CEX.IO Spotlight: Tron

CEX.IO

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Key info (as of September 16, 2022):

  • Circulating Supply — 92,363,264,781 TRX
  • Total Supply — 92,395,754,732 TRX
  • Sector — Smart Contract Platforms
  • Token Type — Native
  • Token Usage — Payments, Votes
  • Genesis Block Date — June 25, 2018
  • ATH — $0.3004
  • ATH Date& — January 5, 2018

Overview

What is Tron (TRX)?

Tron is an open-source blockchain protocol designed to deploy decentralized applications (dApps) and share content without intermediaries. Tron’s system is separated into several core modules and features a delegated proof of stake (DPoS) consensus mechanism.&

Tron claims that these blockchain specifics allow the network to reach 2,000 transactions per second and offer low transaction fees. At the same time, Tron’s approach is sometimes considered a way to relinquish censorship resistance to achieve high throughput and scalability.

The Tron network gained significant traction in recent years, achieving over 100 million users on the blockchain and upwards of 3.7 billion transactions since its launch. Tron hosts the largest circulating supply of stablecoins across the crypto industry and is considered one of the largest crypto ecosystems in terms of total value locked. 

The Tron network has a native token called TRX. It is the basic unit of accounts on the Tron blockchain, meaning it is a natural medium currency for all Tron-based tokens. Originally, TRX was an Ethereum-based token, but it became a native token after Tron’s mainnet launch.&

A brief history of Tron

Tron was founded by Chinese entrepreneur Justin Sun in 2017. Before Tron, Justin Sun worked as a representative of Ripple in China and launched the popular voice streaming app Peiwo. Justin Sun is considered a controversial person in the crypto community who is famous for his aggressive marketing. At the same time, Tron is often criticized for the centralization of its network, in addition to accusations of plagiarism.

In July 2017, Justin Sun founded the Tron Foundation, a non-profit organization that assists with the development of the Tron ecosystem. The same year, the Tron Foundation allocated 15.75 billion TRX to private sale investors and 40 billion TRX during a public ICO, raising $70 million.

The Tron mainnet was launched in May 2018. Soon after, Tron announced the acquisition of the peer-to-peer network BitTorrent. On 25 July 2018, the Tron Foundation finished this acquisition and declared Tron’s independence with the creation of the genesis block. 

In August 2018, the Tron Foundation launched Tron Virtual Machine (TVM) to offer developers the ability to deploy smart contracts within the network. In September 2019, Tron launched the sidechain Sun network to expand the capacity of Tron’s mainnet.

In July 2020, Tron launched the 4.0 version that introduced the TRONZ privacy protocol and helped Tron significantly improve its throughput and block confirmation times, from an average of 57 seconds down to three seconds.&

Since 2020, Tron has been more focused on expanding its ecosystem, and launching a set of different DeFi solutions and infrastructure initiatives to make the adoption of Tron simpler for developers. These efforts included launching Tron-based stablecoins, a Tron wallet, NFT standards, and an oracle network. In May 2022, Tron launched its algorithmic stablecoin USDD.

Presently, Tron is experiencing its “Great Voyage” phase, according to the 10-year roadmap, which is expected to enable the issuance of personal tokens and bring decentralized gaming and forecasting platforms to Tron.

How does Tron work?

Layers

Tron adopts a three-layer architecture consisting of a core layer, storage layer, and application layer, each of which is optimized for a specific set of features and functionalities.

