9. TON I don’t understand

The Open Network (TON) was initially launched in 2019 by Telegram founders Pavel and Nikolai Durov as “Telegram Open Network.” Unfortunately, the founders had to shut it down due to regulatory pressure from the SEC. Independent developers Anatoliy Makosov and Kirill Emelyanenko created The Open Network after Telegram exited the project. This decentralized community project comprises more than 40 independent developers as part of the TON Foundation.

On September 4, 2023, the total circulation of TON tokens was 5,093,825,297, the annual inflation rate was 0.6%, and there were 3,370,488 online accounts. There are 490,585,547 mortgage coins, 9.6% of the total coins, and 15% based on the total number of circulating coins. Comparing Ethereum’s mortgage rate, Ethereum is 22%. In addition, TON has 345 verification nodes, 223,002 transactions on the day, and 220,000 official Twitter followers. The data is pitiful. The Coinmarketcap ranks 11th at 6.4 billion U.S. dollars, but the technical trend of currency prices is stronger than the broader market.

From all technical indicators, it is similar to No. 7 Cardano (ADA), both with low indicators and high valuations. Still, the difference is that TON has a strong backer – the Telegram project, the world’s most well-known free project. Forum Project. Cryptocurrency originated from technologists and, therefore, has always embraced technology. Cardano and TON both have technical images. Cardano is overpacked, while TON has muscular technical strength. The TON project covers all blockchain technical ideas and aims to replace all blockchain projects.

Unsolved technical mysteries

There is not much analytical information on TON. The white paper has 126 pages, and it is not easy to read it through. It has a main chain and a working chain, and each working chain can be sharded. It claims to be able to process millions of transactions simultaneously. Confirmation of a specific block must be done twice, once for the working chain (shard chain) and once for the main chain. A total of 10 seconds. Figure 1 compares indicators between TON, Ethereum, and Solana. Its actual transaction speed is slightly stronger than Ethereum, and transfers are no problem, but it does not meet the requirements for credit card payments. Among cryptocurrencies, credit card speed metrics are achieved only by Solana.


Figure 1

The TON chain is a hybrid of improved Ethereum and Polkadot chains. Polkadot Chain is also called a cross-chain bridge. Cross-chain refers to supporting multiple blockchains with different properties in a single network. Polkadot is also famous, ranking 13th. Of course, TON goes further; for example, it has functions such as managed wallets and user data storage. TON hopes to implement homogeneous and heterogeneous chains in its system. Isomorphism means that a chain only runs the same type of tokens. For example, in addition to Ethereum, there can also be ERC20 tokens of the same kind on Ethereum. Heterogeneity means that two chains with different format types are in its system.

The TON chain adopts the cross-chain technology and algorithm of the Polkadot chain, and its consensus algorithm is the Byzantine Proof of Stake algorithm (BFT POS). The Byzantine algorithm refers to achieving the correct solution in an uncertain environment, referred to as the BFT algorithm. POS refers to the Proof of Stake algorithm. The Byzantine Proof of Stake algorithm is a combination of two algorithms. According to the literature, the BFT algorithm has a limited scope of application. Since the POS algorithm requires limited nodes, it may be applicable, but the implicit statement is that it may not be suitable. The computing nodes of the Bitcoin system are random; that is, there are no restrictions on nodes. It is why Satoshi Nakamoto did not choose the BFT algorithm. The POS algorithm cannot mathematically rule out the possibility of human manipulation, so it is accused of centralization. In practice, there is no unreliability problem with POS. Just as mathematicians accuse Bitcoin of the longest chain principle not being mathematically valid, there is no problem with Bitcoin. Practice is the standard for testing truth. There are no problems with POS, thanks to the top-level design of Satoshi Nakamoto, which resists human manipulation. The Bitcoin system has an open and transparent ledger. Obviously, centralization is a subordinate concept at a lower level. The problem with the TON chain is not the algorithm; the number of nodes and operations is minimal and has not been tested under extreme stress. Solana’s leader node’s stress resistance is 2 million times. If it exceeds the limit, it may crash. If Solana is not run in the actual environment, you will not see this problem happening to Solana. The Solana system has very high computer requirements, but TON has no needs, which is hard to understand. The software on the TON system is complex and has no requirements for the connected hardware. Naturally, people will first question the reliability of the system.

There is no problem with the idea of using cross-chains to achieve heterogeneity. All external transfers of tokens from centralized exchanges are cross-chain. Centralized exchanges have the reliability (completeness) of ledgers, and there will be no logical errors. Polkadot is also easy to understand because it uses a main chain to be responsible for cross-chain scheduling. It is not a big problem for TON to use hash table addressing and scheduling methods for isomorphism, but the risk is significant when used for heterogeneity. Heterogeneity, as file storage, does not require mathematical completeness, but how can financial ledgers ensure mathematical completeness under heterogeneous conditions and require high speed?

