The State of TON DeFi Q2 2023

The Open Platform
11 min readJul 26, 2023

This public article is the result of an internal report conducted by First Stage Labs.

Accelerating Blockchain Startups to Escape Velocity. https://top.co

TLDR:

  • TON Foundation’s Liquidity Mining Campaign caused a surge in TVL with a substantial increase of 30.4% compared to the previous quarter. Notably, TON’s TVL growth rate outpaced that of its peers.
  • During this quarter, the liquid staking protocol, bemo, was launched, and Tonstakers, OpenStake, and Hipo Finance were also announced.
  • TON saw the introduction of two new DEXs: Flex, a trustless DEX, and Storm Trade, the first DEX for synthetic assets on TON, which is currently in its testnet phase.
  • TON Bridge was officially launched and is now supported by DeDust and Flex.

Similar to Q1 2023, this quarter saw a significant influx of TVL, surpassing that of our peers. This growth was driven by the Liquidity Mining Campaign initiated by TON Foundation and the launch of several new DeFi projects.

Furthermore, two highly anticipated developments took place: the introduction of the liquid staking protocols and TON Bridge. As TON continues to be at the forefront of DeFi, it offers promising opportunities for both investors and users, contributing to the ongoing advancement of the sector.

We are happy that we were able to watch TON’s transformation since the beginning of 2023. Although it used to only offer general decentralized exchanges, TON is now providing a diverse range of classic and specialized DeFi products, many of which are already available, while others are in development. As a proud contributor to TON’s DeFi infrastructure, we are providing the foundation for new protocols to be built on top of EVAA for TON’s long-term development.

We firmly believe that TON has the potential to become a Web3 version of Revolut. To achieve this, TON needs more unique products to entice new users to DeFi, including Web3 games and SocialFi products. As a developer, I can confidently say that this is the perfect moment to start building in TON Ecosystem, thanks to its well-established infrastructure solutions, easy development system, and promising market conditions!

Vlad Kamyshov, Co-Founder at Evaa Protocol

In this report, we will highlight the key developments in each DeFi segment and provide recommendations about the steps TON could take to achieve cutting-edge utility and comprehensibility within its DeFi ecosystem.

Overview

This quarter saw a strong increase in TON wallets, TVL, and market capitalization:

Sources: TonApi.io, DeFillama, TonTech.io, CoinMarketCap

On June 1st, 2023, TON Foundation launched a $720,000 Liquidity Mining Rewards Campaign, leading to an instant TVL surge from $13.83M in Q1 2023 to $18.04M in Q2 2023. All major DEXs on TON that participated in the campaign experienced this abrupt increase in TVL.

Source: DefiLlama. The chart only includes projects listed on DefiLlama.

New tokens are continuously emerging within TON Ecosystem, offering beneficial yield opportunities and attracting liquidity. Notably, STON, the newly minted utility token of STON.fi DEX, has taken the lead in trading volume, closely followed by MEGA, the utility token of Megaton Finance.

Source: Tonalytica.Redoubt.Online. Accessed on 14/07/23.

In the next section, we will delve into the recent developments of ecosystem DEXs during this quarter.

DEX Projects

The increase in TVL occurred across all major DEXs on TON listed on DefiLlama, with STON.fi and DeDust rapidly increasing their market shares:

Source: DefiLlama. The chart only includes projects listed on DefiLlama.

STON.fi has released a new version of its Whitepaper, providing a comprehensive description of its zero-trust protocol based on Hashed Timelock Contracts (HTLCs) and Request-for-Quote trading model. Alongside this release, the team has introduced a new Rust SDK and FunC library tailored for developers. This toolkit enables seamless integration of STON.fi into their projects using Rust. Furthermore, STON.fi has made its FunC library accessible, simplifying the development of smart contracts on TON. These tools are expected to streamline the development process and accelerate the launch of various innovative TON products.

DeDust has recently launched an upgraded version of its DEX, DeDust 2.0. Notably, the DeDust DEX now offers official support for token bridging, enabling users to seamlessly transfer tokens between TON Blockchain and Ethereum through the new Token Bridge. Moreover, DeDust has incorporated support for the Wallet Connect protocol, allowing users to utilize well-known crypto wallets like Uniswap Wallet, SafePal, Rainbow, and others. Additionally, DeDust launched a community incentives program and distributed rewards to participating liquidity providers.

Megaton Finance currently leads with 53.49% of the network TVL. DeDust and STON.fi, however, experienced a larger increase in their TVL compared to the previous quarter.

Source: DefiLlama
Source: DefiLlama

Additionally, DeDust is at the forefront in terms of TVL in some of the popular pools with pairs including TON.

Sources: Megaton Finance Dashboard, DeDust Dashboard, Flex Dashboard. Accessed on 05/07/23.

STON.fi leads by 24hr trading volume followed by Megaton Finance:

Source: Tonalytica.Redoubt.Online. Accessed on 11/07/23.

