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Will Telegram Open Network Drive Cryptocurrency Market?

The last few months, the cryptocurrency market is not happy with the majority of its members. Start Bakkt, which had hoped for a digital gold holders, not revived business activity. On the contrary, shortly after the start of trading deliverable futures price of BTC began a rapid decline.
Now many members of the crypto community and I hope that the developers confirmed the launch of the Telegram Open Network (TON) will give a powerful impetus to the market and lay the Foundation for a great economic system on the basis of the popular messenger.
Prepositions your attention, abridged translation of the material Binance Research describing the technical and economic features of the project TON, possible problems in the way of its full implementation, as well as its similarities and differences with Libra from Facebook.

The main provisions of the

In the first quarter of 2018 Telegram Open Network raised $1.7 billion from private investors. Later it became known that in the case that the team TON do not fulfill the promise and will not release the first tokens Gram until 31 October 2019, the proceeds will be returned to participants tocancel.

The launch of the Telegram Open Network will mark the emergence of the fifth generation of the block chain with such features as dynamic sharding, interoperability and support multichain systems.

TON and Libra — two very ambitious project, between which, however, there are a few key differences:

if the vision of a Libra is to rethink the mechanism of the global circulation of money, the TON seeks to dramatically improve the entire blockchain ecosystem;
from an economic point of view Gram is a token, susceptible to price fluctuations. In turn, Libra offers a relatively stable alternative to secured by traditional assets.
However, unanswered many questions remain, partly due to the chosen development strategy and, as a consequence, lack of public control:

whether the proposed strategy for scaling to work perfectly, given the radically rethought the overall architecture?
will not lead to centralization, we offer a combination of stakeholders in the context of Byzantine consensus (Byzantine Fault Tolerant, BFT) and algorithm Proof-of-Stake?
whether the ecosystem is a TON to attract enough developers?
It is not excluded that TON will soon present a minimum viable product (MVP), the simplest implementation of which may involve centralized administration of critical components.

Until finally, it is unknown whether TON to start on time and will the team complete the project promises listed in the whitepaper. If it succeeds, the Telegram Open Network will initiate a new era of development of blockchain systems that can support thousands of decentralized applications (dApps).

Integration necesitatile light wallets TON in Telegram messenger can promote the rapid growth of a huge user base. At the moment there is no official data on the current number of users to Telegram, but it was estimated Binance Research, the number could reach 500 million Such a large user base, you can instantly turn TON one of the most popular blockchains.

The current status of TON

7 September 2019 was submitted to the source code of the blockchain TON. Then there was the ability to run full nodes, the nodes validators, and use the reviewers of blocks in the test network. In addition, there are:

General Telegram whitepaper Open Network;
documents describing the features of the blockchain, and virtual machines;
the documentation for the language of smart contracts TON.
The initial proposal was conducted in accordance with rule 506 (c) of the securities and exchange Commission (SEC), which assumes that all purchasers must be accredited investors.

TON Ecosystem

In general, the TON ecosystem will presumably consist of nine different elements, complementing a kind of “blockchain blockchain”.

The platform used for micropayments and off-chain transactions, including payment for various TON services.
Domain Name System (DNS) is a service that generates user-friendly account names.
A distributed hash table is a system similar to the Kademlia protocol, which computes other network nodes.
Many additional services: various interfaces for the interaction of applications in browsers and smartphones.
Proxy [TON Proxy], which hides the IP addresses of users and nodes for privacy and to prevent DDoS attacks.
P2P network for user access to the Telegram Open Network, transactions and updates for certain components of the blockchain (the so-called shards).
Distributed database for storing information. Using a torrent-like approach, it stores copies of blocks and snapshots of data, as well as arbitrary files.
Interface for external TON integration. It serves for the interaction of on-chain applications built into the Telegram Open Network with other elements of the ecosystem, including the messenger.