Heterogeneity also requires sharding, and only those with strong technical capabilities like Telegraph dare to think about it.

The general principle of product design is usage innovation rather than technological innovation. Try not to use new technologies and choose mature technologies. This is true for both Bitcoin and Ethereum. They only have ideological innovation but no technological innovation. The longest chain principle used by Bitcoin to solve the Byzantine Generals Problem is not a technical innovation either.

The second principle of product design is to be simple and pure. TON’s goal is to exceed the functionality of all blockchain projects and allow users to operate with one click. This idea is good, but it will constitute an extremely complex system called a two-dimensional system. At the same time, it must pursue higher speeds, and it is likely to lose safety because these two goals are contradictory. Ethereum chose security and gave up the pursuit of speed.

Ethereum will only complete the merger of Ethereum 2.0 in 2022. During this period, the Byzantine Proof of Stake algorithm has been adopted by several well-known projects. However, Ethereum uses the most traditional and least efficient Proof of Stake (POS). Why? Is the Ethereum team stupid?

From the perspective of technological innovation, Solana did the best. Still, his technology was not tested in practice, and as a result, there were many downtimes, which had a negative impact.

The author cannot make any valuable judgment on what technical problems may arise in TON. Still, my intuition tells me that similar unreliability problems like Solana may also occur in TON because its technology has not yet been applied on a large scale. Ethereum ran an experimental network for a year and a half before launching the product. The merger of Ethereum 1.0 and 2.0 was equivalent to changing cars without stopping and Trouble-free. It highlights the reliability of its technology.

Unsolved project mysteries

TON’s white paper puts it very well: “Because the servers used by Facebook are essentially validator servers (or clusters), we see the total hardware costs associated with running Facebook on the blockchain. It will be at least 20 times higher than traditional methods.” In other words, blockchain technology cannot compete with centralized mainstream applications except for finance. That shows that they know very clearly where the boundaries of cryptocurrency products are. Can cryptocurrencies compete with mainstream finance? Is TON’s approach the ultimate solution? The answer is negative. Local changes can be made, but don’t consider replacing mainstream finance. Compared with Ethereum, the functional level of TON’s overall application has minor improvements but is very difficult to surpass.

Their design eschews the understanding difficulty of private and public keys, which is clever. For example, regarding the payment function, Telegram users can send TON and BTC directly to friends in the app’s chat room. The usage is the same as the WeChat payment, eliminating the user’s usage threshold. Theoretically, this simple operation is easy to use and should be a big hit. However, Telegram has 800 million users, so why does TON only have 3.37 million users? And its token has been online for more than a year.

Problems

They may be technical experts, but their understanding of cryptocurrency is novice. In February 2023, TON voted to adopt a “TON Token Economic Model Optimization Proposal,” which proposed temporarily freezing inactive mining wallets for 48 months. These wallets have never been activated and do not have any transfers in their history. There are currently 171 such inactive mining wallets. These 171 wallets hold more than 1.081 billion TON in total, accounting for about 21% of the total TON supply at that time.

Their decision violates the basic principles of machine credit. Cryptocurrency does not require trusting a third party in transactions, but the cryptocurrency system still involves trust, but trust in a third party is replaced by machine credit. Trust goes to the programmer. Machine credit is the trust boundary and restriction for programmers. What is machine credit?

Machine trust is the de facto standard created by Satoshi Nakamoto. The Satoshi trust standard can be summarized into 7 items:

1. The fewer people you need to trust, the better.

2. The fewer links that require trust, the better.

3. The safer the links that require trust, the better.

4. The longer the trust has been experienced, the better; it takes time to accumulate credit.

5. Remove the system control party, and you control your data.

6. The ledger is open and transparent and cannot be tampered with.

7. The trusted party has an automatic check and balance mechanism.

It’s an axiom: code is law. Modifying the code must be based on rules, which is the underlying consensus of machine trust standards.

A theorem: the system does not go down.

One feature: no supervision.

TON breaches Article 5.

The author mentioned in the article “Part 3 of this series: USDT is not far from the second” that USDT can freeze user accounts. That is a function that smart contracts can design. For this function, as long as the white paper states in advance that accounts can be frozen according to laws, there will be no problem. Since the user is aware of this provision in advance and the right to choose is also in the user’s hands, it does not violate Article 5 above.

As a machine-trusted financial platform, freezing user assets can easily violate Article 5, let alone freezing user accounts by voting. It is the tyranny of the majority over the minority.

They may be vital in technology but weak in finance and marketing. Why can they finish tenth? I can’t understand it at my level. The span of the cryptocurrency field is vast, and they should perform better due to their technical backing. However, their lack of understanding of cryptocurrency and the market may limit their vision.

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