The New Narrative? An Overview of the Launch of TON Blockchain’s L1 Network &DeFi Ecosystem
TON is finally ready to launch its DeFi ecosystem!
After years of troubled progress, TON is finally ready to launch its DeFi ecosystem. It could be an interesting narrative to watch in the upcoming days. This article provides an overview of TON, its architecture, history, and nascent DeFi ecosystem.
Rising from The Ashes
For those who don’t know the back story, Telegram started exploring blockchain solutions already back in 2019. They launched an ICO for $GRAM, the first testnet of The Open Network (TON).
The sale eventually raised the attention of the SEC which fined Telegram 18,5 million and ordered a refund of the $1.2 billion they raised through the ICO — because $GRAM was deemed to be a security.
In 2020, Telegram officially shut the project, but the development team continued developments through the TON Foundation, a decentralized community started by Anatoliy Makosov and Kirill Emelyanenko.
The TON Foundation took 10 months to bring the network infrastructure back online with basic infrastructure and services. TON officially launched in November 2021. Throughout all 2022, development efforts have been concentrated to provide TON with the necessary security and technology.
Most platforms on TON have been created during the past year, mostly through community efforts such as HacktonX:
To incentivize development, TON Foundation launched The Open Challenge, a reward program offering up to $20M in $TON to teams launching projects that increase TVL in the ecosystem.
The Open Network: $TON
TON is a fast, secure, and scalable blockchain focused on handling millions of transactions per second.
The network has an impressive block time of 5 seconds, and can split workchains into 260 shards (compared to Ethereum's plan to implement 26 shards). Time to finality sits at under 6 seconds.
Due to its architecture TON can be considered as a huge distributed supercomputer, or a “superserver”, intended to host and provide a variety of services to build decentralized internet of the future.
Decentralized: A peer-to-peer network that has no centralized servers;
Stable: Nodes that go offline have no effect on the network’s functionality;
Anonymous: It’s impossible or difficult to identify a node’s IP address.
Encrypted: Data is encrypted when sent to nodes;
The network uses the UDP/IP and TCP/IP internet protocols.
Sharding
TON is a “collection of blockchains” and is composed of 3 blockchain types:
The masterchain, containing general information about the protocol and the current values of its parameters, the set of validators and their stakes, the set of currently active workchains and theirshards, and, most importantly, the set of hashes of the most recent blocks of all workchains and shardchains.
Up to 232 working blockchains, or workchains, containing the value-transfer and smart contract transactions. TON allows different workchains to have a different set of rules to accommodate all use cases. They only need to satisfy minimum interoperability criteria to interact with each other.
Each workchain is subdivided into up to 260 shard blockchains, or shardchains for short, having the same rules and block format as the workchain itself, but responsible only for a subset of accounts.
A form of sharding is built into the system, allowing parallel execution of more transactions at the same time, greatly improving scalability.
Each block in a shardchain (and in the masterchain) is actually not just a block, but a single-block blockchain (also called horizontal blockchain). A pretty cool TON-specific mechanism is introduced to replace detected invalid blocks, without the need of forking the shardchains involved:
if it becomes necessary to fix an incorrect shardchain blocks, a new block is committed into thevertical blockchain, containing either the replacement for the invalid horizontal blockchain block, or a block difference, containing only a description of those parts of the previous version of this block that need to be changed.
In TON each shardchain (and the masterchain) is not a conventional blockchain, but a blockchain of blockchains.
Asynchronous Smart Contracts
A second peculiarity of TON blockchain architecture is the use of asynchronous smart contracts to be more scalable.
To run smart contracts, most modern blockchains use the Ethereum Virtual Machine (EVM) or try to be EVM-compatible. On TON, smart contracts run on the TON Virtual Machine, which is incompatible with EVM.
EVM’s synchronous architecture has limitations with regard to scalability: that’s why the TON network features asynchronous smart contracts.
Benefits of synchronicity
The benefit of synchronicity and the single transaction paradigm is that this entire interaction is very easy to reason about as a single atomic operation. If one of the later steps of a transaction fails for whatever reason, the entire transaction will revert, and the initial steps will also roll back automatically.
Limitations of synchronicity
The negative effect of synchronicity is congestion since computations cannot run in parallel. As the number of contracts and users grows exponentially, the inability to parallelize computations becomes the main limiting factor in network growth. Unfortunately, there is no way to resolve this issue without breaking the entire EVM model.
On Ethereum:
If smart contract “A” interacts with smart contract “B,” which then interacts with smart contract “C,” all three interactions on the blockchain must be processed as one transaction: if hundreds of smart contracts have interactions, they’ll have to be processed as a single transaction, creating congestion.
Instead, TON uses asynchronous actor architecture. A new programming language, FunC, was therefore created to replace Ethereum’s Solidity, allowing developers to harness this new paradigm effectively.
Writing asynchronous smart contracts brings a new set of challenges for developers — and for compatibility to EVM blockchains.
In TON transactions will no longer revert automatically when one of the actions fails. The smart contract developer under the new paradigm has additional responsibility. They must roll back actions manually when operations fail mid-way before the entire flow completes.
For those interested in the more technical aspects of TON, I advise reading this post.
$TON
$TON is the both the utility and governance token of the TON network. It is used for transaction processing fees as well as cross-chain transaction fees. dApps that build on TON can also receive the token in exchange for services their app provides.
TON can also be used to:
Open payment channels, similar to the Bitcoin Lightning Network;
Purchase TON Domains Name System (auto.ton sold for 800,000 TON or about $2m);
Pay for bridge fees.
DeFi on TON is just starting. It currently has only 7m TVL, with almost all of it, 89%, in Megaton Finance.
Megaton Finance is the leading DEX of TON that launched at the end of January 2023. Users can now provide liquidity to Megaton Finance and earn transaction fees and $MEGA tokens as rewards. $MEGA token mining is scheduled to start on February 23 (UTC).
The DEX has currently limited routing capabilities:
All token pairs are created based on WTON and undergo two swap processes for token swap. For example, if you want to swap token A for token B, you would first convert token A into WTON in the WTON/A pair and then use WTON to swap for token B in the WTON/B pair.
As part of their development Megaton will also leverage the Orbit bridge to expand its TON ecosystem by bridging mainnet assets to TON.
Once the initial key pieces of infrastructure will be placed, I am sure the efforts the TON foundation put into active community dApps development will blossom an interesting DeFi ecosystem.
Social Mentions
Food for Thought
TON 2023 roadmap focuses on:
TON Blockchain
TON Proxy (domains)
TON Payments
TON Storage
The TON team is very development focused, their efforts to establish a strong developmental community are fundamental for the well-being of the project. Launching a non-EVM compatible blockchain is a hard feature that poses the question of putting the right incentives in place in order to motivate developers to move over;
TON DeFi ecosystem is just starting, representing a unique opportunity: we all know how important can be to be ahead of the curve with regard to new projects and protocols;
Privacy will be an important element of the TON network, also due to the team's background and ideological stand, as such TON could reclaim its place as one of the key privacy tokens to keep an eye on.