  • Core layer — This layer performs multiple tasks, including smart contracts, account management, and consensus. Tron decided to choose the programming language Solidity (created by Ethereum developers) as the foundational smart contract language, because of its compatibility with the Ethereum network and its popularity for creating dApps.
  • Storage layer — This layer is designed to be utilized as a distributed database, consisting of blockchain and state storage. Tron optimized this layer with the idea of a graph database to allow for more complex data storage needs within the Tron network.&
  • Application layer — This layer is focused on helping developers interact with the Tron ecosystem and create a diverse range of dApps.&
tron_layers_sceme

Tron layers. Source: Tron whitepaper

Consensus mechanism

Tron utilizes a DPoS consensus mechanism, where network users vote and elect nodes to produce new blocks. Block producers are called super representatives (SR) in the Tron network, and any account can become a super representative candidate by putting 9,999 TRX in the node.&

When applying to become an SR, 9,999 TRX will be burned to prevent malicious attacks and “keep SRs honest.” However, only 27 candidate nodes with the highest vote may obtain the status of super representative in the Tron network. SRs earn block and voting rewards, while users who voted for super representatives receive only voting rewards.

The super representative candidates ranked 28th to 127th are called super representative partners. They do not participate in block production but receive voting rewards. Voters who vote for super representative partners also earn voting rewards.&

Voting for the 27 SRs takes place every six hours, meaning there can be a new group of validators each round, which helps make the DPoS approach more democratic. Any account can vote for SRs by obtaining voting rights in the form of Tron Power (TP). This is achieved by staking TRX (1 TRX equals 1 TP). If necessary, stakers may split their TP to vote for different SRs.&

Nodes

The Tron blockchain contains three types of nodes: witness nodes, full nodes, and solidity nodes. Each node type has its own role within the Tron network.&

  • Witness nodes — this node type is set up by SRs and is responsible for block production, verifying transactions, and governance within the network.&
  • Full nodes — this node type provides APIs for broadcasting blockchain status to other nodes and contains all blocks and transaction data held on the network.&
  • Solidity nodes — this node type synchronizes block data from full nodes and provides indexable APIs.

Remarkably, end users cannot directly communicate with witness nodes for security reasons. Instead, they access them through full nodes and solidity nodes. So, for example, crypto wallets that support Tron may need to deploy a full or solidity node in the network.

Governance

Any user may submit a draft Tron improvement proposal (TIP) to encourage developers to add or upgrade certain features. If developers consider adding features described in TIPs, SRs and nodes may accept the changes by updating their clients.&

In addition, every SR, SR partner, and SR candidate may initiate proposals to modify Tron network parameters such as block generation rewards, transaction fees, etc. However, only SRs have the right to vote on these initiatives. These proposals are valid for three days from the time of their creation. During this period, SRs may either vote yes or ignore the proposal. SRs may withdraw their vote if necessary. If the proposal receives 19 SR votes or more, new parameters will be applied in the next three days.

Tron Virtual Machine

The Tron Virtual Machine (TVM) is a tool to run and deploy smart contracts within the Tron ecosystem. Originally, TVM was a fork of the Ethereum Virtual Machine (EVM), which was then adapted to the Tron network. TVM is EMV-compatible, meaning it is easier for developers who get used to EVM to port their applications on Tron.

However, Tron utilizes the concept of bandwidth which differs from the gas mechanism on the EVM. In Ethereum, each transaction costs a gas fee, while Tron transactions and smart contracts are technically free but only up to a certain point.&

In the Tron network, every transaction expends energy and bandwidth points. Every account must purchase energy and is allotted a certain amount of bandwidth points per day. If a user exhausts these points, they must freeze their tokens for at least three days to generate more points. After that, the system will consume the locked TRX for further operations beyond the limit.&

Tron’s native token

Utility

TRX is Tron’s native token that connects the Tron ecosystem through various applications that power transactions on the chain. TRX is predominantly used for the following purposes:

  • Payments within the Tron network.
  • Obtaining voting power by staking/freezing TRX to vote for SRs.
  • Obtaining the corresponding amount of energy and bandwidth points by staking/freezing TRX.

