summary: The Open Network (TON), also known as TON Blockchain, is a decentralized layer-1 proof-of-stake blockchain created by the encrypted messaging platform...
content: The Open Network (TON), also known as TON Blockchain, is a decentralized layer-1 proof-of-stake blockchain created by the encrypted messaging platform, Telegram in 2018. The multi-blockchain architecture of The Open Network provides a platform for decentralized applications (dApps) and smart contracts. It consists of a master chain, multiple working blockchains, and sharding protocols. The Open Network (TON) is a community-driven blockchain with a flexible architecture and focus on serving a typical consumer. In September 2021, the network processed a then-world record of 55,000 TPS during a contest, although reports suggest that current TPS could reach up to the hundreds of thousands or even millions. This high TPS rate and validation is seen as a key factor in the project's rapid growth and is thought to help avoid performance losses, while also having a low environmental impact. History Since 2017, the team at Telegram had been developing a new blockchain platform called the TON (Telegram Open Network) Blockchain and a native cryptocurrency called Gram. TON is a blockchain project created by brothers Nikolai and Pavel Durov to build a platform that disrupts the decentralized application space by leveraging Telegram’s wide user base. The platform promised the speed and scalability important for the mass adoption of cryptocurrency. Through TON, Telegram users were supposed to be able to buy, transfer, and store value in ID-verifiable wallets facilitated by the GRAM coin. Telegram and its affiliates had not made any promises or commitments to develop any applications or features for the TON Blockchain or otherwise contribute in any way to the TON Blockchain platform after its launch. Rather, the Telegram team hoped that the decentralized community of third-party developers would contribute to the TON ecosystem through the development of applications and smart contracts. In January 2018, the team released a white paper and a detailed technical paper which gave an insight into the features and design of the project. TON was described as a platform for decentralized apps and services with the ability to scale and support millions of transactions per second. Gram Gram was the native cryptocurrency Telegram planned to launch to establish a platform for decentralized applications (dApps). In order to fund the development of Telegram and the TON blockchain project, Telegram attracted investments through a private Gram offering. A two-step legal scheme was employed: the Gram purchase agreement was structured as a future contract that allowed investors to receive tokens once TON launched. As futures were only sold to accredited investors, the offering was exempt from registration as securities under Regulation D of the Securities Act of 1933, on the basis that once TON was operational, the Grams would have utility and would not be considered securities. The offering ran in 2 rounds, each taking in $850 million. The first round offering was 2.25 billion tokens at $0.38 each, with a minimum purchase of $20 million, and the second offering was 640 million tokens at $1.33 each, with a minimum purchase of $1 million. As of April 2018, the firm had reported raising $1.7 billion through the ongoing ICO. Development of TON The development of TON took place in an isolated and opaque manner. The launch of the testnet was initially scheduled for Q2 2018 with the mainnet launch in Q4, but the milestones were postponed severally. The testnet was launched in January 2019 with a half a year deviation from the plan. In May 2019, the company released the lite version of the TON blockchain network client. In September 2019, the company released the complete source code for TON nodes on GitHub, making it possible to launch a full node and explore the testnet. The launch of the TON main network was scheduled for October 31, 2019. Telegram vs SEC SEC (Securities and Exchange Commission) had concerns about Gram's private sale and contacted Telegram about it, but after months of communication, both sides did not come to an understanding. On October 11, 2019, a few weeks before the planned TON launch, SEC obtained a temporary restriction order to prevent the distribution of Grams. SEC argued that the initial purchasers of Gram would be acting as underwriters, and the resale of Gram, once distributed, would be an unregistered distribution of securities. After a lengthy legal battle between Telegram and the SEC, Judge P. Kevin Castel of the U.S. District Court for the Southern District of New York agreed with SEC that the sale of Grams, the distribution to initial purchasers, and the highly likely future resale should be viewed