TON Ecology Research Report: How Did On-Chain Transaction Volume Grow Over 30x and Lead to a Win-Win Situation with Telegram?

Original Title: TON Part 2: A win-win outcome from one year of partnership

Original Source: Animoca Brands Research

Original Translation: Mensh, Chaincatcher

Key Questions:

· How has TON progressed in its goal to onboard 500 million users to cryptocurrency?

· What strategies has the TON Foundation adopted to propel the ecosystem to a higher level?

· What benefits has Telegram gained from its collaboration with TON?

An Interesting Chart: Changes in total active wallets versus Jetton wallet count from September 30, 2023, to October.

Table of Contents

Introduction

Three-Step Strategy

Step One: Promote "Click to Earn" social games to onboard users to Telegram Mini Apps

Step Two: Convert Mini-App players to cryptocurrency holders through token airdrops

Step Three: Retain cryptocurrency users through DeFi applications Notcoin, Hamster Kombat, and Catizen

TON Blockchain Growth

· Activity

· Total Value Locked (TVL)

· Comparison with other Layer 1 blockchains

Summary of the TON Part

Telegram's Success

· Features related to the collaboration with TON

· Impact of the growth in Telegram's user base

· Effect on Telegram's profitability

Conclusion

TL;DR

· September 2023: The TON Foundation and Telegram announced a strategic partnership with the goal of onboardi...

· Notcoin's success paved the way for activating Mini-App users through social gaming. Subsequently, users were gradually exposed to cryptocurrency through game token and memecoin airdrops. To support this growth, the Foundation utilized TON Grants, The Open League, and offline events to achieve its objectives.

· July 2024: Telegram Mini Apps reached 500 million Monthly Active Users (MAU), driving Telegram's overall MAU to a new high of 95 million. By October, 30 million users had successfully entered the cryptocurrency space.

· The high interaction rate of Telegram Mini Apps not only enhanced user engagement on the Telegram platform but also significantly increased platform revenue, especially through increased subscription to premium accounts and exclusive Toncoin usage in the advertising platform. Telegram is expected to achieve its first profitable year in 2024, with an estimated annual revenue of $1 billion.

· To further accelerate ecosystem growth, the TON Foundation is transitioning from a centralized governance model to a community-driven fund allocation model through the 'Society DAO.' This shift aims to foster more development and innovation within the ecosystem.

Introduction

In September 2023, the TON Foundation deepened its collaboration with Telegram with the aim of onboarding 30% of Telegram's active users to the TON on-chain ecosystem by 2028. Since the announcement, the TON Foundation has been committed to nurturing the Telegram Mini-App (TMA) ecosystem, positioning the Mini-Apps as the gateway for existing Telegram users to enter the cryptocurrency ecosystem.

This partnership has allowed TON to reach over 9 billion Telegram users. For Telegram, the TON Foundation and its community-driven initiatives have become a core market expansion force for the Mini-App ecosystem, filling the market gap caused by the company's streamlined operations.

This article will explore the journey of both parties since their collaboration and the impact it has had so far.

Three-Step Strategy

As proposed in the collaboration announcement, Mini Apps serve as an intermediary layer connecting the TON infrastructure with Telegram's Web2 user base. Successfully implementing this strategy requires addressing the following three key questions:

1. How to attract Telegram users to Mini Apps?

2. How to convert Mini-App users into cryptocurrency users?

3. How to retain these cryptocurrency users in the long term?

Jack Booth, former Head of Marketing Development at the TON Foundation and Co-Founder of TON Society, shared insights on this strategy in a podcast interview in August 2023:

“We engage everyone through ‘click to earn,’ then some users can easily engage in global cryptocurrency transactions through DMs. Subsequently, some of these users will start using more complex DeFi products on TON. That's the logic behind the whole plan.”

In summary, the Foundation’s answers to the above questions are:

1. Promote ‘click to earn’ social games to attract users to Telegram Mini Apps.

2. Convert Mini-App players into cryptocurrency users through token airdrops.

3. Retain cryptocurrency users through DeFi applications.

In fact, these three-step strategies resemble a retrospective summary of community-driven innovative development rather than a top-down plan execution. Next, we will delve into these three sections in detail.