During this quarter, we welcomed two new DEXs and the first DEX aggregator to TON Ecosystem.

Flex: A New Trustless DEX Powered by TON Bridge

Flex is a decentralized and trustless protocol launched by TON Factory. Flex allows users to swap tokens, including both native TON tokens and token from other blockchains, as well as NFTs. It also lets users create their own tokens and trade them on the DEX. Flex supports bridge.ton.org — a recently launched bridge for transferring assets between TON, Ethereum, and Binance Smart Chain.

Storm Trade: The First DEX on TON for Perpetual Futures

Storm Trade is the first DEX on TON that features decentralized derivatives. Recently, Storm Trade announced the public testing of their protocol on the testnet. The DEX enables users to trade perpetual futures on cryptocurrencies and traditional assets like commodities and stocks with leverage. Participants in the testing phase will have the opportunity to receive rewards.

Optus: The First Liquidity Aggregator on TON

Optus is the first DEX on TON to leverage aggregated liquidity across multiple DEXs on TON, providing users with a variety of trading pairs, reduced spreads, and slippage. Optus offers gasless transactions and fixed spreads to enhance user experience, as well as dashboards with real-time trading volume, liquidity, and price trends. Optus’ roadmap includes services for market makers, such as RFQ trading, as well as the implementation of TradingView charts and bridging with Ethereum, Polygon, and BNB chains.

We are looking forward to monitoring the performance of newcomers and will ensure our readers are kept informed about their progress in our upcoming releases.

Lending Protocols

Lending on TON is facilitated by two platforms: Tonpound and Evaa Protocol. While Evaa is a fully TON-based solution, Tonpound is based on Ethereum and uses a wrapped version of Toncoin as collateral with a goal to connect TON with Ethereum.

At present, Tonpound offers the option to lend and borrow USDT, DAI, wETH, wBTC, USDC, and pTON. On the other hand, Evaa Protocol supports TON, USDT, USDC, wBTC, wETH, and TOS.

Notably, Tonpound’s total borrow has increased by 41%, while the supply has decreased by 50%, resulting in a more balanced supply and demand dynamic.

Source: Tonpound Markets

Tonpound has recently announced the results of their airdrop for this month. The rewards will be distributed among the liquidity providers who participated and were selected as winners.

Evaa Protocol made its debut on Product Hunt, a community-driven platform known for showcasing and discovering new products. Evaa’s testnet is ongoing, and users are encouraged to join and claim an airdrop. Additionally, the team is currently working on an oracle to bring additional data sustainability to TON. Around the time of this report’s publication, Evaa is also set to release its Telegram Web App for the convenient onboarding of Telegram users.

Staking

TON now offers a range of staking pools with different APRs, pool fees, minimum deposits, and opportunities to earn liquid rewards. Whales Team, along with the new staking protocols, bemo and pTON.fi, offer the highest APRs (excluding TonStake, as its reported APR includes compounding).

Sources: Ton Whales, pTON.fi, TonStake

*Includes compounding

The first liquid staking protocols on TON were launched and announced this quarter.

bemo: Liquid Staking Protocol on TON

Liquid staking represents a new generation of staking services, enabling users to stake their assets without locking them up. In return, they receive rewards that represent an independent asset, which can be utilized within the ecosystem. Notably, Lido has emerged as one of the largest DeFi projects on Ethereum and has expanded its presence to Solana, Polygon, Polkadot, and Kusama. The time has come for TON to embrace liquid staking as well.

bemo has partnered with DWF Labs to introduce the liquid staking protocol on TON. With bemo, users can deposit their Toncoin and, in return, receive stTON tokens. These stTON tokens can then be used in other DeFi protocols to earn yield rewards or be utilized as collateral in lending protocols. All of this can be done without removing any staked Toncoin.

OpenStake: Trustless Liquid Staking with Seamless Integration to TON Wallet

OpenStake is a liquid staking protocol designed with a trustless system. When users deposit their TON, they begin to receive osTON as the rebase token, which can be utilized elsewhere in the ecosystem. OpenStake plans to distribute 80% of its revenue back to its users, a higher percentage compared to some other staking platforms. Moreover, OpenStake has implemented a multisign wallet architecture for an additional layer of security.

Tonstakers: Secure TON-Based Liquid Staking at Best Rates on the Market

Tonstakers is a new liquid staking protocol on TON which is being built in tight collaboration with TON Core Developers. Tonstakers will rely on an co-authored open source staking contract. Users can receive rewards in pTON, an asset that represents their share in the pool, while staking TON. The liquid token can be used in the ecosystem. The team has close connections with key ecosystem partners, including Tonkeeper, First Stage Labs, and Core Developers team which is reflected on teststaking.xyz, a website launched for testing current open source contract implementation in testnet.

