Pavel Durov Announces the End of the TON Blockchain Project

On the evening of May 12, 2020, Pavel Durov published a statement announcing that work on the TON blockchain project and the Gram cryptocurrency has come to an end. The first information about this project appeared in February 2018, when Durov registered TON Issuer and Telegram Group with the U.S. Securities and Exchange Commission (SEC). Through two rounds of closed ICOs, the team managed to raise $1.7 billion from 175 investors in the U.S. and abroad.

Previously, we provided a detailed explanation of what TON was and what the project was supposed to become. However, it now seems unlikely that those plans will come to fruition. Below is a translation of Pavel Durov’s statement, which explains the challenges the team faced and why the project was shut down (spoiler: Durov cited legal issues with U.S. authorities as the main reason for the failure).

Pavel Durov’s Statement

“For the past 2.5 years, some of our best engineers have been working on a next-generation blockchain platform called TON and a cryptocurrency we planned to call Gram. TON was created to embody the principles of decentralization developed by Bitcoin and Ethereum, but to significantly surpass them in speed and scalability.

We were very proud of the result—the technology we built enabled open, free, decentralized exchange of value and ideas. After integration with Telegram, TON could have revolutionized the way people store and transfer their funds and information.

Unfortunately, an American court did not allow TON to happen. Why? Imagine a few people pooled money to build a gold mine, planning to share the gold it produced. Then a judge comes and says: ‘These people invested in the gold mine because they wanted to make a profit. They didn’t intend to mine gold for themselves; they wanted to sell it to others. Therefore, they are not allowed to mine gold.’

If this sounds absurd to you, you’re not alone. But that’s exactly what happened with TON (the mine) and Gram (the gold). The judge used this logic and ruled that people cannot buy or sell Gram the way they can buy or sell Bitcoin.

Even more paradoxically, the American court ruled that Gram cannot be distributed not only in the U.S., but anywhere in the world. Why? Because, according to the judge, U.S. citizens might find a way to access the TON platform after its launch. Therefore, to prevent this, Gram cannot be distributed anywhere, even if other countries apparently have no objections to TON.

This court decision implies that other countries do not have the sovereignty to decide what is good or bad for their own citizens. But if the U.S. suddenly decided to ban coffee and demanded that all coffee shops in Italy be closed (because an American might be there), we doubt anyone would agree to that.

Still, despite this, we made the difficult decision not to continue working on TON.

Unfortunately, the American judge is right about one thing: we, people outside the U.S., can vote for our presidents and elect our parliaments, but we are still dependent on the U.S. when it comes to finance and technology (fortunately, not coffee). The U.S. can use its control over the dollar and the global financial system to shut down any bank or bank account in the world. They can use their control over Apple and Google to remove apps from the App Store and Google Play. So yes, it’s true: other countries do not have full sovereignty and the ability to allow anything on their territory. Unfortunately, we—the 96% of the world’s population living in other countries—are dependent on decision-makers elected by 4% of U.S. residents.

In the future, this may change. But for now, we are stuck in a vicious circle: it’s impossible to bring more balance to an overly centralized world precisely because it is so centralized. We tried. Now we leave it to the next generation of entrepreneurs and developers to pick up this banner and learn from our mistakes.

I am writing this post to officially announce that Telegram’s active work on TON has ended. You may see—or may have already seen—numerous websites using my name, the Telegram brand, or the TON abbreviation to promote their projects. Do not trust them with your money or data. Neither current nor former members of our team are involved in any of these projects. While in the future, networks based on the technology we built for TON may appear, we will have no affiliation with them and are unlikely to ever support them in any way. So be careful and don’t let anyone mislead you.

I want to end this post by wishing good luck to everyone striving for decentralization, balance, and equality in the world. You are fighting the right battle. This battle may well be the most important one of our generation. We hope you succeed where we failed.”

Background and Investor Updates

At the end of last month, Durov notified Telegram Open Network investors that the platform’s launch was once again delayed due to ongoing disputes with the U.S. Securities and Exchange Commission (SEC) and a U.S. court ban on distributing Gram tokens.

At that time, Durov offered investors a deal: they could either take back 72% of their invested funds or sign a new agreement giving the project a chance to launch the network by April 30, 2021. In the latter case, investors would receive Gram or another cryptocurrency upon launch, or a 110% refund. Durov even stated he was ready to sell part of his stake in Telegram if the project failed.

Soon after, investors received additional letters from the developers with revised terms. American investors were essentially excluded from further participation in the project but were promised a 72% refund. Other investors were informed that they would not receive Gram or any other cryptocurrency “due to the uncertain stance of the relevant regulatory authorities.” Instead, they were offered to treat their investment as a loan at 52.77% annual interest, so they could expect a 110% return on their initial investment by 2021.