TON, Our Largest Investment Ever

TON INVESTMENT[1]

 

I spent my career finding great investments – and in the end helped some pension plans get a few extra basis points for their retirees.

 

What makes me so passionate about bitcoin and blockchain is that it will change the world.  It will have a massively positive impact on billions of people.  And, not like in some distant, theoretical sense – like concrete improvement for billions within a decade.

 

I’ve met so many wonderful people in this community – all with a shared goal.  It’s so energizing. 

 

I recently had lunch with Pavel Durov, the founder of Telegram.  The purity of his conviction is mesmerizing. 

 

 

Telegram was founded by Pavel in 2013 on the basis of freedom-first.  It is a neutral social platform that is impartial and doesn’t take any side.

 

At 21, Pavel and his brother Nikolai founded VK, dubbed “the Facebook of Russia”.  The platform was so good and free from Russian media control, that Russian opposition used it extensively to organize large protests in Russia. The government pressured Pavel to censor and ban some of the online opposition communities and he refused.

 

 

– Pavel Durov, 2013 blog post

 

In 2013, he left Russia for good.  He immediately founded Telegram, again with Nikolai, on the principles of Freedom, Openness, and Expression.

 

 

– Pavel Durov, Tucker Carlson Interview, April 2024

 

Pavel and his team had to flee their native country – rather than give up their principles.  We are honored to partner with people of such strong conviction.  Pantera recently made the largest investment in its history in TON.  (My partner Ryan Barney explains our investment rationale below.)

 

When building a portfolio it’s best to find a variety of different ideas.  This is an almost unique take.

 

99.999% of blockchain projects are a tech idea trying to create a community – from nothing.  According to CoinMarketCap there are more than 23,000 cryptocurrencies.  That’s a hard road for most.

 

Telegram is a community integrating blockchain technology.  That’s just got to be easier.

 

They’ve begun rolling out a blockchain wallet to their 930 million users.

 

 

PANTERA FUND V LAUNCH

 

Investors often ask us where value will accrue in blockchain – whether it’s venture investing in companies like Alchemy or Circle, investing in private tokens before they open to the public like Arbitrum and StarkWare, capturing alpha in liquid tokens, or access to special opportunities such as discounted token placements directly from foundation treasuries.[2]  We think the answer is:  all four.

 

Our family of funds structure is somewhat a function of our history:  launching the first of each type of blockchain fund – we ended up with four separate funds.  

 

They cover the entire spectrum of blockchain assets.  They are mutually exclusive, so any asset (except bitcoin) can only go in only one fund.  Those evergreen hedge funds are still open for those with specific interests or liquidity requirements.  

 

We’ve found that most investors view blockchain as an asset class and would prefer to have a manager allocate amongst the various asset types.  This compelled us to create Pantera Blockchain Fund (IV) in 2021, a wrapper for the entire spectrum of blockchain assets.  We are excited to announce the launch of its successor and our fifth venture-style fund, Pantera Fund V, in 2025.

 

It will have four main buckets of investments.  Fund V will continue to invest in venture, investing in private companies that are using blockchain to do something better, faster, and cheaper.  When Blockchain Fund (IV) is fully invested (likely at the end of the year), all new venture deals will go in Fund V.

 

We’ll continue to be very active in seeding the best early-stage protocol tokens.  The investment process is very similar to early-stage venture, meeting protocol developers when they have the genesis of an idea, investing in the project and then trying to help them grow over the three or four years it takes to become public, and to get out into the markets.  

 

We also are offered very compelling special opportunities, including discounted tokens directly from foundation treasury which are subject to lockup periods of a few years.  

 

Twenty percent of the fund will be invested in liquid/public tokens. 

 

Our focus continues to be finding and growing the most promising ideas in the blockchain space and continuing to generate outsized returns for our current and future investors.  We’ve backed 240 companies and protocols.  Twenty-one have become unicorns.[3]

 

Similar to its predecessor, Blockchain Fund (IV), we believe this new fund is the most efficient way to get exposure to blockchain as an asset class.  It is a continuation of the strategies we have employed at Pantera for a decade across eight venture and hedge funds.

 

 

 

LPs have the flexibility to invest in just venture (Class V for “venture”), or in venture, private early-stage tokens, and locked-up treasury tokens (Class I for “illiquids”), or the all-in-one Class A.