Integration necesitatile light wallets TON in Telegram messenger can promote the rapid growth of a huge user base. At the moment there is no official data on the current number of users to Telegram, but it was estimated Binance Research, the number could reach 500 million Such a large user base, you can instantly turn TON one of the most popular blockchains.

The current status of TON

7 September 2019 was submitted to the source code of the blockchain TON. Then there was the ability to run full nodes, the nodes validators, and use the reviewers of blocks in the test network. In addition, there are:

General Telegram whitepaper Open Network;
documents describing the features of the blockchain, and virtual machines;
the documentation for the language of smart contracts TON.
The initial proposal was conducted in accordance with rule 506 (c) of the securities and exchange Commission (SEC), which assumes that all purchasers must be accredited investors.

Despite the fact that 5 billion Gram is not yet released, some members of licensee in violation of the agreement already trading tokens that represent future rights to these coins. Transactions are carried out in two different ways: some individuals sell these, in fact, ious via the OTC platform, others through the exchange of Liquid, collaborating with Gram Asia.

In contrast to early investors who have already obtained a significant profit from such transactions, the recent buyers should worry about three things:

Gram tokens may not be released: launch the core network may not take place until October 31;
the counterparties for trading operations can refuse to perform its obligation to deliver Gram;
counterparties will not be able to perform obligations due to a breach of SAFT.

TON will not only support sharding, but also a set of elements, characteristic for systems of previous generations. Like most programmable blockchains, Telegram Open Network will support a virtual machine (the so-called Telegram Virtual Machine, TVM), based on the Noda and supporting smart contracts.

Fift is a Telegram used stack-based programming language, General purpose, similar to Forth. It is compiled into bytecode and executed on the TVM. Interestingly, Fift uses reverse Polish notation, is not particularly popular among programmers.

In a clear attempt to support the community of developers the team start Telegram and announce tenders. One of them aimed at implementation of different smart contracts, TVM improvements and fix bugs in the codebase of the blockchain.

The fundamental architecture of the Telegram Open Network is unique and much is focused on scalability. So, before TON is an incredible task — to achieve the ability to process "millions of transactions per second." For comparison, one of the most widely used payment networks — Visa — is an average of about 1,700 transactions per second. 

However, it is worth noting that:

TON is supposed to be scaled on demand, which means that initially it will not be about millions of transactions;
system capabilities will be involved not only in financial transactions.

Consensus

All the aforementioned elements work together and are embedded in the mechanism of consensus. To achieve significant scalability in TON will be used by the asynchronous variant of the Proof-of-Stake. In a whitepaper project compares delegated Proof-of-Stake and BFT-version mechanism PoS. Unfortunately, the document lacks details on the actual implementation of these mechanisms.

"Some materials were deliberately excluded from the document. One of them concerns the Protocol is Byzantine Fault Tolerant (BFT) used by validators to determine the next block of mastercan or sardjana; this issue is left for a forthcoming paper on network TON," — said in a whitepaper about the features of the blockchain Telegram Open Network.

Used the mechanism of consensus is one of the most important components of any blockchain, so the lack of this information causes anxiety. The specifics of implementation would be extremely interesting, since it is expected that this will be the first project that uses BFT to the public (permissionless) network.

If you require access rights permissioned-blackany can be managed through the mechanism of the Proof-of-Authority, for permissionless systems requires a system of economic incentives. So, work on related to Casper the PoS implementation public blockchain Ethereum has been ongoing for over two years and still not completed.

At least three elements deserve special attention because they are key factors in the differences between TON and other ambitious projects. This:

support both heterogeneous and homogeneous blockchain systems;
sharding on-demand;
the close link of the block chain.

Sharding

The basic idea of sharding is to split data arrays (which include decentralized databases) in multiple independently operating parts of shards.

Sharding can be performed in accordance with a predefined structure, or dynamically, when a separate transaction shards (called TON in the "communications") may trigger events in other shards. In Telegram Open Network using the second option.

