Key takeaways
- Toncoin (TON) inscriptions were launched at the beginning of this week by a new TON protocol known as Tonano
- 3 million transactions flooded TON as users sought to inscribe their tokens with data, which placed strain on validators and caused the blockchain to practically stop
- The TON price prediction algorithm has forecasted a continuation of the short-term retracement, in what would be a -3.50% decline in the next 5 days
Inscriptions service causes transaction bottleneck on TON, highlighting important bugs in the distributed computer network
The price of Toncoin (TON) is $2.26 at the time of writing following a -1.32% move in the past 24 hours.
A newly launched protocol on The Open Network (TON) blockchain brought an Ordinals-style inscriptions service to TON earlier this week. Inscriptions, which have become a hot topic in the crypto sphere during 2023, enable users to etch data onto specific cryptocurrency tokens that are already in circulation.
Toncoin’s new inscription service was launched by Tonano at the beginning of this week. By Thursday, a spike in trading activity had caused TON blockchain to be brought to a near stop. The scale of demand for TON inscriptions produced a 61x spike in trading activity in just 30 minutes, which strained TON validators and resulted in a network-wide bottleneck where transactions per second dropped to just 1 TPS.
TON saw a spike in total transactions after Tonano was launched
Previously, TON had stress-tested its scalability potential at the beginning of November and found that the blockchain could handle 100,000 TPS. TON Foundation stated that the drop-off was a consequence of validators renting low-load servers, which then struggled to handle the spike in transactions and slowed the wider blockchain as it sought to reach consensus.
TON Foundation has since released a patch of the validator client that has helped to ease the bottleneck. Additionally, the foundation stated that it will increase penalties for validators that are found to be unreliable for the consensus protocol moving forward.
QUOTE: TON has a system of decentralized penalties for validators who do their job poorly or incorrectly. However, at the moment, penalties are too kind. To solve this problem comprehensively, we plan to significantly improve the penalty system and increase the size of penalties for bad validators.
The inscriptions debate: A vehicle for mass adoption or a hogger of blockspace?
Inscriptions have become a hot topic in recent months after the launch of Ordinals on Bitcoin split investor opinion. On the one hand, the demonstrable boost in trading activity reflects a true demand from users for personalized inscriptions on the blockchain. All three blockchains that have implemented inscriptions — Bitcoin, Polygon, and TON — have enjoyed a spike in user activity.
On the other hand, only Polygon out of the three blockchains mentioned above has seamlessly handled the resulting trading activity. Bitcoin transaction fees have spiked in direct proportion to the increased user activity since Ordinals were released back in March, which led to the most costly Bitcoin transaction ever recorded in November 2023.
TON blockchain is designed to handle higher load than Bitcoin, and the inscription-driven bottleneck highlighted unrelated bugs in the ecosystem that now look set to be fixed. Regardless, the debate as to whether or not inscriptions are a net good in crypto rages on as detractors claim that they clog up blockspace for other important use cases for the peer-to-peer payment system.
TON price prediction: AI forecasts short-term slide for TON despite positive long-term prediction
The AI price prediction algorithm expects a continued slide for TON over the near term. TON is one of the few cryptocurrencies to be in the red over the past month, as it has fallen -15.43% during this time. To compare its price action to the wider crypto markets, TON has underperformed the total crypto market cap (TCAP) which is up +21.21% in the past 30 days.
The TON price prediction algorithm expects a further -3.50% loss over the next 5 days. However, the cryptocurrency may be nearing the bottom of its current downtrend as the algorithm expects a reversal shortly afterwards, which would mark a continuation of the macro uptrend that TON has been in since early-August 2023.
The bottom line
Tonano, the newly launched inscriptions service on TON blockchain, revealed some key inefficiencies in the underlying network that have since been addressed. The platform, along with TON’s two main wallets, had to pause operations for all queued transactions to be filtered through the consensus mechanism without causing additional harm. The new patch and upgraded disincentive system should now ensure that the problem never recoccurs.
With regard to inscriptions themselves, the new blockchain use case has surfaced as one of the most popular methods for personalizing owned assets. Inscriptions have had widespread adoption on three separate chains since the Ordinals protocol introduced the concept to Bitcoin earlier this year, which has led to a spike in trading volume and an influx of liquidity for each one of the early adopters.
The price prediction algorithm expects TON to see a brief drop in value over the next 5 days in what would be a continuation of its trend on the daily timeframe. On the weekly, TON has enjoyed significant upside since Telegram announced its support for the chain in September, and the underperformance this month does not undermine the macro price trend.
Learn how high AI thinks TON will go after the Bitcoin halving here.