Step One: Promote ‘Click to Earn’ Social Games to Attract Users to Telegram Mini Apps

After the collaboration launch with Telegram, the TON Foundation actively leveraged its community engagement channels to drive the development of Mini Apps.

In the third quarter of 2024, GameFi projects began to appear in the recipients of TON Grants alongside traditional on-chain functionality projects. This shift indicated that the foundation had recognized the significant potential of game development in driving the adoption of Mini Apps.

In January 2024, the first groundbreaking Mini-App game, Notcoin, was launched. This "click to earn" social game quickly became a Telegram sensation, attracting 35 million users even before the TGE. Interestingly, Notcoin was entirely community-driven and was not initially part of the foundation's plans. However, its success prompted the foundation to include social games in its key funding areas.

In the first half of 2024, the number of funded GameFi projects continued to rise. For example, Hamster Kombat and Catizen were launched in March 2024, attracting 300 million and 39 million users, respectively, before the TGE.

By the end of May 2024, Telegram Mini Apps' Monthly Active Users (MAU) had reached 400 million, increasing to 500 million in July. Considering Telegram's total MAU at that time was around 950 million, this meant that over half of Telegram users were interacting with Mini Apps every month. Achieving this milestone in less than 10 months was undoubtedly a major success for the TON Foundation.

Step Two: Converting Mini-App Players to Cryptocurrency Users through Token Airdrops

The introduction of tokens and airdrops became a key step in converting Web2 players into cryptocurrency users. Points earned through the "click to earn" mechanism were converted into on-chain tokens with real market value, incentivizing users to explore and engage in crypto transactions.

The infrastructure supporting this conversion was already in place on Telegram. By November 2023, the Telegram wallet and the non-custodial TON Space wallet had been integrated into Telegram, allowing users outside the US to receive Jettons (TON blockchain's fungible token standard).

The launch of Notcoin and its airdrop was the first significant move in this conversion process. During the first week of the Notcoin token airdrop on May 16, 2024, 2.7 million out of 35 million users claimed the Notcoin tokens, increasing to 11 million by August. This impact was reflected in key metrics of the TON ecosystem: activated wallet numbers doubled from 4.2 million to 8.5 million in the first month of token launch, and wallets with non-zero balances increased from 3 million to 6 million during the same period.

This success was later replicated by subsequent social games such as Hamster Kombat (TGE on September 26, 2024) and Catizen (TGE on September 20, 2024). They brought in 3.2 million and 1.8 million on-chain token claims, respectively, driving further growth in the number of wallets with non-zero balances in October.

The GameFi-driven wallet adoption laid the groundwork for a broader cryptocurrency use case on TON. For example, the meme coin DOGS became the first popular meme coin on the TON network, and its launch at the end of August 2024 set off a new wave of wallet activations, paving the way for subsequent game token issuances. This success was entirely community-driven, unexpected but impactful.

By November 1, 2024, the registered users on TON Space (Telegram's non-custodial wallet) had reached 100 million, while the total activated wallets on the TON blockchain (including TON Space and third-party on-chain wallets) reached 34 million.

Step 3: Retaining Cryptocurrency Users Through DeFi Applications

After attracting Telegram users to the Mini-App and introducing them to cryptocurrency, retaining these users within the ecosystem becomes a key focus for projects and foundations.

The challenge of user retention can be illustrated through the performance of GameFi projects in on-chain TON transactions. Measured by Unique Active Wallets (UAW) on a daily basis, top-performing projects can maintain about 60% of their daily active users after their activity peaks. However, for projects with moderate and lower performance, the retention rates drop sharply: second-tier projects can retain only 37%, while third-tier projects can retain only 25% of their activity.

Measures to Combat User Churn

To address this issue, the TON Foundation and project teams strengthen user retention through the following:

1. DeFi Tool Integration: Introducing decentralized exchanges (DEX), staking, and liquidity mining tools to provide users with more opportunities for crypto asset management and yield.

2. Reward Mechanism Optimization: Incentivizing long-term user engagement in on-chain activities through airdrops and in-game economic designs.

3. User Education and Support: Helping users become familiar with more complex DeFi applications through in-app tutorials and interactive communities within the Mini-App to lower the learning curve.

