Toncoin Plummets Amid Pavel Durov’s Arrest and TON Blockchain Shutdown
The past week has been tumultuous for Telegram’s blockchain ecosystem, with a series of events that have left investors and users reeling. The Open Network (TON), a blockchain closely linked to the popular messaging platform, experienced a significant outage on Wednesday, just days after its founder and CEO, Pavel Durov, was arrested in France.
Early on Wednesday, the TON blockchain experienced a major disruption, halting block production for several hours. The outage was first noticed by crypto enthusiasts who observed that no new blocks were being generated. This led major cryptocurrency exchanges, including Binance and Bybit, to temporarily suspend deposits and withdrawals involving the blockchain.
According to an official update from the TON development team, the cause of the outage was an “abnormal load” on the network. This surge in activity was attributed to the launch of a new meme coin called Dogs Coin, which was integrated into a game on Telegram’s Mini Apps marketplace. The game, also named Dogs, allows users to collect the meme coin by playing on the app. The listing of Dogs Coin on major exchanges like Binance on August 26 triggered a frenzy of trading activity, overwhelming the blockchain’s validators.
“Due to high recent activity (>20 million transactions in recent two days), garbage collection overloaded many of validators for enough time for them to lose consensus with each other,” the TON blockchain team explained in their post-outage update. To resolve the issue, the validators had to be restarted simultaneously with specific flags, restoring the network after nearly six hours of downtime.
Adding to the challenges faced by TON was the arrest of Durov, the enigmatic founder of Telegram, in France. Durov was apprehended at Le Bourget Airport near Paris on Saturday after arriving from Azerbaijan.
The investigation, which began in July, reportedly focuses on several serious accusations, including the distribution of child sexual abuse material, drug sales, money laundering, and Durov’s alleged refusal to cooperate with law enforcement inquiries.
The arrest of Durov has had immediate financial repercussions, particularly for Toncoin, the native cryptocurrency of the TON blockchain. Following the news breaking of Durov’s arrest, Toncoin’s value dropped, falling over 20% from $6.80 to $5.42, leaving an estimated loss in market value at around $2.7 billion.
The TON Society, the official community group of the blockchain, responded to Durov’s arrest with a strongly worded statement, describing it as a “direct assault on a basic human right – the freedom of expression of everyone.” They called on French authorities to respect Telegram’s “right to protect the freedom of expression, privacy of its users, and right to private life,” underscoring the high stakes involved in this case.
The broader cryptocurrency community has shown significant support for Durov in the wake of his arrest. Justin Sun, the founder of the TRON blockchain, pledged $1 million to establish a decentralized autonomous organization (DAO) aimed at assisting Durov in legally gaining his freedom.
Vitalik Buterin, the co-founder of Ethereum, also expressed his concerns, noting that while he has previously criticized Telegram for not taking encryption seriously, Durov’s arrest “looks very bad and worrying for the future of software and comms freedom in Europe.”
The TON blockchain was originally conceived by Pavel and Nikolai Durov as part of a broader effort to integrate a cryptocurrency into Telegram, creating a native token called Grams. However, legal troubles with the SEC in 2019 forced Telegram to abandon the project.
After reaching a settlement, which included an $18.5 million fine, the Durovs distanced Telegram from TON, though the blockchain continued to operate independently.
Despite the separation, the close ties between Telegram and TON remain evident, especially given the option for users to make payments within Telegram using Toncoin. The recent outage and Durov’s arrest have reignited concerns about the degree of decentralization within the TON ecosystem and its reliance on Telegram’s success.
Information for this briefing was found via the sources mentioned. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
