According to a report on May 12, Pavel Durov announced the ultimate shutdown of the TON project. Two and a half years ago, he raised $1.7 billion from investors for a revolutionary blockchain intended to transform people’s ideas about payments and build a decentralized Internet.
Durov considers that the failure of the project is the fault of the American court, while his investors blame the entrepreneur himself. How the story will end is still unclear, but the TON shutdown is probably not the end at all. Changelly has always been following different young cryptocurrencies, and TON is not an exception. So let’s find out the roots of the biggest crypto fail of 2020.
What Was TON?
Let’s briefly speak about the idea of the TON network.
TON or Telegram Open Network is a Peer-to-Peer multi-blockchain platform with a built-in Gram (GRM). TON was the project of the developers of Telegram and VK.com social network. The goal of the TON crypto creators was to surpass existing blockchain projects, including Bitcoin and Ethereum, in speed and scalability. They planned to achieve this by using the Proof-of-Stake (PoS) consensus algorithm, the Byzantine Fault Tolerant Protocol, sharding technology, and Instant Hypercube Routing.
The key service was to be the TON Payments and its crypto wallet. The blockchain architecture was supposed to provide an unprecedented speed of operations (millions of transactions per second).
What Went Wrong?
Six months before Durov’s ICO (Pavel Durov is the CEO of Telegram), the SEC published the results of an investigation about the DAO crypto project, where it was first mentioned as cryptocurrency securities. This was a direct warning that such securitization in the US without registering tokens in SEC would be a violation of US laws. The same happened to such projects as Kick and Block.One.
The SEC sued Telegram for October 11, 2019, less than a month before the TON blockchain launch. It destroyed all the plans of both the company and its investors. The Telegram was temporarily banned from releasing Gram. At the end of October, a week before the launch, Telegram offered investors to take 77% of the investment now, or wait another six months, until April 30, 2020. Up to this moment, the company promised to either solve the problem or return the investors’ money.
However, it did not work.
TON vs US Government
May 12, 2020, Pavel Durov publishes a post on his blog explaining why the TON project is over. He says that the US court prohibits TON, which is senseless for the entire world.
How? Imagine that several people put their money together to build a gold mine – and to later split the gold that comes out of it. Then a judge comes and tells the mine builders: “Many people invested in the gold mine because they were looking for profits. And they didn’t want that gold for themselves, they wanted to sell it to other people. Because of this, you are not allowed to give them the gold.”
The Telegram CEO claims that the US government played a role in preventing the TON launch, which is based on principles of decentralization. Durov also points out that the majority of global financial processes are under US supervision.
Perhaps even more paradoxically, the US court declared that Grams couldn’t be distributed not only in the United States but globally. Why? Because, it said, a US citizen might find some way of accessing the TON platform after it launched. So, to prevent this, Grams shouldn’t be allowed to be distributed anywhere in the world – even if every other country on the planet seemed to be perfectly fine with TON
He also underlined that the court’s decision violates the sovereignty of jurisdictions around the world, stating:
“This court decision implies that other countries don’t have the sovereignty to decide what is good and what is bad for their own citizens.”
Durov also concluded that among 96% of people who live around the world, there are only 4% of those who vote for the politics we should all depend on.
What About Investors?
In January 2018, when it all started, it seemed that the project had a great future. In two rounds of ICO, Telegram collected $1.7 billion from investors.
It became known From the court materials that Telegram has 175 investors (funds and individuals), 39 of them are from the United States. Americans invested $424.5 million in TON, including the most significant funds in the Valley: Kleiner Perkins, Benchmark and Sequoia Capital.
This week, Telegram put forward a final offer to investors. After the TON ban, the company promised that everyone who is not related to the US will return 110% of the original investment in a year, or 72% of it now. Investors were divided into two groups: those who agreed to wait one more year, and those who would like to take their funds immediately.
On May 7, the Free TON Community, which includes developers of the TON blockchain platform and its potential users, launched the Free TON platform-without the participation of the leading project founder Pavel Durov.
The Free TON platform is based on the TON Protocol, which was created by Nikolai Durov, a programmer and brother of Telegram founder Pavel Durov. The platform will have the same features, but it is not yet known whether it will be integrated into the Telegram messenger.
Dmitry Goroshevsky, a significant member of Free TON, left a comment on Durov’s post:
Well it’s quite clear. Pavel was forced to do this statement. Yet I agree with every sentiment it has and particularly with the last statement regarding decentralization. This resonates exactly right with Free TON goals. We will continue to develop, build, and distribute TON around the world. We will get it into the hands of millions of people. Because that is the right goal!
In his post, Pavel Durov sums up:
I want to conclude this post by wishing luck to all those striving for decentralization, balance, and equality in the world. You are fighting the right battle. This battle may well be the most important battle of our generation. We hope that you succeed where we have failed.
TON was a significant project that failed. Anyone related to the crypto community should realize that rules and regulations are essential. If you are a developer, miner, investor, or even hodler, you have to check if your actions are legitimate in the country you stay in. We are sure that TON is going to be an excellent example for the crypto society not to make this mistake again.
Remember, that the Gram tokens are not a thing anymore. Only fraudsters offer users to exchange or buy Gram tokens. If you are interested in purchasing or swapping coins, Changelly platform offers you a way to exchange over 150 cryptocurrencies using your banking card swiftly, safely, and with minimal authentication procedure.