Is TON in Trouble?

The TON blockchain has had a box office year — buoyed by the runaway success of clicker games like Hamster Kombat and a strong bull run.

Its native token Toncoin has more than doubled in value since January and is now one of the 10 biggest cryptocurrencies by market cap, comfortably outperforming Bitcoin and Ether.

Last week, the crypto exchange Bitget confirmed it’s involved in a $30 million strategic investment in TON, so it’ll play a role in the network’s governance.

So far, so good. But in an interesting development, Bitget’s also released an in-depth research report that exposes some of TON’s weaknesses — and suggests clouds are on the horizon.

While noting it’s one of 2024’s fastest-growing networks, the authors claimed TON suffers from weak DeFi infrastructure and a smaller number of developers.

Yet the biggest elephant in the room is TON’s close ties to the messaging app Telegram, which is facing regulatory scrutiny following the sensational arrest of its founder Pavel Durov.

According to Bitget, these legal woes could imperil TON in the long run — and pose “significant challenges” in its quest for global expansion and adoption. The report says:

“The development of TON is heavily reliant on the traffic generated by Telegram, and the deep integration of TON with Telegram’s wallet and user base creates a significant dependency on the messaging platform. Consequently, the regulatory risks associated with Telegram loom over the TON blockchain like a ‘Sword of Damocles.’”

Indeed, this is a blockchain facing regulatory challenges of its own. Just this week, it was announced that the Wallet app — which enables Telegram users to send and receive cryptocurrencies like Toncoin — was being suspended in the UK while the service seeks approval to operate from the Financial Conduct Authority.

With TON’s value falling sharply after Durov was detained, Bitget went on to predict that TON may undergo “de-Telegramization” to distance itself from this messaging app.

That’s a radical suggestion that could starve TON of users. So how likely is this to happen? We’ve asked a critic and a supporter of this blockchain for their insights.

Blockchain Wars

Before we delve into TON’s future, it’s worth briefly returning to its past.

Back in 2017, Telegram had set its sights on launching its own blockchain, which would be known as Telegram Open Network. A staggering $1.7 billion was raised in a token sale for Grams, but the company was later ordered to repay investors following a messy legal battle with the Securities and Exchange Commission in the U.S.

Telegram then ceased working on this blockchain, but decentralized teams carried on with development. Competing visions for what the future should look like started to emerge.

Ron Millow is a blockchain entrepreneur who was an early member of Free TON, which later rebranded to Everscale after missing out on Durov’s endorsement. He’s critical of what TON has become — telling Cryptonews this network’s DeFi infrastructure is “virtually non-existent.”

“Everscale was the ‘other’ TON that launched way beforehand. Both have made serious mistakes. While Everscale centered on attracting public development and decentralization, Toncoin focused on its brand, likening itself to what the first TON was supposed to have been, albeit plagued full of holes.”

Millow argues that both Everscale and Toncoin should have been in partnership from the start — especially considering Everscale had focused on DeFi infrastructure.

“Telegram later endorsement of Toncoin was simply a matter of choosing a side as the two camps had found reason to bicker over approach, and then later their inevitable detachment from one another forced Durov to make a choice. Mistake after mistake, while in fact the two are like chocolate and peanut butter and should have aligned.”

He’s also deeply skeptical about whether TON will ever be able to achieve “de-Telegramization” — and it will be “impossible” for this blockchain to distance itself from the messaging app.

“They are tied at the hip. No amount of clever marketing or rebranding can change that. The only option I see is for the teams of Toncoin and Everscale to come together and relaunch under one new umbrella. Barring that, no magic wand can wave this new Assange-like persecution of Pavel Durov away. Pavel will be a martyr, but no one with money to stake will touch Toncoin with a ten foot pole. Would you? I wouldn’t.”

A TON of Opportunities?

Not everyone agrees with Millow’s prognosis of the situation — and Bitget’s argument that TON should branch out from Telegram.

One of them is Mitja Goroshevsky. He was one of the founding members of Free TON and went on to become co-founder of Acki Nacki, which claims to have a Telegram app that boasts more than three million users.

He told Cryptonews that “de-Telegramization” is not necessary, adding:

“I believe Telegram will resolve its problems with regulators and TON will continue to be tightly connected to Telegram’s user base.”

And despite the criticism about a lack of DeFi infrastructure, Goroshevsky argued that TON’s focus has been elsewhere — and this has delivered a massive user base to Web3.

“The number of users now flowing to Web3 through Telegram is astonishing. No other chain except maybe Bitcoin has brought so many new users to the Web3 world.”

He went on to say that Toncoin’s price rises are a reflection of how the project has exposed Telegram’s base of almost one billion users to blockchain technology.

“We’re witnessing completely new types of dApps being developed for this user base, and on a scale that’s never been seen in Web3. This inflow dwarfs the ICO craze of 2018, for example.”

Bitget’s research report isn’t all doom and gloom — with researchers predicting that TON will see growing support from institutions and an influx of developers introducing new use cases. The researchers also anticipate that this network has the potential to accelerate adoption of crypto among everyday consumers — and there’s a chance that “one or two native meme tokens may emerge with substantial returns.”

Now on bail and ordered to remain in France, Durov recently confirmed that Telegram will step up its moderation efforts, crack down on illegal content, and work closely with governments investigating the app’s users.

But make no mistake: legal proceedings are still underway, and the coming months are shaping up to be hugely consequential for Telegram and TON alike.

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