• How A Team Of Russian Engineers Resurrected Telegram’s Blockchain

  • As cryptocurrency markets remain uncertain this summer, following China’s official ban on financial institutions providing cryptocurrency services and upcoming FATF (Financial Action Task Force) recommendations, retail investors are reminded that the most significant barrier to mainstream cryptocurrency adoption remains the global regulatory environment.

    In 2018, Pavel Durov attempted to bring instant payments to 500 million active Telegram users, enabling instantaneous and affordable peer-to-peer global transactions. The project’s goal was to facilitate transactions on the Telegram Open Network using the ‘gram’ token (TON).

    The dream came to an end when the SEC filed a lawsuit against Telegram for illegal token issuance and requested an emergency order prohibiting Telegram from “selling or otherwise distributing” tokens within the United States. By 2020, the case had progressed to the point where Telegram was required to pay an $18.5 million civil settlement and pledge to return more than $1.2 billion invested in its token sale.

    There was speculation as to why the SEC pursued Telegram and its associated TON blockchain offering so harshly, especially given that other private token offerings, such as EOS, were allowed to continue operating after paying a fine. When Mark Zuckerberg was forced to appear before the United States Senate Financial Committee to defend Facebook’s Libra blockchain, investors gained some clarity. Similar to Telegram, Facebook was integrating instant crypto payments into its messenger apps, promising to put a new cryptocurrency in the hands of its 1.8 billion users. It became clear that, in the battle between Wall Street and Big Tech, the United States would come out on top. The government was adamant about retaining monetary sovereignty. Any messenger app with a large user base could undermine the US Dollar as the default medium of exchange by creating its own token.

    “I’d like to end this post by wishing good luck to everyone working for global decentralization, balance, and equality. You’re fighting a good fight. “This battle may well be the most important battle of our generation,” said Pavel Durov, founder of Telegram, in announcing the shutdown of the TON blockchain project.

    This was not Durov’s first run-in with the authorities. Durov’s previous mega-success was a Russian social media website called “VKontakte,” which offered features that were strikingly similar to those of Facebook. Durov gradually lost control of the company to Russian government-connected investors seeking to silence dissenting voices on the platform, particularly during the Russia-Ukraine conflict in 2014.

    Durov reported several threats to his life made by government officials at his apartment and office. In 2013, Russian detectives accused Durov of a hit-and-run, claiming that a traffic officer was injured by a white Mercedes driven by the Telegram founder. Durov insisted he does not drive. Durov then fled with several key employees, denouncing his ties to Russia and traveling the world on a Saint Kitts and Nevis passport he bought for $250,000. He eventually anchored his next project, Telegram, in Dubai after living and working in several jurisdictions.

    Not surprisingly, Telegram was created with the intention of creating a communications platform that was not controlled by the government. Telegram began developing the TON blockchain and its associated ‘gram’ token with the ultimate goal of decentralization in mind. Following the SEC’s injunction, Durov was forced to abandon the blockchain portion of the business, leaving the open-source code online for anyone to develop.

    With Russia’s current political climate and a thriving pro-opposition movement led by Navalny against a government frequently criticized for corruption and censorship, Durov’s previous efforts have become symbolic of change. His vision of decentralization and political independence struck a chord with many, particularly a group of Russian engineers who inherited the open-source code left behind. This initial group of members, later renamed the TON DeFi Alliance, resurrected Telegram’s abandoned blockchain, aptly renaming it the “FreeTON” project.

    Today, FreeTON is entirely driven by the community. Even after speaking with several members in an attempt to obtain a quote from a project “figurehead,” the developers did not provide any names. “We make decisions through network validator consensus,” was a common response.

    Institutional investors have already expressed interest in the project. Silicon Valley’s Runa Capital, RTP Global, BR Capital, Bitscale Capital, Warp Capital, and strategic corporate backers Minergate, Broxus, MTX Connect, and Pi Capital Union are among the supporters of TON Labs, the largest developer on FreeTON, and TONSwap, TON’s decentralized exchange. With a new set of DeFi features, FreeTON hopes to compete with competitors like MATIC’s Polygon and Solana.

    According to FreeTON representatives, the project is a multi-blockchain platform that can handle thousands of transactions per second thanks to its ‘dynamic sharding mechanism,’ which generates new shards as needed. The network, which has over 400 nodes, lacks an owner or centralized management that decides what should be done and when, as well as which tools or projects should run on it. Instead, FreeTON promotes and implements decentralized governance principles, allowing the community to participate, contribute, and make decisions.

    True to its roots, FreeTON developers emphasize values such as personal data privacy, freedom of speech, and open-source software, with the goal of providing an alternative blockchain solution for use-cases where privacy is critical, such as voting in elections and online gaming. The developers went on to say that one of their goals is to build a blockchain that solves some of the government’s most difficult problems rather than interfering with it, so that decentralized technologies can be integrated with less friction, eventually leading to a truly decentralized world.

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