TONCOIN ($TON) Price Boom Incoming? Hype or Reality

Just a couple months ago, Ton was celebrated as the fastest growing blockchain of 2024. It onboarded tens of millions of users at record speed using the Telegram messaging app. But the trend has shifted. Network activity is down and token prices have been in freefall since the summer. The arrest of Telegram co founder Pavel Durov in August sent shockwaves through the crypto world, raising concerns about Telegram and Ton's future. So what's gone wrong? Was Ton's meteoric rise just hype? And how much growth potential does Khan still have? We answer all these questions in this video and as always, remember, this is not financial advice. And some of us on the team do hold Ton in our portfolio. But with that, let's dive in and unpack the story behind the headlines. First, some background. Ton, short for the Open Network, is a layer one open source blockchain that was initially developed by the Telegram team in 2018. Using a proof of stake mechanism. With sharding, TON enables fast, low cost transactions. Initially raising $1.7 billion in an ICO, the project faced a setback when the US SEC accused Telegram of selling unregistered securities. Following a legal dispute, Telegram stepped away from Ton in 2020, leaving development to the community led by the Ton Foundation, a Swiss nonprofit. Fast forward to 2024 and Ton is exploding. Monthly active addresses on TON shot up from 100,000 in September 2023 to to 10 million a year later. That's mainly due to one factor. Distribution. Ton's seamless integration with Telegram gave it access to the messenger's 900 million monthly active users through mini apps built directly into Telegram. TON has made it incredibly easy for average users to engage with its blockchain ecosystem.

Distribution is the most powerful force within technology markets. We've seen big tech use this playbook to absolutely dominate. We've seen base in crypto use distribution to, you know, thrust itself into, you know, being a top five, top three network in a very short period of time.

This ease of access is one of the main reasons why VC firms like Pantera Capital and Animoca Brands have heavily invested in Ton.

If we look historically, crypto builders have been focused on infrastructure improvements first, then building applications, then third, finally, distribution. The thesis for tonight is actually flipping on its head, and it's basically investing in a network that's focused on distribution as its killer advantage.

The best example of Ton's integration into Telegram is the Ton wallet, which allows users to transfer tokens easily within the app, bypassing the need for complex setups like seed phrases. Or external accounts. But the main driver of user adoption of ton has been gaming. Telegram offers a unique distribution platform for developers of Web3 games, television tap to earn. Games like Natcoin and Hamster Combat have drawn in tens of millions of players, enticing them with the promise of free crypto through airdrops. And by the way, if you want to learn more about how these games work, be sure to watch our dedicated video. We'll put a link in the description.

We were unable to find the kind of distribution outlets until basically Telegram came along and with Ton blockchain opened up their ecosystem and said, you know what? You can avail to our network, to our users and grow basically the gaming ecosystem and other areas of web three.

Mini apps played the biggest role in the growth of ton ecosystem and the number of active wallets involved in the ecosystem these days. Our strategy was to acquire as more audience as we can get, utilizing the opportunity of Telegram as a social network with its viral and organic mechanics, to acquire audience and to spread the word.

Now, if all of this sounds too good to be true, you're right. After last summer's hype, the activity on Ton has dropped significantly daily. Active users have fallen from a peak of 1.4 million in September to under half a million by the end of October. A lot of that activity was driven by the hype surrounding the hamster combat airdropped, which happened in September. Since then, excitement faded. The game's active users were down over 50% in the last month. The total value locked or TVL on ton has also dropped to about half of its peak value, suggesting that much of the network's activity was unsustainable, sustainable.

This user is not medium to long term. He's gonna play until it's making money, when it's not profitable anymore. If there's another offering giving away more money, he's gonna change for that. So he's not holding ton tokens.

