Disclaimer: The views expressed in this article are those of the authors and do not necessarily reflect the official position of Chainlink.
The TON (The Open Network) blockchain architecture encompasses a variety of innovative features aimed at scalability, security, and efficiency. This article provides an overview of the tokenomics of TON, including its consensus mechanism, token distribution, staking processes, transaction fees, and burn mechanism.
High-level architect
TON (The Open Network) is a decentralized layer-1 blockchain designed to facilitate fast and cost-effective transactions. The network employs a Byzantine Fault Tolerant (BFT) Proof-of-Stake (PoS) consensus mechanism, which enhances both security and scalability.
Validators are required to stake a minimum of 300,000 TON to participate in the consensus process. Validator rewards comprise block rewards and transaction fees, while penalties include the forfeiture of some or all of the staked TON for signing invalid blocks. A big portion of the confiscated funds is burned, and another portion is awarded to fishermen who report invalid blocks.
Nominators can delegate their TON coins to validators, sharing both the risks and the revenues associated with validation. Fishermen, which can be any nodes on the network, can deposit some TON in the masterchain and report invalid blocks. When validators misbehave, part of their confiscated funds is transferred to these fishermen. Collators are responsible for suggesting new blocks to validators, a task that can typically also be performed by the validators themselves.
TON tokenomics
Token Symbol: TON or Toncoin
Token mining and distribution
From July 2020 to June 2022, TON employed an Initial Proof-of-Work (IPoW) mechanism, after which it transitioned to a Proof-of-Stake (PoS) system. The initial token supply was set at 5 billion TON, with the team allocated 72.5 million TON (1.45%). The remaining 4.9275 billion TON (98.55%) was pre-mined. Research has shown that 85.8% of the tokens during the IPoW phase were minted by a few interconnected miners affiliated with the TON Foundation.
Of this pre-mined amount, approximately 1.081 billion TON from 171 accounts were voted to be frozen for 48 months. These genesis accounts, which mined TON directly from the IPoW mechanism, have never initiated any transactions.
The TON Believers Fund, utilizing the locker smart contract, was launched to allow TON holders to lock their tokens for a period of five years — comprising a two-year cliff followed by a three-year linear release. The deposit period ended on October 23, 2023, during which around 1.033 billion TON were collected. Including approximately 284 million rewards, a total of about 1.317 billion TON are locked for two years. Starting from October 12, 2025, about 37 million TON will be added to the circulating supply every 30 days over 36 installments.
These measures have effectively removed approximately 2.4 billion TON from the circulating supply for a certain period.
Under the PoS system, the masterchain adds 1.7 TON per block, and each shardchain adds 1 TON per block. At the end of each epoch, the accumulated rewards are distributed among the validators and nominators.
Note that TON holders could earn staking rewards while keeping the liquidity by using the liquid staking.
Token Utilities
TON tokens serve multiple functions within the ecosystem. They act as a payment token for various services, including transaction fees, application services, DNS, storage, advertisements, proxies, and cross-chain activities. Additionally, they function as a staking token for validators and nominators, providing incentives for securing the network. Furthermore, TON tokens serve as a governance token for decision-making processes.
While the governance is centralized under the TON Foundation, the ton.vote platform allows TON holders and validators to vote on proposals. However, it is important to note that the results of these votes are not binding.
Transaction fee and Burn mechanism
The fee mechanism in TON differs significantly from Ethereum’s user-pay model. Instead, TON adopts a developers-pay model similar to Internet Computer Protocol (ICP). Unlike the synchronous smart contracts on Ethereum, both Dfinity and TON utilize an asynchronous actor architecture to enable parallel computation.
Transaction fees in TON comprise several components: storage fees, message ingress and egress fees, routing fees, and computation fees. On average, the transaction fee is around 0.005 TON, but this value can be adjusted by validators as needed. The purpose of the transaction fee is to deter malicious actors from overloading the network. Additionally, half of the collected fees are used to reward validators and nominators, incentivizing them to maintain the network’s security and efficiency.
Half of the transaction fees in TON are burned, meaning they are sent to a black hole address and permanently removed from the circulating supply. Additionally, the majority of the slashed funds from misbehaving validators are also burned. This burning mechanism helps to reduce the circulating supply, contributing to the overall economic stability and deflationary aspects of the TON network.
Conclusion
TON’s tokenomics is designed to balance incentives for validators, ensure network security, and maintain economic stability. The combination of a PoS consensus mechanism, a robust staking system, and a transaction fee structure aligned with network usage ensures the sustainability and scalability of the TON blockchain.
The author Dr. Yulin Liu, currently serves as the senior economic advisor at Chainlink. Yulin specialises in monetary theory, bank supervision, cryptocurrency, token economics and blockchain governance system. He holds a Master of Science in Quantum Computation and a Ph.D. in Economics from ETH Zurich. Yulin was a visiting scholar at the European System of Central Banks and has been invited for talks at major central banks, universities and conferences worldwide.
