Alex Felix

·

Follow

Published in

CoinFund Insights

·

8 min read

·

1 day ago

—

TON emerges as the mainstream ecosystem for crypto apps.

The blockchain industry has built extensive web3 infrastructure with the promise of a garden of thriving decentralized applications. Core to that vision was the promise of the ‘killer app’ — the mythical global product that would reach cult-like status and magically convert even the most skeptical tech users from web 2.0. But, despite numerous applications with modest success among thousands or millions of users, the elusive breakthrough moment has remained out of reach year after year. However, a critical shift in consumer behavior is emerging quietly on The Open Network (TON), which is tightly integrated with Telegram’s application, promising to revolutionize the landscape. Telegram, the app that has supported crypto adoption, education, and coordination globally since the early days, is now heading full steam down a web3 path. It’s been with us all along… and we believe Telegram will now help solve crypto’s go-to-market and user experience hurdles as well as promote transparent transactional activity by settling it on a public blockchain.

While most investor analysis has been focused on the sheer size and potential of Telegram’s 900 million users, the discourse has overlooked Telegram’s activation mechanism, a crucial aspect to convert those users into revenue and a growth flywheel. Our conviction has been driven by Telegram’s elegant, somewhat retro approach to ushering real users to web3, combined with a more powerful business model for developers and content creators.

The TON ecosystem is addressing several critical flaws in Web3 today. First, instead of trying too hard to convert the next million users who are not ecosystem-adjacent, we need to converge with the mainstream, which means going to where the users are. Second, consumer services are too segregated, making them hard to discover. Lastly, consumer crypto must ensure safe transactions every time a user engages with a new experience or contract. In addition to these corrections, Telegram’s philosophy and jurisdiction to promote a credibly neutral platform, along with the launch of mini-apps, support this packaged approach. Attempts to merge web3 with scaled applications have often failed due to immature infrastructure or existential regulatory challenges, as seen with Kik and Facebook; in many ways, this is the first organized technological roadmap for web3 designed by a large tech company with expertise and success in consumer technology.

Correcting for Web3 Flaws: Telegram is First Scaled User Container

The early internet was a beacon of content exploration, beginning modestly but evolving into the intuitive, controlled landscape dominated by a few platforms today. Similarly, web3 needs a clear roadmap to guide users through its complexities. Telegram’s integration of web3 features atop a familiar UX marks a significant shift in the approach to creating a user container. Before this, decentralized applications were largely obscure, discovered mainly by following insiders on niche platforms. Telegram’s embrace of open-source blockchain technology is changing this narrative, showing how user-friendly design and developer freedom can drive innovation and broad adoption.

The manner in which the crypto industry has asked new users to onboard is akin to navigating an unknown city without signage. The industry still fumbles over the simplest question: “What can I read quickly to get started?” Instead, people hear about crypto from a friend and use them as a crutch for some time, or drop out entirely when they discover gas fees and failed transactions or don’t know what other dapps to use. 75% of Americans are not confident in the safety or reliability of crypto, and we’re doing nothing to help convince them. In a modern culture of exploration and independence, where time is money, consumers hate being told to “go figure it out.” Think about all the web 2.0 companies focused specifically on the online checkout experience and conversion, not to mention the hundreds of daily encounters we all have to understand the world’s information: in menus, on our phone screens, in the index of a book and on Apple TV. People want a guide.

In web3, wallets serve as gateways to decentralized realms. Yet, true innovation lies in enabling users to traverse the web3 landscape seamlessly. Imagine a unified portal, reminiscent of AOL’s early days, connecting users to a preferred NFT marketplace, DEX, gaming platform and governance forum seamlessly. We are witnessing the seedlings of this new approach with the independent company Top Labs building out infrastructure and supporting early apps, including incubating STON.fi, one of our recent investments. As the liquidity layer of Telegram, STON.fi supports in-app swaps and is easily linked directly from other applications, allowing for the mini-app to populate for trading needs. Mini-apps are better than the bots we’ve seen to date because they can offer more complex and visually appealing interfaces, similar to full-featured web applications, as opposed to bots which primarily interact through messages and commands on the chat interface. The ecosystem build out is well underway with a playbook from other Layer 1 chains. Recently, Notcoin became TONs first successful web3 consumer application and community schelling point for awareness and adoption. The token launched for trading two weeks ago and holds a $920M market cap with 100% of the supply released and 35M players.

