Telegram has had a rough few weeks. The messaging app’s founder, Pavel Durov, was arrested in late August and released on €5 million bail in France. He is accused of running a company that was complicit in distributing child sexual abuse material and facilitating drug trafficking and organized fraud. Predictably, this caused the price of the network’s cryptocurrency, Toncoin, to drop by a third.
But last Wednesday, in Seoul’s upscale Dosan-daero neighborhood, there was no sign of sadness in the long line of people waiting to get into a party hosted by TON, the blockchain that runs on Telegram. Indeed, the crowd of developers, marketers, investors, and others in the blockchain ecosystem were in a party mood: Just hours earlier, TON had announced at Korea Blockchain Week that transactions on the blockchain had passed the billion mark.
Unexpectedly, Durov’s high-profile arrest turned out to be a boon for Telegram. The app’s downloads spiked shortly after the arrest, and it seems that this has also improved the stats on TON.
“Last week, TON hit all-time highs in active users and transaction counts in what, let’s be honest, is probably one of the worst weeks in TON history,” Jack Booth, co-founder of TON Society, which manages the TON community, said during a talk at Korea Blockchain Week.
A complicated relationship
In theory, Durov’s status should not have a material impact on TON. Telegram and the TON Foundation, which develops the blockchain, claim to be two independent entities. But things are more complicated in reality.
Durov launched TON with his brother Nikolai Durov under Telegram, but the messaging app had to abandon the blockchain after the U.S. Securities and Exchange Commission sued Telegram for conducting a massive unregistered initial coin offering. The app has since tried to distance itself from TON — at least by separating its corporate structure.
In the meantime, a group of open-source developers and blockchain enthusiasts founded The Open Network Foundation, or TON Foundation, to continue developing the blockchain. Since then, TON has spawned several entities to support its growing operations, including TON Society and The Open Platform, or TOP, which created the TON-based crypto wallet that runs on Telegram.
And to address concerns that the app’s disproportionate holding of Toncoin could compromise the network’s decentralized nature, Durov announced in February his intention to “cap Telegram’s share of TON to around 10% of supply.”
However, the fact that people panic-sold Toncoin speaks to the perception that TON and Telegram are closely linked and somewhat interdependent. One person who identified himself as Minho told me at Korea Blockchain Week that he had been buying more TON since Durov’s arrest in the hopes that “prices will rebound after his release.”
Operationally, Telegram’s ambition to become a super app like WeChat also depends heavily on TON’s success. To attract third-party developers, Telegram needs not only a proper tech stack, but also a robust payment network to support in-app commerce. Only, instead of using fiat, it’s opting for cryptocurrency.
“When you tie your ecosystem to the success of the Telegram platform, then obviously when that’s called into question, people start to doubt what could happen,” Booth told me. Still, he stressed that the fact that TON is a blockchain network gives it a level of independence that would allow it to survive without Telegram.
“Ultimately, the TON ecosystem simply uses Telegram as a front-end experience. The app also runs on the website, so even in the worst case scenario where Telegram gets shut down, TON will still be available to run,” he said.
Optimism galore
A billion transactions sounds like a big number, but how big is TON in reality? It’s hard to compare on-chain activity, as decentralized networks are often tracked by different parties and measured by different metrics. But to give you a rough idea: daily transactions on TON were 14.6 million on September 10, or about 40% of the “non-voting” transactions on Solana, a more established blockchain that is currently the fifth largest by market cap. Toncoin, by market cap, is in tenth place.
Still, the total value locked in TON is only $408 million, or about 8% of Solana’s current value of $4.77 billion, according to DefiLlama.
These numbers are consistent with Booth’s observation that the current TON boom is being fueled by a handful of viral “tap-to-earn” games that reward users with in-game assets for the simple click of a button, and players trade those assets on exchanges where they are accepted. Solana, on the other hand, is attracting far more capital thanks to its vibrant and much more diverse decentralized finance (DeFi) ecosystem.
According to Booth, a TON-based game called Hamster Kombat, in which players take on the role of CEOs of a cryptocurrency exchange, has amassed 250 million monthly active users. That’s an impressive number, but it should be taken with a grain of salt, as the tap-to-earn mechanic used here is fairly subpar by modern video game standards and raises valid questions about the longevity of such games.
But for TON, and Telegram by extension, the value of clicker games lies in their ability to bring users to Web3 with a few clicks (and keep them there with a financial incentive), Booth said during his talk. And it’s worth noting that playing Web3 games requires users to jump through a lot of hoops in the first place: they have to download an app, set up a crypto wallet, and keep long wallet keys secure. So anything that makes that easier is likely to be favored.
That’s not to say studios aren’t trying to create more sophisticated titles for TON’s games. One such title, called Catizen, lets players manage and optimize a colony of cats and has attracted 30 million monthly users, more than 2 million of whom are active on the blockchain, Tim Wong, president of the Catizen Foundation, told TechCrunch. In less than six months, the game has generated $21 million in revenue.
“Most Web3 games gain users without generating in-game revenue,” Wong told me. “The mini-game ecosystem is already well established on WeChat, and it’s just getting started on Telegram. We believe that humans’ need for high-quality gameplay and their desire to spend money on entertainment are universal.”
Toncoin may not be going to the moon anytime soon, given the charges against Durov, or the frequency with which Telegram is mentioned in connection with bad news. But as is often the case with cryptocurrency projects, there is a healthy dose of fervor and optimism. Roy Chen, who is based in Denmark and developed a console-inspired title, HypeSaints, that runs on TON, pointed out that the major impact of Durov’s arrest has been on Toncoin’s price rather than the ecosystem itself.
“After all, the potential for mass adoption of crypto via TON is huge, thanks to Telegram’s 950 million users,” he said.
