The Open Network (TON) investors are uncertain whether the blockchain linked to the Telegram messaging app can continue its growth trajectory after its Chief Executive Officer (CEO) Pavel Durov's arrest, as it’s unclear exactly how much influence he has over the network. Since Durov’s arrest, Toncoin has dropped 20%, now trading at $5.55 and the blockchain has since suffered multiple outages. TON’s TVL has also tanked 30% to $358 million, down from $508 million since Aug. 24, the day of his arrest, and down 54% from its all-time high of $776 million on June 20. Decentralized exchange (DEX) trading volume on TON has also declined. The volume dropped 66%, falling to $3.8 million from $11.1 million on the day of Durov’s arrest, affecting DEXes like DeDust and Ston.Fi. TON’s price and activity are plunging after Durov’s arrest as investors worry about Telegram’s close link to TON and whether his arrest will impact the network's stability, technical integrations, and regulatory standing. The market reaction shows that a single individual can have a big impact on a network that is supposed to be decentralized. “This event creates questions for TON around the extent of the network’s reliance on its primary leader Durov, as well as its close connection and integrations into Telegram,” said David Kinitsky, COO of Dominant Strategies, a tooling and application developer on Quai Network. The Connection Between Durov and TON Telegram is not just a messaging platform but has become a host for crypto-native features like blockchain games and payments, also providing the infrastructure through TON for deploying Telegram’s mini apps — an open platform for businesses to build and deploy crypto-friendly apps. The TON blockchain was conceptualized in December 2017 by Telegram co-founders and brothers Pavel and Nikolai Durov, aimed at creating a blockchain integrated with the popular encrypted messaging app. Durov has no official role with the TON Foundation, which operates independently, headed by Steve Yun, the President of the Foundation Council. However, Telegram does hold a share in TON. In February, Durov announced that Telegram’s share of TON would be limited to about 10% of the total supply to promote decentralization, which means around 510 million TON tokens out of a total supply of 5.1 billion TON. It remains unclear exactly how many tokens Durov or Telegram own in TON. The crypto research firm White Rabbit found in 2023 that 85.8% of the initial token supply was mined by a few interconnected groups affiliated with the TON Foundation. Telegram and TON did not respond to The Defiant’s request for comment. Matthew Graham, founder and CEO of VC Firm Ryze Labs and an investor in TON, mentioned that while Telegram and TON are not the same, they are “loosely coupled” and highlighted that Pavel is “hugely important to both.” According to a research report by Galaxy Digital, TON has more than 350 validators globally. However, the report notes that it is unclear how many of these, if any, are operated by Telegram. The report questions "how resilient TON can be in the case that France or any other major governments attempt to attack it or to take it down as part of Durov's arrest." "The extent to which the charges against Pavel involve TON, or Telegram's integrations with TON, is not known," wrote Alex Thorn, head of firmwide research at Galaxy. "It is possible that some of the 'fraud' or 'money laundering' charges could revolve around Telegram's integration with TON and/or TON's use in illegal activity." The Arrest French authorities have indicted Durov on multiple charges for failing to maintain content moderation on Telegram. The charges include “complicity [in] acquiring, transporting, possessing, offering, or selling narcotic substances… complicity [in] web-mastering an online platform to enable illegal transactions by an organized group… complicity [in] possessing child pornography, [and] complicity [in] distributing, offering, or making available pornographic images of minors in an organized group.” The legal term "complicity" implies that while Durov is not directly accused of these crimes, his lack of content moderation is alleged to have enabled criminal activity. Telegram responded that its content moderation practices are within “industry standards” and “constantly improving,” arguing, “It is absurd to claim that a platform or its owner are responsible for abuse of that platform.” Telegram added that Durov has nothing to hide and routinely travels around Europe. Prominent tech executives and representatives from the web3 industry also protested Durov's arrest. Vitalik Buterin, Ethereum’s chief scientist, expressed concerns over the charges, while Elon Musk, Tesla co-founder and owner of X, supported Durov by sharing a previous interview with Tucker Carlson and the hashtag #FreePavel Currently, Durov is mandated to remain in France under judicial supervision with bail set at $5.56 million. Distancing From TON Durov distanced himself from TON, which was an internal Telegram