Telegram Open Network

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The Open Network
The open network logo.svg
Other namesTON, Telegram Open Network
Original author(s)Nikolai Durov, Pavel Durov
Developer(s)newton-blockchain, Telegram (no longer participation)
Repositorygithub.com/newton-blockchain
Written inC++
LicenseGNU LGPL v2
Wallet example
For access to wallets uses 24 secret words, on the basis of which calculates 256-bit private key of the wallet

The Open Network (previous Telegram Open Network, both abb. as TON) is a blockchain-based decentralized computer network technology, originally developed by the Telegram team. In May 2020, Telegram withdrew from the project after litigation with the US Securities and Exchange Commission.

History[edit]

Since the release of Telegram messenger in 2013, its CEO Pavel Durov emphasized that instant messenger will not include advertising. According to documents related to U.S. Securities and Exchange Commission (SEC) v. Telegram suit (2020), by 2017, the self-funded startup needed money to pay for servers and services. Durov considered venture capital financing but decided against it until the problems are solved.[1] In the mid-December 2017 Bloomberg interview, Durov announced that Telegram would begin monetization in early 2018.[2] TechCrunch had soon confirmed that the company planned launch a blockchain project named “The Open Network” or “Telegram Open Network” (TON) and its native cryptocurrency “Gram”.[3]

In January 2018, a 23-page white paper[4] and a detailed 132-page technical paper[5] shed some light on the project. According to documents, the Durovs planned to attract the existing Telegram user base to TON and promote the mass adoption of cryptocurrencies, turning it into one of the largest blockchains. TON was described as a platform for decentralized apps and services akin to WeChat, Google Play, or App Store,[6][7] or even a decentralized alternative to payment processing services of Visa and MasterCard due to its ability to scale and support millions of transactions per second.[8][9][10] The codebase for TON was created by Nikolai Durov, the developer of Telegram's MTProto protocol, and Pavel became the public figure for the project.[10]

Gram Private Sale[edit]

To fund the development of the messenger and the blockchain project, Telegram attracted investments through a private Gram offering.[11] A two-step legal scheme was employed: Gram purchase agreement was structured as a future contract that allowed investors to receive tokens once TON is 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.[12] The contract was drafted by major U.S. law firm Skadden.[13]

The offering ran in two rounds, each taking in $850 million. Russian tech news site calculated the first round as offering 2.25 billion tokens at $0.38 each, with a minimum purchase of $20 million, and the second as offering 640 million tokens at $1.33 each, with a minimum purchase of $1 million.[14][15] As of April 2018, the firm had reported raising $1.7 billion through the ongoing ICO.[16] Company officials have not made any public statements regarding the ICO. As of spring 2018, the only official sources of information were the two Forms D that Telegram filed with the U.S. Securities and Exchange Commission.[17]

Development[edit]

The development of TON took place in a completely isolated manner and was opaque for the whole time.[8] The launch of the test network was initially scheduled for Q2 2018 with the main network launch in Q4, but the milestones were postponed several times. The testnet was launched in January 2019 with a half a year deviation from the plan.[18] In May the company released the lite version of the TON blockchain network client.[19] In September the company released the complete source code for TON nodes on GitHub, making it possible to launch a full node and explore the testnet.[20][21] The launch of the TON main network was scheduled for October 31.[22][23]

SEC v. Telegram[edit]

SEC had concerns about Gram private sale and contacted Telegram shortly after, but over the 18 months of communication, the sides didn't come to understanding.[citation needed] On October 11, 2019, a couple of weeks before the planned TON launch, SEC obtained a temporary restrictive order to prevent the distribution of Grams. The regulator contended that initial Gram purchasers would be acting akin to underwriters, and the resale of Grams, once distributed, will be an unregistered distribution of securities.[24]

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 the SEC's vision[25] 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 secondary market in an unregistered security offering. The "security" at issue consisted of the whole set of contracts, expectations, and understandings around the sale and the distribution of tokens to interested public, and not the Grams themselves. In this case the initial purchasers acted as underwriters that planned to resell tokens, and not to consume them. The restrictions on Gram distribution remained in force for purchasers based in and outside U.S., as Telegram had no tools to prevent U.S. citizens from purchasing Grams on secondary market.[26][27][24]

Following the court decision, the Telegram Open Network team announced that they would be unable to launch the project by the expected 30 April 2020 deadline. On 12 May 2020, Pavel Durov announced the end of Telegram's active involvement with TON.[28][29] On June 11, 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. The company also agreed to notify SEC of any plans to issue digital assets over the next three years. The judge approved the settlement on June 26. "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," the SEC spokesperson noted. Telegram had subsequently shut down TON test network[30]