4. Ecosystem Linkage: Bringing GameFi users into other application scenarios, such as the NFT market, DAO participation, and on-chain payments, further expanding the value network of the TON ecosystem.

While there is still room for improvement in retention rates, the Foundation's measures are gradually consolidating long-term user engagement, laying the foundation for the sustainable development of the TON ecosystem.

Although the TON Grant program mainly focuses on supporting initial development of applications within the ecosystem, The Open League (TOL) has emerged as a more effective alternative to promoting user retention. Launched by the TON Society in January 2024, TOL is an incentive program designed to reward projects that perform the best during specific periods. Unlike funding that emphasizes project potential, TOL focuses on rewarding actual results. The program is divided into four competition categories: App, DeFi, Token, and NFT. Each category uses specific metrics to evaluate the performance of a DApp or token. Seasons typically last from two weeks to two months, allowing the Foundation to adjust incentive measures based on rapidly changing dynamics.

Particularly in the App category, the evaluation of Telegram Mini Apps is based on a series of on-chain interaction metrics (such as unique active wallets and per-user transaction volume), as well as online metrics, including the number of Telegram users and the user stickiness of the Mini-App.

While all four categories play a crucial role in strengthening the ecosystem, the shifting focus among them reflects the evolving priorities of the TON Foundation. Tokens and Apps have always been important reward categories. DeFi stopped receiving rewards after the first two seasons but regained attention in the fifth season.

In the sixth season, the TON Foundation made significant adjustments to the TOL model. Instead of providing Toncoin rewards to projects that can attract user interest, the Foundation now directly rewards users who can bring more activity to projects. This new approach includes two main initiatives:

1. Normie Airdrop: Encouraging users to explore DApps by granting them "Normie Scores," which can be redeemed for Toncoin tokens or project airdrop rewards.

2. Degen Airdrop: Targeted at traders, providing rewards based on a "Degen Score" that evaluates their trading activity and liquidity.

The shift from funding developers to incentivizing on-chain users, especially those driving more transactions and liquidity, reflects a belief of the TON Foundation that widespread user engagement across Telegram Mini Apps and DApps is more impactful than focusing on a few top-performing projects.

Furthermore, in October, the TON Foundation supported the launch of Memelandia, a community support organization aiming to foster the growth of the meme coin ecosystem within the TON ecosystem. This indicates the Foundation's recognition of the important role meme coins play in driving community engagement and on-chain activity. Early success stories include DOGS, which reached 17 million holders and a peak daily trading volume of 14.4 million transactions.

While Jack viewed DeFi as the primary user retention tool in his August comments, the actual development trajectory demonstrates a broader trend towards diversification. GameFi, meme coins, and DeFi are becoming key contributors to sustaining an active and engaged TON Mini App community.

Simultaneously, the TON Foundation is gradually transitioning to a more decentralized governance structure, particularly in promoting community-driven initiatives. This shift is reflected in the independent operation of TON Society in August and the introduction of the Society DAO in December. Through this decentralized decision-making framework, community members are empowered to explore and leverage emerging opportunities in various areas of the TON ecosystem, further accelerating its growth.

Notcoin, Hamster Kombat, and Catizen

As one of the most successful categories in this collaboration, three standout projects deserve a closer look: Notcoin, Hamster Kombat, and Catizen.

Along the user conversion path mentioned earlier, the explicit support from TON Grants and the outcomes of TOL indicate that GameFi projects, especially those adopting the "tap-to-earn" model, serve as the "engine" of the entire conversion path.

These three games engage users through simple gameplay (such as tap operations) to earn points. Users can also earn additional points by participating in social referral programs and inviting friends to join the game, rapidly expanding the user base. After the Token Generation Event (TGE), points can be exchanged for airdrop rewards, thereby activating users' wallets.

Following a Sybil detection process used to identify and prevent fake players, around 40% of players were found to be eligible for the airdrop in Hamster Kombat and Catizen. Nevertheless, the actual number of players in these games still exceeded ten million, with Hamster Kombat's user base even surpassing one billion. This level of engagement now rivals mainstream mobile games.

