Durov’s Blockchain Platform: How TON Works, Its Currency, and Opportunities
June 2, 2019
When Will Durov Launch the Project?
Short answer: By November, two things are expected: the launch of TON and the enactment of the sovereign Runet law.
By November, the TON developers promised investors to launch the “live” version of their blockchain system. This doesn’t mean they’ll immediately roll out cryptocurrency payments in the messenger, launch dozens of services, or even allow anyone besides developers to work with TON. Judging by the repeated delays in testing, it’s more likely that by November, Telegram will introduce some limited functionality for working with TON.
The TON launch will coincide with the partial implementation of amendments regarding the sovereign Runet, which will require telecom operators to install equipment capable of filtering traffic and blocking prohibited resources, as well as allowing Roskomnadzor to take centralized control of the Runet if necessary. However, this is unlikely to help the authorities finally block Telegram (we explained why here). It’s unclear whether the authorities will immediately use these new capabilities or if they’ll be technically ready to enforce any blocks by November, but it’s reasonable to assume that any new restrictions on the Runet will attract more users to Durov’s products, which are protected from such measures.
TON is expected to become such a protected environment (with some caveats), and Telegram will be one of its services.
What Is TON?
Short answer: It’s a highly secure web platform where, in theory, you can do almost anything.
To put it simply, the TON platform will resemble the web, but much more secure and scalable (we described the technical details here, and here’s the TON documentation). The web isn’t just about websites—it includes apps, games, video streaming, and even coffee makers. TON won’t be limited to cryptocurrency and messaging via Telegram. The creators promise to include a variety of services and allow anyone to develop new ones.
For example, developers plan to launch TON Payments (a payment system), TON Storage (file storage), TON Proxy (an anonymizer), a website analog, and even their own DNS, which will turn complex blockchain addresses into readable, user-friendly ones. App stores and the ability to withdraw funds are also expected. It’s quite likely that one of the first payment gateways between TON and the real world will be Germany’s Wirecard—a major online platform for various types of electronic payments and commerce.
This doesn’t mean Durov plans to build an isolated system from scratch. The documentation states that three types of applications will work in TON: those existing entirely within TON, those partially connected (for example, allowing authorization via TON services), and various hybrids of the two.
For regular users, TON will be introduced gradually, as the audience grows, developers realize its benefits, and investors start earning returns from the blockchain platform. The economic success of TON and its cryptocurrency, Gram, will play a key role.
How Much Will It Cost?
Telegram’s audience in 2018 was 200 million users, but developers plan to reach 300 million soon. A few months ago, in an unofficial (now outdated) document, developers estimated it would take several years to reach a billion Telegram users—the key audience for TON services.
The minimum valuation of TON, according to investors during the ICO, is $3–4 billion. That’s comparable to the GDP of South Sudan, half the GDP of Kyrgyzstan, a quarter of Georgia’s GDP, and just under McDonald’s quarterly revenue.
For comparison: Facebook has 2.5 billion users and is valued at $183 billion.
It’s expected that TON’s value will rise significantly after launch. Even before Gram was released, the first derivative appeared on a crypto exchange, and its price quadrupled in a month based on hype alone.
How Can You Make Money from This?
Short answer: You’ll likely be able to do so in dozens of ways. The main one is trading the Gram cryptocurrency and related derivatives.
Within TON, Gram will be a universal means of payment. For example, Gram will be paid to owners of special validator services that confirm the integrity of transactions within the platform.
Users of various services may be paid in Gram—for performing real-world actions, viewing ads, or subscribing to Telegram channels.
Traditional “smart contracts” allow for blockchain-based banking, such as making deposits or taking out loans. This may also appear in TON.
Gram will be traded on crypto exchanges. Even before its issuance, a derivative is already trading on Xena Exchange.
Earlier this year, The Bell reported that the TON team was negotiating with crypto exchanges in Japan, China, and the UK. Trading of its cryptocurrency is expected to start in Asia, specifically Japan.
Long-term investment is the main way to profit. TON is designed so that each subsequent Gram is more expensive than the previous one. Early purchases ensure a significant return on investment in the future, which made Gram attractive to initial investors.
Risk. It’s completely unclear how financial regulators will react. There’s a chance the cryptocurrency system will launch gradually, starting in countries with the most transparent crypto regulations.
Financial regulators and central banks are the main organizations that will determine TON’s success. Unlike governments, which often try to ban Telegram as a service (like in Iran and Russia), central banks provide legitimacy to the concept itself. Without their approval, TON and its infrastructure will remain in the darknet and won’t attract major legal investors.
Who Controls All This?
Short answer: Pavel Durov and major investors who received large amounts of Gram.
There’s no public list of investors, so initially, a few hundred major token holders will regulate the economy. As far as is known, no government agency controls or regulates TON.
During the preliminary sales stage, Durov’s project raised $850 million from 81 investors, according to data published by the SEC. A few months later, they sold more tokens (exchangeable for Gram) for another $850 million from 94 investors. In total, $1.7 billion was invested in TON.
Among Russian investors are Qiwi co-founder Sergey Solonin, who reportedly invested $17 million, Wimm-Bill-Dann co-founder David Yakobashvili, who invested $10 million, and entities linked to Roman Abramovich. Major Western investors reportedly include Silicon Valley giants Kleiner Perkins Caufield & Byers, Benchmark, and Sequoia Capital, who, according to the FT, planned to invest $20 million each.
The key point: these investors are unlikely to allow rampant drug trafficking, terrorism financing, or other illegal activities often associated with Telegram. They’re interested in a legal infrastructure that allows their investments to grow for as long as possible. Therefore, control mechanisms, including those introduced from outside, are inevitable.
Is It Safe?
Short answer: Very.
TON uses elliptic curve cryptography—the same system that the secure service Protonmail called “the most advanced system to date.” According to the technical documentation, all operations within TON will be thoroughly encrypted.
Still, no system can be considered absolutely secure. For example, a recent hack of WhatsApp, the world’s most popular messenger, allowed attackers to install spyware on users’ devices without breaking encryption. The hacker exploited a flaw in the call system. A similar critical vulnerability was found in WhatsApp last fall, based on video calls. According to Pavel Durov, a harsh critic of WhatsApp, this is the result of intentionally left backdoors in the code.
Judging by the behavior of Telegram’s creators, they are obsessed with not sharing information with authorities or providing such backdoors. This reduces the likelihood of hacking, but as with any complex system, it can’t be ruled out entirely.