TONCOIN (TON) tokenomics

The native token of The Open Network (TON) is Toncoin (TON), which is integral to the platform's decentralized infrastructure, serving as the medium of exchange, payment for network services, and the mechanism for network security and governance.

Issuance Mechanism

Toncoin operates with an inflationary supply mechanism, which is used to reward network validators.

• Initial Supply and Inflation: The TON blockchain launched with an initial total token supply of 5.00 billion TON. As of November 22, 2023, the total token supply has increased to approximately 5.09 billion TON due to an annual inflation rate of 0.60%.
• Minting: TON tokens are progressively minted as emissions to pay rewards to validators.
• Block Creation Subsidies: The network subsidizes block creation by adding newly minted TON, sourced from the annual inflation, to the reward pool. The subsidy amounts to 1.7 TON for each masterchain block and 1 TON for each basechain block.
• Deflationary Mechanism: A community-approved update in June 2023 introduced a burn functionality, which burns 50% of network fees, including storage and transaction fees. This mechanism is designed to potentially reduce the circulating supply as network transaction volume grows.

Allocation Mechanism

The initial distribution of Toncoin was primarily conducted through a Proof-of-Work (PoW) mechanism, although the network now operates on Proof-of-Stake (PoS).

• Initial Distribution (Past): At launch, 4.92 billion TON (approximately 96.66% of the total token supply) were pre-allocated to smart contracts known as "Proof-of-Work (POW) Givers." Users could earn TON rewards by solving computational puzzles. This initial distribution phase concluded in June 2022 when the POW Givers were depleted.
• Current Distribution: As of November 22, 2023, the circulating supply was approximately 3.45 billion TON (about 69.00% of the total token supply).
• Concentration: A significant portion of the total token supply is held by a small number of wallets. The top ten wallets cumulatively hold approximately 3.14 billion TON (62.80% of the total token supply). The top three individual wallets control over 10.00% of the circulating supply each, including the "Elector Contract" which holds approximately 507.04 million TON (10.14% of the total token supply).

Usage and Incentive Mechanism

TON is a utility token with multiple functions centered around network operation, security, and governance.

Core Utility and Usage

• Transaction Fees (Gas Fees): Users pay network transaction gas fees in TON for utilizing the network, covering costs such as storage, computation, and message processing.
• Medium of Exchange: TON is used as payment for various products and services within the TON ecosystem, including blockchain-based domain names (DNS) and TON Proxy.
• Decentralized Finance (DeFi): TON is used in DeFi applications, such as providing liquidity in decentralized exchanges (DEXs) and liquid staking protocols. The TON Foundation has launched incentive programs, such as a 5 million Toncoin DeFi incentive program, to bolster USDt-TON adoption and liquidity.

Incentive and Security Mechanisms

The network uses a Proof-of-Stake (PoS) consensus mechanism to incentivize security.

• Validator Staking: Users can become validators by meeting hardware requirements and staking a minimum of 300,000 TON (self-staked and/or nominated). Validators secure the network and earn rewards from two sources:
  1. Computation Fees: A portion of the transaction gas fees paid in TON accumulates in the Elector contract's reward pool.
  2. Block Creation Subsidies: Newly minted TON from the annual inflation is added to the reward pool.
• Nominating (Staking for Tokenholders): Tokenholders who do not run a validator can nominate their holdings to an existing validator by staking a minimum of 10,000 TON. Staking rewards are split between validators and nominators at a configured ratio.
• Slashing: Validators can be penalized (slashed) for idle or malicious behavior. The standard fine is 101 TON, incurred after a complaint and a dispute resolution period requiring 66.00% validator approval.

Governance

TON tokenholders participate in on-chain governance through two primary mechanisms:

• Governance Portal: Tokenholders can vote on on-chain governance proposals (e.g., network fee adjustments). Voting power can be based on a "Weighted balance" (proportional to the amount of TON held) or "One wallet, one vote."
• Validator Voting: Validators oversee configuration changes. While any user can propose changes, only validators can implement them. A configuration proposal requires a three-fourths (75%) majority of on-chain validator votes to be implemented, with votes weighed based on individual validator stakes.

Locking Mechanism and Unlocking Time

The TON ecosystem has developed tools to facilitate token locking, but specific details on vesting schedules for initial allocations were not available.

• Lockup Tools: A smart contract called "The Locker" has been created and tested, allowing users to lock up their coins for an extended period and potentially assign a reward for the locking action. A vesting wallet toolkit has also been developed for working teams.
• Unlocking Time: Specific token unlock schedules or vesting timelines for initial token allocations were not available.