as a single "scheme" to distribute Grams to the secondary market in an unregistered security offering. The "security" consisted of the whole set of contracts, expectations, and understandings around the sale and the distribution of tokens to the interested public, and not only the Grams. In this case, the initial purchasers acted as underwriters that planned to resell tokens not consume them. The restrictions on Gram distribution remained in force for purchasers based in and outside the U.S., as Telegram had no tools to prevent U.S. citizens from purchasing Grams on the secondary market. Following this development, The Telegram Open Network team announced that they would be unable to launch the project by the expected 30 April 2020 deadline. On May 12, 2020, Pavel Durov announced the end of Telegram's active participation with the TON blockchain. On June 11, 2020, Telegram settled with SEC U.S. Securities & Exchange Commission and agreed to return $1.22 billion as "termination amounts" in Gram purchase agreements, and pay an $18.5 million penalty to SEC. Telegram also agreed to notify the SEC of any plans to issue digital assets over the next three years. The judge approved the settlement on June 26, 2020: "New and innovative businesses are welcome to participate in our capital markets, but they cannot do so in violation of the registration requirements of the federal securities laws," Kristina Littman, chief of the SEC Enforcement Division’s Cyber Unit, in a statement. In 2020, Telegram repaid TON investors $770 million and converted $443 million into a one-year debt at 10% interest, raising its total liabilities to $625.7 million. On 10 March 2021, Telegram made the placement of 5-year bonds worth $1 billion to cover the debts it returned by 30 April 2021. Post-SEC Since TON (Telegram Open Network) was developed as an open-source software project and its code was publicly available on GitHub, other projects started to develop the technology. On May 7, 2020, the Free TON project was launched, which used the available TON technology developed. By January 2021, the community of the project reached 30,000 people. Free TON's token titled "TON Crystal" or just "TON" was distributed as a reward for contributions to the network. Of 5 billion tokens issued at the moment of launch, 85% were reserved for users, 5% for validators, and 10% for the developers (including 5% dedicated to TON Labs, the developer of TON OS middleware for TON blockchain, which is the essential part of Free TON). On June 29, 2021, the Telegram team said they would consider granting the use of the ton.org domain and GitHub repository to the TON Foundation, in response to an open letter. By August 4, 2021, the domain was transferred to the TON Foundation. TON Foundation After Telegram quit the project in May 2020, an open-source developer community led by Kirill EmelyanenkoK and Anatoliy Makosov initiated NewTON open-source community aimed at further development and support of TON on the open source principles. Developers who never worked for Telegram, members of the open developer community, validators, winners of public TON Blockchain Contests, and crypto enthusiasts from all over the world joined them. Upon researching TON source code, architecture, and documentation, NewTON resumed developing in compliance with the original whitepaper and ideas. In May 2021, the NewTON team was renamed as TON Foundation (The Open Network)— a not-for-profit community focused on the support and development of the network. Telegram CEO Pavel Durov on December 23, 2021, published a post on his official Telegram channel that gave backing to the TON Foundation project. “When Telegram said goodbye to TON last year, I expressed the hope that future generations of developers would one day carry on with our vision of a mass-market blockchain platform, So I was inspired to see the champions of Telegram’s coding contests continue developing the open TON project, which they rebranded to Toncoin.” - he wrote. TONCOIN The Telegram native crypto \- Gram was rebranded into TON coin (The Open Network) after the abandoned project was taken over by the TON Foundation in 2020. TON coin is the principal cryptocurrency of The Open Network (TON) blockchain, and in particular of its masterchain and basic workchain. It is used for transaction fees, securing the blockchain through staking, deciding how the network develops, gas payments (i.e., smart-contract message processing fees), and settling payments. Background In November 2019, Telegram Open Network testnet2 launched and 5 billion coins were minted, with a small fraction (1.45%) distributed to developers and testers. In May 2020, after the SEC prohibited Telegram from issuing Grams to investors, Telegram ceased its work on the TON ecosystem and testnet2 tokens were placed into 