project. His decision to step away from the blockchain was driven by concerns over legal and regulatory issues. In 2018, Durov raised $1.7 billion through private Initial Coin Offerings (ICOs) to launch TON, which was then called Telegram Open Network. However, in October 2019, the U.S. Securities and Exchange Commission (SEC) alleged that these ICOs constituted unregistered securities offerings. In March 2020, a U.S. federal court prevented TON from distributing the GRAM tokens sold via its ICO. Following this, Durov announced in May 2020 that Telegram would abandon the TON project and begin refunding investors. A month later, Telegram settled with the SEC. The project was then picked up by TON Labs, a development team that had worked with Telegram. They forked the blockchain and rebranded it from Telegram Open Network to The Open Network. Though TON struggled initially, it gained traction in late 2023 thanks to Telegram introducing features that allowed users to interact with the blockchain, including wallet integrations and support for Toncoin transfers within the app, signaling that at least a degree of connection between the two organizations remained The TON Foundation is based in Zug, Switzerland. Its open-source codebase allows global contributions, reducing reliance on any single developer or team. TON, fueled by Telegram’s 900 million active users, has become the fastest-growing major Layer 1 chain in 2024. Its TVL surged 2,400% to $356 million from $14 million this year, outpacing all competing Layer 1s. The network processes over 13 million daily transactions from 14 million active wallets, according to TON Stat. In 2022, TON raised $250 million from investors, including Mask Network, FJ Labs, and MEXC Ventures, with strategic support from Animoca Brands and OKX. Recently, Pantera Capital announced its largest investment ever in TON, bringing its total funding raised to $504 million. The network’s ad-sharing program with content creators and a partnership with Tether have further increased activity and boosted its token price. TON's mini-app games have also propelled its user base through games like Notcoin, which has 35 million players and a $1.2 billion market cap, and Hamster Kombat, boasting 236 million users. An Opportunity Amidst Chaos? Some view the TON price drop after Durov’s arrest as an opportunity. Rishi Thomas, core contributor at Triangle, a Telegram and TON accelerator, sees potential for growth. “Where there is murder in the markets, there is opportunity. For those that end up shunning Telegram away, others will onboard and capitalize on the infrastructure and marketing hype,” said Thomas. “So, more and more projects will deploy mini-apps. Existing applications will try and capitalize on the growth of TON and Telegram as the airdrop season on TON continues to take place.” Investment firm Kingsway Capital is also optimistic. The firm wrote in an investor letter that the history of blockchains has long been accompanied by bans, “which hasn’t stopped the industry.” The firm is confident that “TON could even operate entirely independently of Telegram.” Graham believes that from house arrest in France, Durov will still be able to effectively manage his businesses, and he could issue a public statement to help restore confidence among TON users and investors. "I think it's pretty unlikely that developers or users will be less interested in building on TON because of Durov’s arrest,” he said. “The DApps will continue to thrive on the platform.” David Kinitsky, COO of Dominant Strategies, agrees. “Assuming there’s no existential or fundamental fallout from the arrest for TON, its longer-term market prospects will be driven by continued development and organic growth within its ecosystem. Same as it ever was,” he said. VC firm Ryze Labs notes that Andrew Rogozov, a founding member of TON, is “capable of guiding the project in Pavel Durov's absence, ensuring leadership continuity.” Regulatory Challenges Still, Graham is concerned that Durov’s arrest could introduce new regulatory hurdles for the TON network. “We continue to see aggressive attempts to regulate crypto. So I think there’s always been some level of risk,” he told The Defiant. Graham said, "This could lead to conversations in places like Apple about whether or not Telegram should remain in the App Store. That’s a huge potential problem." He noted that the app had already been removed from the China App Store in April at the Chinese government’s behest, suggesting there could be similar issues in other regions. What’s Next for TON? Investors and users are closely monitoring the developments surrounding Durov and the TON ecosystem, contemplating how these events will shape the network's future. Saurabh Kumar, Vice President of Growth and International Expansion at crypto exchange Mudrex and a user of Telegram’s mini apps, is skeptical about TON’s future. “If Durov ends up in jail, I foresee a loss of confidence and a decrease in traction for the chain,” he wrote in a message to The Defiant.