It also turned out that a lot of Ton's activity wasn't really genuine. Bots were infiltrating the network's metrics in order to extract value. The downtrend also affected Ton's native token. Prices have plummeted since last summer, in contrast to the rallies we're seeing in other major cryptos. To make things worse, Telegram founder Pavel Durov was arrested in France facing serious charges related to allegedly facilitating illegal activities on the platform, from drug trafficking to child exploitation. But Durov's arrest isn't likely the main reason behind Ton's recent price slide. The real reason seems to be using Airdrops as an onboarding model. After receiving free ton based tokens, a large portion of users just cash out as soon as they can. As a result, Hamster Combat and natcoin have lost most of their initial value.

Since if you give stuff for free, nobody will value it. There's no fees or they're too low to compensate for the ton issuing that are giving away for users or for games and etc. So the selling pressure from the VCs and from the game users will continue causing the ton token price to go down.

That's what researchers at Blockworks warned about back in July. The Ton narrative had become overheated. The market had already priced in Ton's large growth potential, but leaving new investors with little margin of safety.

Ton was trading at a $40 billion valuation that was greater than Datadog, it was greater than the nasdaq, it was greater than Coinbase at that time. And that just seemed to me, you know, incorrect.

In order to ensure long term success, Ton will need developers building quality apps on the network. And here's where Ton faces another hurdle. It uses a programming language called Funko, which isn't compatible with the Ethereum virtual machine, which is the standard for blockchain programming. The lack of EVM support could make it difficult to attract new developers, as they'd have to learn a new language. Only Solana has managed to build a large developer community outside of the EVM ecosystem. Still, supporters believe that Ton's access to Telegram's massive user base could be enough to draw developers in.

Now, as I'm a developer, I now know that there are millions and millions of users on ton that have a wallet, that have certain assets, that have some tokens, and if I have a product I think I can sell to them, then they can give me some of those tokens that I can then use to build my business. That's actually the kind of spending power that Ton is building.

Yes, Telegram's monthly user base is impressive, but it could be misleading without looking at the daily active users. Researchers at Blockworks note that Telegram's daily to monthly user ratio is relatively low compared to other major messengers and social networks.

For a messaging app where messaging is so integral to daily life, we hoped that it would be a little bit higher. You've had two decades of network effects compounding within messaging apps globally in the technology space, like WhatsApp has a lot of mindshare. WeChat has tremendous mindshare. It's very, very hard to compete with those applications.

But don't despair Ton fans out there. Despite the challenges we've mentioned, Ton is still relatively young compared to competitors like Ethereum or Solana. While Telegram's distribution might be a little overestimated, it's still the only social network that integrates seamlessly with Web3, and that remains its most powerful advantage. Yes, the growth we saw this year was significantly inflated, but activity on the network now is still far higher than it was just one year ago.

That's why people are joining the ecosystem, because they hope to make money from it. But then there's a bunch of people that stay behind because they believe in this more, right? And they think that there's something greater. And you build from there.

The Town foundation has a bold vision. By 2028, they aim to enable 500 million users to own their digital identity data and assets, all within a Web3 ecosystem built right into the Telegram Messenger. Their success will hinge on attracting a strong community of developers. These developers will have to make new applications and new use cases to build on the audience gained from this year's Tap to earn games.

And now they have a wallet. And now they have a thing. They've already been educated on what crypto is. What are the applications we can build for them from their wallet? Maybe using some of the Hamster Combat coins.

Or maybe not.

It looks like payments, looks like advertising. Maybe it looks like social commerce.

Let's say Hamster Combat does not succeed in making a better game. It does not succeed in creating, you know, a game that will attract the users to stay in Hamster Combat. Fine. However, because the people have a wallet in Tong, it is not only up to Hamster Combat to keep the users. It's up to anyone else in ton. It's not up to one company to succeed. It's up to hundreds or thousands of them.

Well, that's all for today's video, but.

What do you think?

Are you bullish or bearish on Ton's future? Let us know in the comments below. And if you found this video helpful, be sure to like and subscribe for more deep dives in the crypto space. Thanks for watching and we'll see you in the next one. It.