TONCOIN (TON) Tokenomics

Issuance Mechanism and Supply

Toncoin (TON) is the native token of The Open Network (TON) blockchain. The initial total token supply at launch was 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%.

The issuance mechanism is based on inflation, where new TON tokens are progressively minted as emissions to reward validators. The network subsidizes block creation by adding TON, sourced from this annual inflation, to the reward pool. Specifically, the subsidy amounts to 1.7 TON for each masterchain block and 1 TON for each basechain block.

Allocation Mechanism (Historical)

The initial allocation of TON was heavily concentrated in a historical mining mechanism:

• Pre-mined Allocation: In June 2020, 4.92 billion TON (approximately 96.66% of the total token supply) pre-mined at launch was transferred to the first set of 20 smart contracts called "Proof-of-Work (POW) Givers."
• Acquisition: Users could acquire TON by solving puzzles with computational resources via these POW Givers. These initial pools were depleted two years later, in June 2022.

As of November 22, 2023, the circulating total token supply is approximately 3.45 billion TON (about 69.00% of the total token supply).

Usage and Incentive Mechanism

TON serves multiple critical functions within The Open Network ecosystem:

1. Transaction Fees and Deflation

Users pay network transaction gas fees in TON for utilizing the network. These fees include storage fees, fees for importing/outcoming messages, computation fees, and action fees.

A deflationary mechanism was introduced via a community proposal and validator vote to burn 50% of all network fees, including storage and transaction fees. This burn functionality is intended to reduce the circulating supply as network and transaction volume grows. The remaining 50% of transaction fees are accumulated in the Elector contract's reward pool, from which validators receive a portion.

2. Staking and Network Security (Incentives)

TON uses a Proof-of-Stake (PoS) consensus mechanism to secure the network, offering two primary ways for token holders to earn rewards:

• Validator Election: A validator's chance of being elected during each validation cycle (lasting approximately 18 hours) is proportional to the amount of staked TON.
• Slashing: Validators can be penalized (slashed) for idle or malicious behavior, incurring a "Standard fine" of 101 TON.

As of November 22, 2023, approximately 457.30 million TON (about 8.98% of the total token supply) are staked across roughly 339 validators, with a staking APY of 5.18%.

3. Governance

TON token holders can participate in on-chain governance via the project’s governance portal to vote on proposals, such as network fee adjustments and consensus modifications.

• Voting Power: Voting can use two strategies: "Weighted balance" (voting power corresponds to the total TON held) or "One wallet, one vote" (each participant holds equal voting power).
• Validator Governance: Validators exercise on-chain governance by overseeing configuration changes. Implementing a configuration proposal requires three-fourths (75%) of on-chain validator votes to be in its favor, with votes weighed based on individual validator stakes.

4. Medium of Exchange

TON is used as a medium of exchange for payment across various products and services within the TON ecosystem.

Locking Mechanism and Unlocking Time

While no specific, mandatory vesting schedule for initial token allocation is detailed, the TON ecosystem has developed tools for voluntary token locking:

• The Locker: A smart contract that allows users to voluntarily lock up their coins for an extended period. It is possible to assign a reward in Toncoin for this locking action.
• Vesting Wallet Toolkit: A toolkit has been developed to assist working teams with vesting requirements.

The initial 4.92 billion TON pre-mined tokens were fully distributed and depleted from the POW Givers smart contracts by June 2022, meaning the vast majority of the initial supply is now unlocked and circulating.