The on-chain activity demonstrates the effectiveness of attracting users to cryptocurrencies. As of November 16, 2024, the number of holders of Notcoin, Hamster Kombat, and Catizen is 2.9 million, 1.3 million, and 1.6 million, respectively, surpassing the holder count of mainstream GameFi tokens.

From one month after the TGE to November 8, 2024, the proportion of non-zero addresses (defined as addresses holding a Jetton balance) to total addresses that ever held Jetton is as follows:

· Notcoin: approximately 40%

· Hamster Kombat: approximately 80%

· Catizen: approximately 70%

These variances indicate that users of Hamster Kombat and Catizen exhibit higher loyalty as holders, possibly benefiting from the implementation of a Sybil detection process.

TON Blockchain Growth

With the successful attraction and conversion of Telegram users, the TON blockchain has experienced significant growth.

Activity Data

· Wallets: As of October 2024, the number of activated wallets has increased from 800,000 in September 2023 to 32 million, a 39x growth. Additionally, the number of non-zero balance Jetton wallets has grown to 22 million, indicating a large number of activated wallets are being actively used.

· User Engagement: Monthly Active Wallets (MAWs) reached 10 million in October, with Daily Active Wallets (DAWs) at 800,000. Both figures have grown over 90x compared to 14 months ago.

Cryptocurrency Usage

· On-Chain Transaction Volume: Monthly on-chain transaction volume (by transaction count) reached 200 million in October 2024, a 30x increase from September 2023, with around 60% of transactions involving Toncoin transfers.

· Transaction Fees: Monthly on-chain transaction fees increased to $5.1 million, demonstrating the high activity within the TON ecosystem.

Total Value Locked (TVL)

Total TVL: As of October 2024, the Total Value Locked (TVL), including liquid staking, reached $726 million. This growth was primarily driven by the expansion of decentralized exchanges (DEX) and liquidity staking protocols. With the support of TON Grants and the momentum of the TON Early Seasons, liquidity staking protocols and DEX reached TVLs of $335 million and $342 million, respectively. STON.fi and DeDust.io have emerged as the two leading DEXs on the platform.

Comparison with Other Layer1

To better understand these data points, TON's key metrics and TVL can be compared to other major Layer1 blockchains. While TON still has room for growth in absolute on-chain usage scale, its development trajectory is remarkable.

· In the time taken for monthly transaction volume to grow from 5 million to 30 million, Ethereum took 52 months, Avalanche took 28 months, and TON only took 5 months.

· In terms of TVL growth rate, TON is on par with other Layer1 solutions.

In recent scale-related metrics, TON's transaction fees and native token transfer volume are still smaller than Ethereum. However, when compared to infrastructure projects of similar market capitalization (such as Avalanche), TON leads in transaction fees and native token transfer volume. The volume of Toncoin transactions on-chain has reached 20% of Ethereum, highlighting Toncoin's widespread use as a digital currency within the TON ecosystem.

Summary: Challenges Ahead for TON

The collaboration between TON and Telegram has greatly enhanced TON's ability to attract developers and ignite community engagement. The early success of the social game Notcoin catalyzed exponential growth in Telegram Mini App usage, and subsequent initiatives such as airdrops and the introduction of meme coins like DOGS successfully onboarded a significant number of Telegram Mini App users into the Web3 ecosystem. This rapid expansion is an achievement unmatched by other major Layer1 protocols.

However, challenges remain. The ability of TON and Telegram Mini Apps to maintain user stickiness after the initial hype is yet to be proven. Gaming, meme coins, and DeFi all have the potential to nurture a sustainable Web3 user base, but achieving the key target of attracting 500 million users by 2028 will require a 20x increase from the current baseline of around 30 million activated wallets.

To address these challenges, the Foundation has shifted from a top-down governance model to a more community-driven resource allocation approach. This transition aims to empower the TON community with greater authority to better explore and seize growth opportunities. It can be expected that new TON initiatives from communities worldwide will continue to thrive. Ultimately, a flourishing ecosystem is built on a foundation of diversity and adaptability.

Telegram's Success

Telegram is a messaging platform with 950 million monthly active users, operated by an extremely lean team consisting of only 30 engineers and 50 employees. This lean structure ensures the company can focus on scalable technical development, such as core messaging features and developer SDK, or high-impact partnerships, like integrating wallets and stablecoins into the platform. However, for labor-intensive activities like developer engagement or ad operations, Telegram relies on outsourcing or entrusts these opportunities to external parties.

