TRON is a Layer 1 blockchain that aims to become the main infrastructure of the Web3. The TRON blockchain was created by Chinese entrepreneur Justin Sun and its management has been gradually delegated to a decentralized autonomous organization (DAO). An overview of a highly popular ecosystem in Asia.
What is TRON (TRX)?
The TRON protocol is a layer 1 public blockchain that aims to solve the problem of excessive centralization of the Internet due to companies like Amazon, Netflix, Google and Twitter that have total control over user data.
The TRON blockchain thus aims to become the major infrastructure of Web3, allowing developers to create smart contracts and decentralized applications, much like the Ethereum or Solana blockchains. The governance of the TRON project is entrusted to a decentralized autonomous organization (DAO), the TRON DAO.
TRON relies on a Delegated Proof of Stake (DPoS) consensus, in which 27 validators named Super Representatives rotate every 6 hours to validate blocks and transactions taking place on the TRON network.
The TRON blockchain is also known for its very low transaction fees on its network (less than $0.01) and for its significant scalability estimated at 2,000 transactions per second.
Smart contracts on the TRON network can be coded in Solidity, similar to the Ethereum blockchain, and are compiled on the TRON Virtual Machine (TVM). The native and central cryptocurrency of the TRON ecosystem is TRX.
In 2018, the decentralized peer-to-peer file-sharing network BitTorrent was integrated into the TRON ecosystem, while in May 2022 the Decentralized USD (USDD), a decentralized algorithmic stablecoin, was deployed on the TRON blockchain.
Over time, and especially with the USDD, the TRON blockchain has established itself as one of the most widely used blockchains in decentralized finance (DeFi).
The TRON blockchain ecosystem
The 27 Super Representatives
The consensus of TRON is the Delegated Proof of Stake, concretely, each owner of TRX tokens can either vote for a candidate to represent him or her, or decide to become a candidate himself.
In order to be able to vote, one must first have staked their TRX tokens, knowing that 1 TRX token is equal to 1 vote. In order to run for the election of the Super Representatives, the candidate must first pay 9,999 TRX tokens, which is approximately $600 at the current price (November 2022).
Then, the 27 candidates with the most votes become Super Representatives (SRs) while the candidates ranked 28th through 127th become Super Partners.
Figure 1: The 27 TRON Super Representatives (November 2022)
SRs are responsible for producing blocks and aggregating transactions and receive TRX tokens as rewards, while super partners only receive voting rewards.
Every 6 hours, a vote is held to determine the 27 SRs that will take care of the production of the blocks. A rotation of the SRs therefore potentially takes place if the result of the votes is different from the previous session. In practice, rotations are rare.
Only SRs can propose to change some parameters of the TRON network. The proposal is then active for 3 days and needs 19 votes out of 27 to be adopted (more than 2/3 of the votes).
Finally, the SRs also have a role in the operation of the Decentralized USD (USDD) stablecoin as they periodically vote on its true exchange rate.
A 3-layer infrastructure: Core, Storage and Application
TRON’s core layer consists of several modules such as DPoS consensus, smart contracts and account management. A lightweight virtual machine is implemented on the network, the TRON Virtual Machine (TVM). Its objective is to provide a blockchain system that is custom designed to be stable, secure, scalable and efficient.
The programming language for smart contracts is Solidity, the same as the one used on the Ethereum blockchain. Thanks to this, the TVM is compatible with the Ethereum Virtual Machine (EVM).
However, unlike Ethereum, TVM uses a bandwidth concept that differs from the gas mechanism on EVM. Thus, transaction and smart contract operations on TVM are completely free.
Figure 2: The 3-layer architecture of the TRON blockchain
TRON’s Storage layer is a distributed storage protocol composed of blockchain storage and stateful storage. Specifically, the blockchain storage uses LevelDB, a database management system developed by Google.
For state storage, TRON has KhaosDB in the “node memory”, in order to guarantee the speed of block generation and thus support the transaction throughput of the TRON blockchain.
Finally, TRON’s Application layer, or application layer, simply allows smart contracts to be deployed and executed, to create various decentralized applications and digital wallets on the TRON network.
BitTorrent Chain (BTTC), an acquisition of the TRON project
TRON acquired BitTorrent in July 2018. Originally a peer-to-peer file-sharing network, BitTorrent has metamorphosed and now offers a cross-chain and layer 2 solution with BitTorrent Chain, which is compatible with the TRON blockchain, Ethereum and BNB Chain.
Thus, the BitTorrent Chain aims to help the development of the TRON ecosystem and in particular the sectors of decentralized finance (DeFi) and non-fungible tokens (NFTs), while trying to solve the difficulties related to the interoperability of the network applications.