 

 

As in all previous Pantera venture funds, we strongly support helping our LPs get access to deals in this fund.  Fund LPs with capital commitments of $25mm or more will have the option to collectively co-invest in at least 10% of each venture equity, private token, and special opportunity deal that the Fund invests over $10mm in.  There is no management fee or carried interest on co-investments for those with co-investment rights.

 

We will endeavor to offer co-investment opportunities, on a capacity available-basis, to other LPs as well.  These co-investment opportunities are subject to 1/10% fees.

 

Pantera Fund V will have its first closing in Q1 2025.  We are targeting $1 billion.

 

To learn more about the Fund, we invite you to participate in the launch call for Pantera Fund V.

 

The call will be held on Tuesday, May 14, at 8:00am PDT / 11:00am EDT.  You may register by clicking the button below.

 

 

Pantera donates 1% of revenue from all new funds to 1% For The Planet.

 

 

 

TON INVESTMENT RATIONALE

 

 

TON is a Layer 1 network originally designed by Telegram and continued by the open source community.  We believe TON has the capacity to introduce crypto to the masses because it is used extensively within the Telegram network. Telegram has over 900 million monthly active users on its future-facing, fast, and secure messaging platform that is used for personal and group communications, large-scale community building, content sharing, and more.

 

By leveraging Telegram’s vast user base and seamless UX with the vibrancy of TON’s emerging ecosystem, we believe TON has the potential to become one of the largest crypto networks.

 

We also believe this not solely based on the fundamentals of its distribution potential, but also because of the values that define Telegram, the application it was designed for.  During Token2049 this year, Pavel’s keynote focused explicitly on these values.

 

 

The company doesn’t sell user data and its virality is truly due to the promise of privacy.  It is a neutral platform free from government influence and has been at the center of community organization for protests from Hong Kong to Belarus and more.

 

Telegram is one of the world’s fasted-growing and largest social messaging platforms. They have spent $0 on marketing and are adding almost 2.5mm users a day.  They have 930mm monthly active users and Pavel is still the sole Product Manager at the company with only 30 people.  

 

Telegram regularly outpaces its closest alternative, Signal, by 10x the amount of monthly downloads, garnering over 36.7 million in January of this year.

 

Telegram vs. Signal: January 2024 Monthly Downloads

 

 

Telegram stands out not only because its platform has significant distribution, but also because it embodies crypto’s ethos.

 

At Token2049, Pavel introduced why TON and Telegram are a great fit; “The reason I love Blockchain, is because it is a technology with freedom – it gives power back to the people”.  No other social messaging app is positioned in this way.

 

What about the other top messengers? Telegram is the only major platform that is free of regulatory hurdles to incorporate Web3 for an open blockchain network. While Messenger attempted to incorporate crypto payments with Libra, they ultimately faced regulatory hurdles from the U.S that led to a complete shutdown. WeChat has attempted to integrate CBDC payments of digital yuan, but the system is limited in scope and builders don’t have the ability to create permissionless applications. 

 

We believe Telegram is well positioned to bring crypto to the world because of its shared Web3 ethos and large distribution. 

 

 

The Open Network (TON) is a blockchain initiative developed by Telegram, designed to leverage the messaging app’s extensive user base to create a decentralized network capable of supporting a diverse range of applications. TON features a multi-component ecosystem, which includes TON Blockchain, TON Storage, TON DNS, and TON Services – all integrated to function seamlessly together.

 

The backbone of this system, the TON Blockchain, is built for high performance and scalability, processing transactions quickly thanks to its dynamic sharding mechanism. This architecture ensures the network can handle millions of transactions per second and scales efficiently as user numbers grow, making it ideal for developers aiming to launch applications for hundreds of millions of users without compromising speed or security.

 

TON’s dynamic sharding enables a scalable network for millions of users.

 

 

Onboarding users to use crypto applications is usually difficult. A new user needs to write down a 24-word passkey and store it somewhere safe. But what if you forget your password? How do you send or receive money to another user? Copying and pasting a public key may not be the best experience.

 

Telegram simplifies many complexities with Top.co’s Wallet in Telegram, which allows users to seamlessly connect to mini apps. Users can easily buy, sell, or manage tokens and NFTs all within a single interface, accessible directly through the Telegram settings and personal chats.

 

Wallet in Telegram features both custodial and self-custodial management based on TON, allowing all users to enjoy an easy onboarding experience while giving experienced users the option to have full control over their keys. With TON’s self-custody wallet, users don’t need to remember their seed phrase; instead, they can simply use Telegram and their email as backup.