This operational philosophy was reflected in Telegram's collaboration with Mini Apps. Mini Apps were initially introduced as "Web Apps" alongside the Telegram Bot API v6.0 release in April 2022, allowing developers to launch rich web experiences directly through Telegram bots (e.g., games and media). In June 2023, with the release of API v6.7, Web Apps were officially rebranded as Telegram Mini Apps. Despite the enhanced functionality, Mini Apps did not attract much attention in their initial 18 months.

It was during this period that the TON Foundation became an ideal partner for Telegram to promote Mini Apps. Leveraging its global developer community and the ability to distribute incentives from the Toncoin reserve, the Foundation played a key role in driving the adoption of Mini Apps.

The success of Telegram Mini Apps not only strengthened the platform's user base but also provided Telegram with an opportunity to monetize through increased user engagement. Revenue streams like premium accounts, digital collectibles, and advertising are directly linked to the growing ecosystem. With Telegram planning an IPO by 2026, leveraging this wave of platform growth for profitability is crucial for Telegram.

TON Partnership-Related Features

Since the partnership, Telegram has been rolling out features related to TON and Mini Apps. These features either lay the groundwork for integrating cryptocurrency into the Telegram ecosystem or support the growth and adoption of Mini Apps.

TON Wallet: In November 2023, Telegram partnered with third-party developer The Open Platform (TOP) to release its native wallet. The wallet follows a custodial format, where encrypted transactions are held on a central server, similar to centralized exchanges. It also includes a non-custodial wallet option, TON Space, integrated within the wallet interface, providing direct on-chain transactions akin to MetaMask.

USDT on TON: In April 2024, Tether USD (USDT) — the largest stablecoin by market capitalization — launched its TON version. Through this move, Telegram users can engage in encrypted dollar transactions directly through the native wallet or third-party wallets. While this feature may seem like a natural step for the TON Foundation, it was actually ensured by the Telegram team through this partnership.

Telegram Stars: Stars, launched in June 2024, is Telegram's online points system that allows users to purchase digital goods and services. Users can buy Stars with fiat through Apple and Google stores or with Toncoin through Fragment. For Telegram's businesses and channel owners, Stars can serve as an additional feature to help them derive value from users. For example:

· Set up a paywall using Stars as a payment method.

· Receive donations directly from users.

· Purchase ads at around a 35% discount (e.g., $0.013 worth of Stars can buy a $0.02 ad).

While Stars are non-refundable, accounts holding over 1000 Stars can withdraw Toncoin funds via Fragment. There is no fiat value pegged during purchase or refund.

Mini-App Store: In August 2024, Telegram introduced "Apps" as a new category in its search bar, streamlining the discovery process for Mini Apps. Although this feature more closely resembles a search tool within an app store rather than a standalone app store, it provides users with a high-level entry point for accessing Mini Apps. Despite the naming difference, this update complements the earlier release of the Telegram Apps Center by the TON Foundation (a Mini-App-style Mini Apps store).

Telegram Mini-App 2.0: On November 17, 2024, Telegram released a major update to the Mini-App functionality. New features such as full-screen mode, geolocation access, and motion tracking aim to enhance the user experience. These additional features provide developers with more tools and inspire new use cases for Mini Apps, driving further adoption and innovation.

Telegram Platform Growth

In July 2024, Telegram reached a record 9.5 billion monthly active users (MAUs). Telegram and Pavel Durov had previously reported platform milestones of 7 billion, 8 billion, and 9 billion MAUs by the end of 2022, the first half of 2023, and April 2024, respectively.

Meanwhile, Mini Apps also experienced significant growth, with MAUs reaching 400 million in April 2024 and 500 million in June 2024. This means that approximately half of Telegram users actively engage with Mini Apps.

Another rapidly growing metric is Telegram Premium subscription users. Telegram Premium offers enhanced features such as ad-free experience, real-time translation, unlimited cloud storage, etc. The service reached 1 million subscribers in December 2022. The growth significantly accelerated since the start of partnerships, reaching 5 million in January 2024 and doubling to 10 million by September 2024.