A powerful and customizable business model with web3 safety rails

TON has a significant distribution advantage that will attract developers and content creators. Builders can now generate revenue from transactional activity on the blockchain for their services, in addition to traditional advertising-based revenue. While the former is familiar to web3 builders, the ability to layer in attention-based strategies enhances the opportunity. Highlights to date:

• 50% of revenue from ads will be shared with channel owners.
• 95% of the revenue from stickers will be shared with the creators, with 730 billion stickers shared as of this month.
• Telegram is generating hundreds of millions from advertising and it’s still early in its marketplace development.
• Telegram is also monetizing its namespace and selling phone numbers, which have generated $350 million to date through the front-end service Fragment.

As one of the largest messengers in the world, Telegram has deep domain experience in fighting phishing and spam. The growth of the user base and continued viability of the platform depends on this. Creators will only leverage these opportunities and bring their business to Telegram if they can be guaranteed a direct line to their customer, free of overwhelming distractions that often take down popular services on more active networks. Telegram is a leader in this area — you have to be when managing day to day communication for 900 million people.

When merging a messenger with web3, it’s exceptionally important to start from a position of strength in consumer safety. We need Telegram’s expertise as a citizen in our ecosystem to also help users avoid losing funds held in non-custodial wallets. Mainstream users will not warmly adopt a future where a single wrong click can drain your wallet. Ensuring safe adoption of crypto and blockchain has been a critical focus for our ecosystem and regulators worldwide. And even basic protections can help accelerate growth. Web3 should eliminate hexadecimal addresses and continue ongoing efforts to reduce phishing and spam, improve KYC processes with phone number verification and enhance online account security.

Similarly regulators will desire transparency into transactional activity occurring on the platform. And the approach to turning the black box of traditional platforms on its head by leveraging an open blockchain such as TON for settlement will build in an exceptionally high level of operational transparency.

Conclusion

As one of the earliest investors in companies building on the platform, we are excited about the potential that Telegram and TON hold for the future of web3. Our recent investments, such as STON.fi who have already attracted $130M in liquidity, reflect our confidence in the transformative impact of this integration. We have more announcements forthcoming as we continue to connect with all the innovative projects within this ecosystem. The future of crypto lies in integrated applications, and Telegram is the first mover.

* * *

Disclaimer: The views expressed here are those of the individual CoinFund Management LLC (“CoinFund”) personnel quoted and are not the views of CoinFund or its affiliates. Certain information contained herein has been obtained from third-party sources, which may include portfolio companies of funds managed by CoinFund. While taken from sources believed to be reliable, CoinFund has not independently verified such information and makes no representations about the enduring accuracy of the information or its appropriateness for a given situation.

This content is provided for informational purposes only, and should not be relied upon as legal, business, investment, or tax advice. You should consult your own advisers as to those matters. References to any securities or digital assets are for illustrative purposes only, and do not constitute an investment recommendation or offer to provide investment advisory services. Furthermore, this content is not directed at nor intended for use by any investors or prospective investors, and may not under any circumstances be relied upon when making a decision to invest in any fund managed by CoinFund. An offer to invest in a CoinFund fund will be made only by the private placement memorandum, subscription agreement, and other relevant documentation of any such fund and should be read in their entirety. Any investments or portfolio companies mentioned, referred to, or described are not representative of all investments in vehicles managed by CoinFund, and there can be no assurance that the investments will be profitable or that other investments made in the future will have similar characteristics or results. A list of investments made by funds managed by CoinFund (excluding investments for which the issuer has not provided permission for CoinFund to disclose publicly as well as unannounced investments in publicly traded digital assets) is available at https://www.coinfund.io/portfolio.

Charts and graphs provided within are for informational purposes solely and should not be relied upon when making any investment decision. Past performance is not indicative of future results. The content speaks only as of the date indicated. Any projections, estimates, forecasts, targets, prospects, and/or opinions expressed in these materials are subject to change without notice and may differ or be contrary to opinions expressed by others. This presentation contains “forward-looking statements,” which can be identified by the use of forward-looking terminology such as “may”, “will”, “should”, “expect”, “anticipate”, “project”, “estimate”, “intend”, “continue” or “believe” or the negatives thereof or other variations thereon or comparable terminology. Due to various risks and uncertainties, actual events or results may differ materially and adversely from those reflected or contemplated in the forward-looking statements.