Decentralized USD (USDD), the algorithmic stablecoin of the TRON network
Decentralized USD (USDD) was launched in May 2022 on the TRON blockchain. It is a decentralized algorithmic stablecoin based on the model of the now defunct TerraUSD (UST).
USDD tokens are issued by the TRON DAO Reserve and use an elastic monetary policy mechanism to maintain their parity with the US dollar (1 USDD = 1 USD).
In concrete terms, when the protocol detects a deviation from its dollar peg, an arbitrage mechanism is supposed to restore it. When the USDD price falls, USDD tokens are burned while TRX tokens are created, and vice versa. The TRX token thus absorbs the volatility of the USDD stablecoin.
The TRON DAO Reserve aims to be transparent about the amount of TRX burned as well as the amount of USDD created. The USDD is currently over-collateralized by about 300%.
In particular, the USDD is connected to the Ethereum blockchain and the NBB Chain through the BTTC cross-chain protocol.
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What are the roles of the TRX token?
TRX is the native cryptocurrency of the TRON ecosystem. Its use cases are varied, TRX is used as a means of payment for all operations taking place on the TRON network, and therefore for interaction with decentralized applications.
The governance of the TRON network is also done through TRX tokens. Indeed, a user can store his TRX tokens in order to vote for candidates wishing to become Super Representative while generating a passive return.
Finally, the TRX token is essential to the operation of the USDD algorithmic stablecoin since it acts as collateral to it and absorbs its volatility. The circulating supply of the TRX token is elastic to the demand for USDD tokens, so when new USDD tokens are created, the dollar equivalent of TRX tokens is burned, and vice versa.
TRON and TRX Tokenomics fundraising events
The TRON project has closed two rounds of funding:
- Sale to private investors in September 2017 with undisclosed amount of funds raised;
- Approximately $70 million raised during an Initial Coin Offering (ICO) in September 2017.
Concerning the Tokenomics of the TRX token, the initial offer was 100 billion tokens distributed as follows:
- 40% to ICO investors;
- 25.7% to private investors ;
- 34% to the TRON Foundation;
- 10% to founder Justin Sun’s company, Peiwo Huanle Technology Co;
- 1% were burned at the launch of the TRON mainnet.
The outstanding supply of TRX tokens is not fixed:
Figure 3: Outstanding supply of TRX tokens
We can see from the chart above that the outstanding supply of TRX tokens began to decline in May 2022, which corresponds to the date of the rollout of USDD, the algorithmic stablecoin in the TRON ecosystem.
Many TRX were burned to create USDD tokens, so as of November 5, 2022, the outstanding supply of TRX tokens amounts to 92.2 billion units. We can also note a staking rate of TRX tokens of 42.74%.
The TRON team and its partners
The TRON team
TRON is the project of the TRON Foundation, which has made a transition to a decentralized autonomous organization (DAO) in December 2021. The TRON DAO is now responsible for the development of the project.
The major figure of the TRON project is Justin Sun, founder and former CEO of the TRON Foundation before he founded the TRON DAO and resigned as CEO. However, he remains the major figure in the TRON ecosystem and represents blockchain publicly (social networks, interviews, events, etc.).
The co-founder and former technical director of the TRON Foundation is Lucien Chen. He left the project in May 2019.
The rest of the TRON team is very discreet, and little information is circulating about it.
TRON’s partners
The TRON project has entered into many partnerships (Samsung, Opera, etc.) and here are some recent examples of partnerships in 2022:
- Dominican Republic (2022), which has selected the TRON blockchain as its national blockchain, which means that the country could accept tokens from the TRON ecosystem such as TRX, BTT and USDD for tax payments for example;
- Wintermute (2022) joining TRON DAO and providing liquidity for major trading pairs with TRX.
How to buy TRX?
Our opinion on the TRON blockchain
TRON is a blockchain that has carved out a solid place for itself in the cryptocurrency industry since its mainnet rollout in 2018. As of this writing (November 2022), it is the 3rd most used blockchain in decentralized finance, only behind Ethereum and BNB Chain with $6 billion locked up (TVL).
However, this activity in DeFi relies heavily on the JustLend lending platform and the JustStables and SUN stablecoins. Specifically, it relies heavily on the high returns that can be generated with the USDD stablecoin on these platforms.
It will be important to see if TRON’s DeFi ecosystem can manage to attract funds in other ways as well, as its algorithmic stablecoin USDD still has a relatively sulphurous reputation after the Terra case and its UST.
Moreover, we can observe a certain degree of centralization among the 27 Super Representatives who are in charge of producing the blocks of the TRON network. A number of validators that is far too low for TRON to be considered a decentralized blockchain, especially since these 27 representatives are almost always the same
However, the TRON blockchain is extremely popular in Asia and especially in China, and has very interesting technical features (fast, low cost) coupled with a very complete ecosystem of DApps.