These observations, along with 70% of the top 50 Telegram channels focusing on the TON project (all of which include Telegram Mini Apps), indicate that TON partnerships have significantly boosted Telegram user engagement. The increasing popularity of Telegram Mini Apps has transformed Telegram from an occasionally used tool into an essential app for users, driving many to subscribe to premium features to further enrich their experience.

Impact on Telegram's Profitability

Enhanced user engagement has significantly increased Telegram's ability to generate revenue from its platform operations. Existing revenue streams, such as Telegram ads, merchandise sales, and premium account subscriptions, have all experienced significant growth. Additionally, the newly launched Telegram Stars has provided an additional revenue stream for the platform.

Telegram Ads: The Telegram Ads platform shifted ad sales to on-chain tracking in April 2024, enhancing the transparency of its performance monitoring. Furthermore, the platform expanded the ad display scope to include channels with fewer subscribers, allowing new advertisers to participate. According to Telegram's disclosed financial report for the first half of 2024, Telegram Ads generated $120 million in revenue in 6 months, nearly doubling the $70 million revenue for the full year of 2023. We expect this advertising momentum to continue, with full-year ad revenue reaching $240 million.

Merchandise: Merchandise transactions are entirely conducted on-chain through Telegram's Fragment marketplace. Revenue includes platform commissions from both primary and secondary sales. While revenue surged in March and April, it has since stabilized. We estimate that merchandise revenue in 2024 will reach $36 million, an increase of $18 million from last year, representing a growth of over 100% year-on-year.

Premium Account Subscriptions: As mentioned earlier, premium account subscriptions experienced significant growth in 2024. In the 2024 first half financial report, revenue from premium account subscriptions was $119 million. Based on the subscription growth trend, we expect full-year revenue to reach $285 million, a growth of over 200% year-on-year, making premium accounts the largest revenue source in Telegram's business.

Telegram Stars: Telegram Stars, as digital goods sellers, have brought new revenue streams to the platform. While we lack comprehensive insights into fiat purchases done through Apple and Google, on-chain Stars sales via the Fragment marketplace provide a conservative estimate. Based on the results of the first four months, we anticipate on-chain Stars revenue to reach $55 million in 2024. The total Stars revenue is likely higher, but we are using this figure as a conservative estimate.

TON Direct Revenue: According to the Financial Times, Telegram has generated $225 million in revenue by allowing Toncoin as the only way for small businesses to purchase ads. We believe this revenue stream effectively replaced the 2023 "advanced access to the advertising platform," which allowed Mini-Apps to purchase ads on Telegram with restrictions. Furthermore, due to the exclusive partnership with TON, fees charged by Telegram from its "integrated wallet" are expected to continue. While there may still be user-generated fees associated with wallet transactions and withdrawals, we expect these contributions to remain relatively small this year.

Based on gathered information and estimates, we predict Telegram's full-year revenue for 2024 will reach at least $971 million and potentially surpass the $1 billion mark. The mid-year 2024 report has already shown revenue of $525 million, including $225 million from Toncoin ad access revenue recognition.

In terms of expenses, Pavel Durov revealed in an interview in 2024 that "the annual spending per user is less than 70 cents." Based on the current Monthly Active Users (MAU) growth trend, we expect full-year expenses to be $667 million. This will result in an annual operating profit of over $300 million, marking a significant leap in the company's profitability.

This will be a significant step for Telegram's IPO plan. Telegram raised $20 billion through convertible debt before 2024 and another $3.3 billion this year. This debt is expected to mature in 2026, adding time pressure to Telegram's listing plan. The year-end profit result will undoubtedly help strengthen its path to IPO readiness.

Conclusion

The first year of collaboration between TON and Telegram has already proven to be a win-win situation for both parties. TON has seen significant growth in popularity, and its governance model continues to evolve to meet the demands of the active community eager to drive further expansion. Leveraging this wave of user engagement, Telegram has successfully utilized its active user base to drive additional revenue, particularly through premium account subscriptions and exclusive rights. In this mutually beneficial partnership, it is expected that this collaboration will continue to thrive in the coming years.

This article is contributed content and does not represent the views of BlockBeats.