The master chain contains hashes of all the shardchains and workchains. It defines some universal properties that must be observed in all shards, finalizes calculations using the BFT PoS consensus mechanism, and tracks information about active validators and their current shares.

Workchains are just “virtual” blockchains, representing a combination of underlying chardchains. Each workshop can contain local rules governing the format of account addresses, transactions, virtual machines, native crypto assets, and the like. Workchains are heterogeneous (that is, different), while shardchains are homogeneous (in other words, equal).

The “tight connection” of the TON blockchain suggests that many homogeneous shardchains from heterogeneous workchains can freely interact with each other. This feature plays a crucial role in ensuring interoperability and supporting a dynamic network of specialized blockchains.

This architecture lays the foundation for a fast-moving mesh network - Instant Hypercube Routing. This system has been studied in academic circles, but has not yet been implemented on the blockchain.

At first, probably, only one workchain will work - Telegram Open Network. It will use the Fift language for smart contracts, TVM for their implementation, and Gram will be used as a native asset.

Workchains will be created by sending a separate transaction to the masterchain. To prevent Sibyl attacks, masterchain operations will involve significant transaction costs. In addition, their implementation will require the approval of a qualified majority of validators, that is, two-thirds of their total number.

Integration of sharding and consensus

Transaction validation will involve four different types of participants:

The most important participants are validators. One of them can be by blocking Gram at the address of a special smart contract. It is expected that at first, when the loads are low, 100 validators will participate in the network (later their number will increase to 1000). He will choose their smart contract, taking into account various factors, for example, the shares provided and the maximum allowable load per one validator.

A global group of validators checks the blocks in the master chain. This group, however, is divided into many target subgroups in a pseudo-random and deterministic manner to match the number of shardchains.

Full nodes can act as validators, which need to comprehensively monitor the status of the corresponding shardchains. The verification period takes about one hour, after which the validators are redistributed to the new shardchain.

After a candidate receives two thirds of the total number of votes, he is included in the next block of the shardchain. After processing “almost all” (the documentation does not indicate how much specifically) the shardchain blocks, a new masterchain block can be issued. The latter includes all the hashes of the blockchain blocks.

To facilitate the work of validators and reduce the risk of centralization, several other participants are also involved:

the so-called Fishermen, who, for a fee, can publish masterchain transactions, including evidence of the invalidity of validator transactions and the corresponding Merkle tree;
Nominees - can vote for the validator, providing him with Gram tokens as a share. Thus, they become responsible for the decisions of validators. Nominees can receive part of the reward for checking the blocks, but they can also lose part of the capital if the share of the validator is cut (if the fishermen have proved that the transaction is invalid). Nominators vaguely resemble miners pooling together.
another group is the so-called Collators. They can offer candidates for shardchain blocks to get a share of the validation reward.

TON vs Libra

There are many similarities between TON and Libra:

both were created by companies seeking to tap into a huge user base in projects;
have significant resources to create new products and support existing ones;
these are ambitious, conceptual projects, the vision of which is largely contrary to the ideology of bitcoin.
There are many differences in the features of these projects, in their general strategies. If Libra intends to create a new user case for money, then the Telegram Open Network seeks to give a significant impetus to the development of the entire blockchain ecosystem.

Differences in Libra and TON strategies are visible, in particular, according to the corresponding GitHub repositories. So, Libra currently has 83 direct and more than 22,000 external contributors, TON has 15 and 8, respectively. The same situation is with services developed by third-party service providers. Unlike TON, the Libra source code is well documented.

The estimated launch dates for these two projects are also different. If TON should start before October 31 of this year, then Libra does not have such a clearly defined deadline. Nevertheless, it is expected that the project from Facebook will be launched in 2020.

Economic analysis

In the first round of the initial distribution, Grams were sold at an average price of $ 0.38. In the second round, the price of the coin was already $ 1.33.