Hipo Finance: Liquid Staking with Optimized Rewards

Similar to the protocols mentioned above, Hipo enables users to earn liquid rewards in hTON by depositing their TON. The hTON received can be used within TON’s DeFi ecosystem, while the staked TON continues to generate rewards. Hipo has optimized these rewards by carefully selecting validators with the highest reward rates. Moreover, Hipo plans to announce an Incentive Program and the launch of their governance token in Q4 2023. Early adopters will have the opportunity to receive this governance token.

Bridges

In our previous release, we introduced TON Bridge, and this quarter, it was successfully launched. TON Bridge currently offers support for TON, Ethereum, and Binance Smart Chain, allowing users to seamlessly transfer Toncoin, USDT, USDC, DAI, and wBTC across these networks.

Before the official launch, TON Foundation organized a smart contract competition, encouraging participants to attempt to hack the bridge. However, no vulerabilities were found (source). Additionally, the smart contracts were reviewed by CertiK, Quantstamp, and Hexens (source).

As we previously mentioned, TON Bridge is now officially supported by DeDust, enabling users to transfer assets from Ethereum to TON and vice versa without leaving the DEX. Flex also offers official support for TON Bridge, allowing users to bridge assets between TON, Ethereum, and Binance Smart Chain directly on the platform.

Launchpads

There are currently two launchpads on TON: GAGARIN and Tonstarter. GAGARIN specializes in conducting project launches across various chains, including Ethereum, BNB, Arbitrum, OKC, and Polygon. They offer a range of products for projects seeking to launch on their platform, such as separate platforms for IDO and INO, marketing services, listings on both DEXs and CEXs, market making, and development and audit support. Furthermore, the team plans to incorporate additional fundraising tools like staking, claiming, and distribution. Unlike Tonstarter, GAGARIN has its own ecosystem token, $GGR, which can be acquired on STON.fi.

As of now, Tonstarter is exclusively focused on TON Ecosystem and actively provides support to TON-based projects through community incentives programs. In April, Tonstarter launched a Community Incentives program for Punk City, the first game launched on $punk, a token managed by TON Punks, and STON.fi DEX.

Source: Cryptorank.io, Tonstarter, GAGARIN Launchpad

TON vs Peers

We believe that it is important to consistently monitor the performance of TON’s DeFi ecosystem and its market capitalization in comparison to its peer. Doing so will help us understand the factors influencing TON’s valuation and allow us to gauge the size of its DeFi ecosystem both in absolute and relative terms.

TON is maintaining its leading position in terms of TVL growth rate when compared to peer blockchains. Interestingly, half of the sample experienced a decrease in TVL during Q2 2023.

Sources: DefiLlama, First Stage Labs

In absolute terms, TON’s TVL is currently on par with Aurora and Hedera, and it surpasses that of Sui and Moonriver.

Source: DefiLlama

As evidenced by its TVL ratio, TON is still overvalued compared to its peers. Notably, this overvaluation is closely related to the TVL growth chart mentioned earlier. The holders of TON, Cardano, and Aptos appear to be factoring in substantial growth expectations compared to other chains within the sample.

Sources: DefiLlama, CoinMarketCap, First Stage Labs

Future Outlook

As the DeFi landscape continues to evolve, it is important to consider some of the key aspects that have an impact on the trajectory and future growth of TON. Notably, TON’s current valuation remains relatively high compared to its peers, indicating that investors have high expectations for its potential expansion and development in the upcoming months.

However, TON faces a notable challenge with its lack of EVM (Ethereum Virtual Machine) compatibility, which acts as a bottleneck for achieving significant growth in TVL and user base. To address this, introducing EVM capabilities could potentially result in a two-fold or even larger increase in TVL for TON. As a result, TON is actively seeking the support of skilled developers who can help overcome this limitation and enhance the network’s capabilities.

Another critical area of focus is the implementation of oracles. Ensuring additional data sustainability in TON’s DeFi ecosystem could enhance the integrity and safety of existing DEXs and lending protocols. Additionally, connecting TON to traditional finance asset data could enable trading of decentralized derivatives on stocks, forex, indices, and more, or even on-chain real estate.

While TON has achieved significant milestones, including the successful launch of the liquid staking protocol and TON Bridge, there is still room for further diversification within the DeFi ecosystem. One area of interest is the potential emergence of the first decentralized collateralized stablecoin on TON, which could complement the protocols mentioned in this report. Additionally, the integration of DEX aggregators and yield optimizers/autocompounders could improve overall user experience and comprehensibility of the ecosystem.

Addressing these gaps is crucial for TON to fully realize its potential and provide users with a comprehensive DeFi environment. We encourage developers to see these gaps as opportunities and take advantage of the chance to secure the role of their products in this rapidly developing ecosystem.

What to Build on TON Now?

We look forward to seeing:

Do you have ideas about how to bring more value and utility to our DeFi ecosystem? DM us on Twitter. Visit our official website: https://top.co.

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The Open Platform

We are an ecosystem builder on TON Blockchain building next-generation products for mass adoption. Our website is https://top.co.