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, the company made the placement of 5-year bonds worth $1 billion to cover the debts it had to return by 30 April 2021.[31][32]

Post Telegram[edit]

By May 2020, when Telegram's commitment to the project was unclear, other projects started to develop the technology.[33]

Launched on May 7, 2020,[34] Free TON is a project to continue development of Telegram Open Network technology using the source code freely available under GNU GPL.[35] By January 2021, the community of the project reached 30,000 people.[36] Free TON's token titled "TON Crystal" or just "TON" is distributed as a reward for contributions to the network.[37] Of five billion tokens issued at the moment of launch, 85% were reserved for users, 5% for validators, and 10% for the developers (including 5% dedicated for TON Labs, the developer of TON OS middleware for TON blockchain, which is the essential part of Free TON).[38][39][34]

On June 29, 2021, the Telegram team said they would consider granting use of the ton.org domain and GitHub repository to the TON Foundation, in response to an open letter. By August 4 the domain was transferred to the TON Foundation.[40][41]

Architecture[edit]

TON was designed to enable processing millions of transactions every second. It also allows building Web3 empowered by decentralized storage, DNS equivalent, instant payments and decentralized services (or DApps).

TON was planned to be a network of blockchains of different types and aims at achieving increased scalability. It was hoped to shard into up to shard blockchains (shardchains) which themselves would be the shards of working blockchains (workchains) all validated and committed into one master blockchain (masterchain).

References[edit]

