Though Bitcoin is certainly performing well in 2024, a digital asset that many might not have expected is up almost 300% year to date. Toncoin (TON), has entered the top 10 cryptocurrencies by market cap thanks to its price surging to an all time high of $7.65 in April 2024, with the price now settling in the $6 range.
But what is Toncoin and where did it come from? What’s pushing its price up and is there anything to be aware of before investing? We’ll cover all that and more. Let’s jump in.
What is Toncoin?
Toncoin (TON) is a layer-1 blockchain project that was first developed in 2018 by Telegram and was originally called GRAM. The project had to be abandoned after a legal battle with the SEC. The project was then taken over by the TON Foundation, a separate entity, andit was renamed from “Telegram Open Network” to “The Open Network” (TON).
Toncoin is a proof of stake blockchain network that works within the Telegram app. This allows you to send and receive funds in TON, along with staking it to earn passive income. There is a max supply of 5 billion TON tokens, with 3 billion already circulating.
Toncoin’s History
TON was originally developed in 2018 by Telegram under the aforementioned GRAM name. The GRAM project had raised $1.7 billion in seed funding before the SEC intervened. The SEC forced Telegram to repay $1.2 billion to investors, and this is still ongoing.
Those who were US investors were forced to take a 72% refund and exit the GRAM token project. Non-US investors had the opportunity to receive 110% of their invested sum instead, by letting Telegram invest the money they owed the investor.
This was and remains a pretty sketchy repayment option, and it’s worth noting that the initial investors still haven’t fully been repaid despite the TON network reaching new all time highs. The SEC has also mandated Telegram to inform them of any blockchain projects in the future.
TON Labs, a separate entity from Telegram, was the one who relaunched the project, thus avoiding the SEC’s mandate to inform them as Telegram themselves didn’t specifically launch it (more on this later).
Toncoin started with 15 validators and has since grown, but it’s hard to say how genuine the project is and we’ll get to that soon.
Why is Toncoin Performing So Well?
There are two main reasons why Toncoin is performing so well in 2024, but they’re both very much related to investor speculation.
The first reason is that Telegram announced that they’ll share ad revenue with channel owners on the messaging platform in late February 2024. This announcement alone caused the price to shoot up about 40%, but the price was further pushed by the second reason that Telegram is performing so well.
Telegram then announced about a month later that it will no longer accept Euros for ad payments on the platform, instead requiring potential advertisers to pay their fees in TON. Creators are also paid out in TON.
Assuming Telegram continues to be a popular messaging app, investors are speculating that TON will be more valuable over time. This has caused increased demand for TON, helping to boost the price. It also helps when you consider the distribution of Toncoin.
Toncoin Distribution
Above is the top ten Toncoin addresses by balance. Some quick maths will tell you that the top 10 addresses hold 3.161 billion of the 3.47 billion TON that exists in circulation. That’s about 91% of the entire supply that is circulating.
What’s interesting, and perhaps concerning, is that if you start to add up more addresses from the list, the total gets over the circulating supply before you even get through 50 addresses, which doesn’t make sense.
To make matters more confusing, there isn’t any other Toncoin block explorer that shows you addresses and their holdings, making it difficult to determine if this is an error, or reality.
Regardless, it’s fairly clear that the supply of TON is held heavily by whales, and it’s only available on a few popular exchanges, meaning that there actually isn’t that much supply circulating. This causes the price to move up pretty quickly when exchange holdings start to be purchased in any meaningful quantity.
The TON Believers Fund also seems like one of the most confusing concepts, as the details of the fund indicate that it is a five year vesting contract, where you can either deposit or donate TON. The donors are the ones who are paying the depositors’ vesting reward, which seems odd. There is also no benefit to donors being donors, which begs the question why would you even donate? There is also no indication of what your vesting reward might be. The true purpose of the Fund seems to be found in this line:
“The benefit of the smart contract lies in the fact that users who make deposits will receive much more TON after some time, as part of the TON will be temporarily removed from circulation, which will have a positive impact on the TON price”
Which essentially indicates, if there’s less circulating, the price will go up. But again, there isn’t any indication of what your reward will be for locking your TON up for 5 years.
Consider the fact that on the last day you could send funds to the Fund in October 2023, TON was only about $2. Meaning anyone who locked up their TON has already missed out on the opportunity to take profit on a 300% gain.
Future Legal Issues?
As mentioned earlier, TON has already had an issue with the SEC, though not under its current name. Though the project describes its initial launch as extremely fair and open to anyone, they cherry-picked 15 validators to start the network, and gifted them 380,000 TON each. The minimum amount of TON you need to hold to be a validator is 300,000 TON, meaning no one else can be a validator unless they purchase 300,000 TON.
It’s then worth noting that there is no other distribution of TON other than staking rewards, which are between 4-5%. So to be a validator you have to buy at least 300,000 TON yourself. At current prices, you’d need to spend over $1.5 million dollars to be a validator on the network, which is a ridiculously high barrier to entry and certainly doesn’t lend itself to any sort of decentralization or fair launch.
For reference, you need 32 ETH to be an Ethereum validator, which would be under 10% of the cost to purchase than the TON, and that’s already a high barrier to entry. There are currently only 380 TON validators, compared to over 1 million for Ethereum.
It also seems odd that despite Telegram saying that they have nothing to do with TON, they’re adopting it as the main currency for their platform, and also are one of the top 10 holders. That seems like a serious conflict of interest, especially considering that the project was originally their idea that was squashed by the SEC and was simply rebranded and relaunched.
It seems more likely than not, that should Toncoin continue to do well, that the SEC may look into the project, though when they do so would be hard to say. However, it’s certainly something to keep in mind before you choose to invest in TON.
Closing Thoughts
Toncoin has certainly performed well in 2024, but to say its growth is truly organic would be hard to prove. Supply constraints and pump-inducing announcements are likely the main contributors to its resurgence. There are certainly some sketchy aspects to the project, which any investor should consider before putting in funds. However, should TON avoid any legal issues in the future, it could be a winner in terms of value.