At the end of September, tokens were traded on the Liquid exchange for about $ 4. Since Telegram’s initial project coin supply is 5 billion, Gram’s total market capitalization is around $ 20 billion. The stake reward implies annual inflation of 2% or $ 400 million in accordance with the current coin market price.

Unlike Libra, Gram is not a currency, but a utility token. Thus, there is no reason to fix the price of a TON project coin at a certain level. This means that the price of a coin in the secondary market will fluctuate depending on the ratio of supply and demand. However, in order to stimulate price increases, TON can redeem part of the Gram offer, putting the coins in reserve and thereby reducing their number in circulation.

Since Gram is a utility token, it can be used in several user cases:

Staking required for block validation.
Transaction commissions. To send the transaction to the TON masterchain and workchain, payment in Gram will be charged. In other working groups, commissions may be charged in other native crypto assets.
Gas fee. Like Ethereum, interacting with a smart contract is costly.
Storage fee.
Gram and Ethereum have pretty similar user cases, so the SEC is unlikely to classify the Telegram coin as a security. Also, given that the initial TON offer was conducted in accordance with SEC requirements, Gram tokens are likely to be classified as crypto assets. This can create short-term benefits for TON, as the relevant regulation is either not yet in place or is only being developed.

Libra, in turn, has a much more limited range of use cases. The coin from Facebook is primarily a currency whose exchange rate stability will be supported by reserve fiat assets and short-term government bonds.

As for the users of Telegram, at present their number exceeds 500 million people. Facebook has 2.4 billion users, which is 5 times more than Telegram.

Unresolved issues

The most exciting question: will the project TON free to start before 31 Oct, having all the technical features described more than 500 pages of documentation.

Unlike other popular projects (e.g., Polkadot) development of a TON was completely isolated. Some of the code is published on GitHub, but in General, the work on the project is carried out in a closed, non-transparent mode. As a result, it is problematic to find out some specifics of the architecture, which could help to identify potential attack vectors.

On the other hand, some obvious barriers to entry for developers, which can become a serious obstacle to the introduction of a new blockchain solutions. For TON is characterized by a very unpopular and poorly documented programming language, a very small community of developers and a whole new, difficult to understand the architecture.

Thus, instead of broad and open community that can actively participate in the management process and give the project a network effect, there is a risk that over-TON will operate a homogeneous group of developers, which increases the likelihood of centralization.

It also remains unclear the extent of confidentiality of the transactions. Is it possible to implement "obligations of the Pederson", which, among other things, will reduce the amount of data stored? Whether it is a workable paradigm of endless sharding? Finally, a sharp transition to the millions of transactions is difficult to reconcile with the practical reality and the distributed consensus nodes, deployed throughout the world.

findings

If successful, the Telegram Open Network will achieve significant success by solving the most significant problem of the entire blockchain ecosystem: the scalability of a decentralized database. In tandem with the BFT PoS permissionless mechanism, the paradigm of infinite sharding can solve many performance problems.

Like most PoS blockchains, TON is apparently vulnerable to centralization. This problem can be exacerbated by a small and homogeneous community of developers.

Given the number and scale of problems that can be solved with TON, open source development would be more than justified. Although the documentation for the project is very extensive, to a large extent it is only a logically consistent plan that does not describe in detail the implementation.

Open source would enable everyone to make suggestions and point out potential security flaws. Obviously, the lack of such communication is a wake-up call. On the other hand, this may indicate the style of work of the project team.

Perhaps the development team at first will be forced to present only a minimally viable product. The simplest compromise in such a system could be the replacement of the consensus mechanism by centralized management.

On the other hand, Telegram has what every project in the cryptocurrency ecosystem longs for - users. If ultimately TON starts in tight integration with convenient Telegram Messenger, most likely, users will begin to massively use the Gram crypto asset.

If the project is successful, the development of the entire blockchain ecosystem will reach a new level. The technology will provide many decentralized applications that will become everyday for millions of users.

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