  1. ^ "Plaintiff Securities and Exchange Commission's memorandum of law in support of its motion for summary judgement" (PDF). January 13, 2020.
  2. ^ Stepan Kravchenko, Nour Al Ali, and Ilya Khrennikov (11 December 2017). "This $5 Billion Encrypted App Isn't for Sale at Any Price". Bloomberg. Retrieved 8 March 2021.{{cite web}}: CS1 maint: multiple names: authors list (link)
  3. ^ Butcher, Mike. "Telegram plans multi-billion dollar ICO for chat cryptocurrency". TechCrunch. Retrieved 12 January 2018.
  4. ^ "TON.pdf". Google Docs.
  5. ^ "TON.pdf". Google Docs.
  6. ^ Mike Butcher, Josh Konstine (January 8, 2018). "Telegram plans multi-billion dollar ICO for chat cryptocurrency". TechCrunch. Retrieved 4 April 2020.
  7. ^ Jon Russel (January 15, 2018). "Inside Telegram's ambitious $1.2B ICO to create the next Ethereum". TechCrunch. Retrieved 4 April 2020.
  8. ^ a b "Exploring Telegram Open Network". Binance Research. September 27, 2019. Retrieved 4 April 2020.
  9. ^ Josh Nadeau (January 15, 2020). "Telegram's Pavel Durov in court over his quest to revolutionize cryptocurrency". Russia Beyond The Headlines. Retrieved 4 April 2020.
  10. ^ a b "TON & Gram: how it started and why it ended". PaySpace Magazine. October 9, 2020. Retrieved 5 April 2021.
  11. ^ Mix. "Here is the leaked white paper for the massive Telegram ICO". HardFork. Retrieved 6 April 2018.
  12. ^ Rachel McIntosh (October 18, 2019). "SEC vs. Telegram: Will Gram Tokens Ever Be Distributed?". Finance Magnates. Retrieved 5 April 2021.
  13. ^ Cali Haan (August 20, 2019). "Unauthorized Telegram Token Secondary Market Transferring Risk". Crowdfund Insider. Retrieved 5 April 2021.
  14. ^ Korolev, Igor (2 April 2018). "Under what conditions will Telegram return to investors the collected $ 2.55 billion". CNews (in Russian). Retrieved 12 October 2018.
  15. ^ Liptak, Andrew (1 April 2018). "Telegram has raised a total of $1.7 billion from its two pre-ICO sales". The Verge. Retrieved 12 October 2018.
  16. ^ Shen, Lucinda (31 March 2018). "Even as Bitcoin Languishes, Telegram Raises $1.7 Billion Ahead of Largest ICO Ever". Fortune. Retrieved 31 March 2018.
  17. ^ "Telegram Files New Form D with SEC Indicating $1.7 Billion will be Raised | Crowdfund Insider". Crowdfund Insider. 2 April 2018. Retrieved 6 April 2018.
  18. ^ "Despite delay, Durov on track to launch his cryptocurrency in March". The Bell. January 23, 2019. Retrieved 17 March 2021.
  19. ^ Denis Olshansky (27 May 2019). "Тестовый клиент TON (Telegram Open Network) и новый язык Fift для смарт-контрактов" [TON test client and FIft language for smart contracts] (in Russian). Habr. Retrieved 7 June 2021.
  20. ^ "Telegram может начать публичное тестирование своего блокчейна 1 сентября" [Telegram may start testing its blockchain on September 1st] (in Russian). Vedomosti. 28 August 2019. Retrieved 7 June 2021.
  21. ^ Vladislav Voytenko (7 September 2019). "Исходный код TON Blockchain теперь доступен на GitHub" [TON blockchain source code now available on GitHub] (in Russian). Kod. Retrieved 7 June 2021.
  22. ^ Sean Hollister (27 August 2019). "Telegram will launch its Gram cryptocurrency by October 31 or bust". The Verge. Retrieved 21 March 2021.
  23. ^ Mikhail Tetkin (26 June 2020). "Самолет в никуда. Весь путь развития Telegram Open Network" [A plane to nowhere. The history of Telegram Open Network] (in Russian). RBC. Retrieved 7 June 2021.
  24. ^ a b Robert A. Schwinger (May 26, 2020). "Blockchain law. A "Telegram" to SAFTs: "Beware!"" (PDF). New York Law Journal. Retrieved 15 March 2021.
  25. ^ "SEC v. Telegram: Key Takeaways and Implications". www.cooley.com. Retrieved 13 May 2020.
  26. ^ "Is There Life for SAFTs After the Telegram Case?". JD Supra. July 21, 2020. Retrieved 10 March 2021.
  27. ^ David I. Miller, Charlie Berk (2020-04-01). "SEC v. Telegram: A Groundbreaking Decision in Cryptocurrency Enforcement?". Greenberg Traurig. Retrieved 10 March 2021.
  28. ^ "What Was TON And Why It Is Over". Pavel Durov. 12 May 2020. Retrieved 12 May 2020.
  29. ^ Durov, Pavel (2020-05-12). "What Was TON And Why It Is Over". Telegraph – Pavel Durov. Retrieved 2020-05-22.
  30. ^ "Telegram to pay SEC fine of $18.5 million and return $1.2 billion to investors as it dissolves TON". Techcrunch. 26 June 2020. Retrieved 28 June 2020.
  31. ^ Павел Казарновский, Владислав Скобелев, Анна Балашова (15 March 2021). "Telegram разместил бонды на $1 млрд. На каких условиях инвесторы рискнули вложиться во внебиржевые бумаги" [What were the terms of Telegram's $1 billion bonds placement] (in Russian). RBC. Retrieved 15 March 2021.{{cite news}}: CS1 maint: multiple names: authors list (link)
  32. ^ Schechner, Sam (2021-03-15). "Telegram App Is Booming but Needs Advertisers—and $700 Million Soon". Wall Street Journal. ISSN 0099-9660. Retrieved 2021-03-16.
  33. ^ Ivan Sychev (14 January 2021). "Free TON вырос до $200 млн и планирует дойти до $1 млрд" [Free TON capitalisation reached $200 million and aims for $1 billion] (in Russian). VC.ru. Retrieved 8 June 2021.
  34. ^ a b "Недооцененный блокчейн: как разработчики платформы TON запустили ее под другим названием и привлекли $6 млн" [Underrated blockchain: how the developers of TON launched it under the other name and raised $6 million] (in Russian). Forbes. 20 May 2021. Retrieved 30 May 2021.
  35. ^ "ton/ton-blockchain". GitHub. Retrieved 8 June 2021.
  36. ^ Ivan Sychev (14 January 2021). "Free TON вырос до $200 млн и планирует дойти до $1 млрд" [Free TON capitalisation reached $200 million and aims for $1 billion] (in Russian). VC.ru. Retrieved 8 June 2021.
  37. ^ Vladislav Skobelev, Anastasia Skrinnikova (7 May 2020). "Блокчейн-платформу TON запустили без Павла Дурова и Telegram. Но без аудитории мессенджера проект рискует остаться нишевым" [TON blockchain was launched without Pavel Durov and Telegram. But without Telegram users it risks to remain a niche product] (in Russian). RBC. Retrieved 7 June 2021.
  38. ^ Elyas Kasmi (8 May 2020). "Основателя Telegram не взяли в его собственный блокчейн-проект" [Telegram founder wasn't accepted into his own blockchain project] (in Russian). CNews. Retrieved 7 June 2021.
  39. ^ Mikhail Kabanov (22 May 2021). "TON: каким стал один из самых громких блокчейн-проектов без Дурова" [TON: What one of the most famous blockchain projects became without Pavel Durov] (in Russian). RBC. Retrieved 30 May 2021.
  40. ^ "Telegram response to an open letter". 2021-06-29.
  41. ^ "TON Legacy: How Telegram's Crypto Coin Lives On". Nasdaq. 2021-08-17.