs and circumstances before making any decision to buy or sell any token or participate in any protocol. Observations and views expressed herein may be changed by Token Terminal at any time without notice. Token Terminal accepts no liability whatsoever for any losses or liabilities arising from the use of or reliance on any of this content.

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