 

 

 

Top.co’s Wallet in Telegram has 15 million users and counting.

 

 

TON’s burgeoning ecosystem leverages Telegram’s innovative design and substantial user base. Over 360 million users engage monthly with what Telegram refers to as “Mini Apps”, which include chatbots and mini-games. With TON, we envision that integrating crypto into these “Mini Apps” will significantly enhance the user experience for these hundreds of millions of users. There are more than 300 projects on TON, the majority of which built mini-apps on Telegram which are accessible via the Telegram Apps Center.

 

Earlier this year, we observed how memecoin trading tools like BonkBot generated tens of millions of dollars in revenue through Telegram’s user interface. TON-based applications, such as StormTrade, now enable users to trade perpetuals, cryptocurrencies, stocks, and equities using the same interface. StormTrade facilitates over $10 million in trading volume daily, and we believe that similar TON-native Telegram bots will become the preferred user experience for many traders.

 

Telegram serves as a foundation for viral social and gaming applications. Early experimental Telegram games like Pixels and Fanzee Battles have attracted millions of users within days, demonstrating the platform’s vast potential for user engagement. Catizen is a cat-themed minigame platform built on TON that now has over 4 million users, of which over 700k users play daily. Notcoin, a social app built on TON where users compete to mine a digital currency, has rapidly onboarded over 30 million users—one of the fastest crypto adoption events ever recorded. 

 

TON Foundation recently announced their incentive program which will reward development of successful TON applications. We believe this will catalyze the creation of exciting new crypto mini apps that have the potential to onboard the masses.

 

 

TON is unlocking numerous ways for the Telegram community to monetize, share, and grow their businesses. As a decentralized marketplace on the TON network, Fragment offers a platform where users can trade collectibles such as virtual phone numbers and custom Telegram usernames. Fragment has already facilitated over $350 million in sales of custom usernames and virtual phone numbers. This is just the start. In the near future, Telegram stickers, of which 730 billion have been sent, could be transformed into NFTs. These NFTs would then be available for purchase and sale through the TON blockchain.

 

Telegram is taking a significant step forward by integrating revenue sharing with content creators and channel owners through its Fragment platform powered on TON blockchain. This move marks a shift from traditional social media models by directly allowing these creators to earn from ad revenues on their channels. This approach not only rewards creators for their content but also fosters a closer relationship between the platform and its users, promoting a fairer distribution of financial benefits within the digital ecosystem.

 

 

On April 19th, 2024, Tether announced the deployment of its stablecoin, USDt, on the TON blockchain and in Wallet in Telegram. This development represents a significant advancement for the crypto industry, as it allows hundreds of millions of users to seamlessly send and receive stablecoins through the Telegram platform, making payments as easy as using Venmo or Apple Cash.

 

The TON network’s scalability allows for a fixed fee of ~$0.1 for transactions between two users – that is 66% cheaper than other crypto payment platforms. Additionally, built-in on-ramps and off-ramps, including bank transfers and exchanges, are being made available to further facilitate access and use.

 

Stablecoin Payments on TON

 

We believe that stablecoin payments on Wallet in Telegram are particularly crucial for individuals in developing countries, who often lack access to banking services and are forced to navigate complex crypto user interfaces to store and transfer funds. With stablecoins deployed on the TON network, crypto is making a significant leap toward realizing the vision of programmable peer-to-peer money and a decentralized financial system accessible globally.

 

 

We believe the TON network is still in its early stages, and we are excited to witness the adoption of its ecosystem and new features by the Telegram user base. 

 

At its core, Telegram embodies the ethos of crypto: an open, free network accessible to all. With TON, Telegram achieves a symbiotic relationship where scalable smart contract functionality and a robust payments network enable groundbreaking capabilities that were unattainable in the Web2 environment. Given its vast user base, scalable infrastructure, a thriving ecosystem of mini apps, and native stablecoin transactions, TON taps into the potential of a network with 900 million active, engaged users.

 

At Pantera Capital, we are thrilled about this investment and are eager to support the future builders within the TON ecosystem. If you are developing on TON and share our enthusiasm, please don’t hesitate to reach out.

 

After maintaining a very low profile for the better part of a decade, Pavel did two public appearances recently.  Both are well worth viewing.

 

 

TOKEN2049 Announcement Highlights – video:

 

Tucker Carlson Interview Highlights – video:

source: https://panteracapital.com/blockchain-letter/ton-our-largest-investment-ever/