Token allocation

Initially, when the first 100 billion TRX were issued, it was considered the token’s total supply. 15.75 billion TRX were allocated to private sale investors and 40 billion TRX were allocated to public sale investors. 10 billion TRX were allocated to Justin Sun’s company Peiwo, while the Tron Foundation allocated the remaining funds to itself.

initial_tron_allocation

Initial TRX allocation. Source: Coin98

However, because of constant TRX burning for different reasons, the total and circulating supply of TRX are considered unpredictable. One of the reasons is the Tron-based algorithmic stablecoin USDD which can be minted when TRX is burned. In June 2022, Justin Sun mentioned that TRX burning will be deliberately unpredictable to make USDD less susceptible to the attacks that Terra and its algorithmic stablecoin UST experienced in May 2022. 

The current annual issuance rate of TRX is 0.5%. 91% of tokens (160 TRX per block) are distributed as voting rewards, while 9% (16 TRX per block) are distributed as block rewards. However, since October 2021, the number of TRX burned has been exceeding the number of TRX generated, making the asset deflationary. 

A brief overview of the Tron ecosystem&

Tron is considered the second largest smart contract platform in terms of total value locked after Ethereum. According to Tronscan, the current TVL in the Tron ecosystem is over $13 billion. Remarkably, while many other smart contract platforms experienced a significant drop in TVL in 2022, Tron has seen a slight increase. One of the major reasons for that is the Tron-based lending platform JustLend and its JustCryptos bridge.

total_value_locked_chart

Source: Tronscan

The biggest decentralized wallet in the Tron ecosystem is TronLink. It provides users access to numerous dApps and serves over 10 million Tron users. TronLink is available in the form of different browser extensions and mobile apps for different use cases. As the major oracle network, Tron-based dApps use Winklink, which previously was known as Justlink.&

According to DaapRadar, more than half of Tron-based dApps are related to the high-risk category. The network also hosts numerous gaming (Cuties, Chainz Arena), gambling (Wink, 888 Starz), and NFT-related (Kraftly) projects.

Stablecoins

At the moment, Tron hosts the largest circulating supply of stablecoins across the crypto industry, especially when it comes to Tether (USDT). Starting from 2021, many smart contract platforms either stopped or decreased USDT issuance. But Tron issued more than 20 billion USDT that year. At the moment, around half of all USDT tokens are hosted on the Tron network. 

In addition, there are more than 3 million USDC and 300,000 TUSD issued on the Tron blockchain. Tron also hosts native stablecoins like USDD and USDJ, which have more than 700,000 and 200,000 token supply respectively within the network.&

Lending

JustLend was the first lending platform on Tron and continues to be the largest project in the Tron ecosystem in terms of TVL. JustLend offers users lending and borrowing of Tron-based and other assets while also supporting smart contracts.&

Interest rates on JustLend are determined by an algorithm based on the supply and demand of Tron assets. However, JustLend has been criticized for offering high supply APY for Tron-based assets, which some suggest makes JustLend’s growth appear artificial.

According to Tronscan, JustStable is the second largest lending platform in terms of TVL on Tron. JustStable provides a stablecoin lending protocol and supports its own USDJ stablecoin.&

DEXs

SunSwap was the very first decentralized exchange to be built on the Tron blockchain. It offers a similar set of services as PankakeSwap and Uniswap, including on-chain token exchange, stablecoin conversion, staking, and liquidity mining. Other notable DEXs in the Tron ecosystem are TransitSwap, SocialSwap, and Uswap.

top_dexes_in_tron_network

Top DEXs in the Tron network in terms of 30-day volume. Source: DappRadar

Find out more about Tron

Tron features a smart contract platform with low fees and high throughput that attracted many developers to deploy dApps and create tokens. This also helped make Tron one of the most popular platforms to transfer and host stablecoins.&

Stablecoins are considered to play an important role in the development of crypto ecosystems. This means that Tron’s status as the platform with the largest circulating supply of stablecoins may help its ecosystem with further developments.

At the same time, the Tron ecosystem is moving towards scaling. Although the current Tron ecosystem contains numerous casinos and high-risk projects, the Tron DeFi Hackathons and IDOs may help the ecosystem find the missing pieces while improving network stability.

Stake Tron on CEX.IO

With CEX.IO, you can purchase TRX to join the Tron ecosystem and take advantage of its features. In addition, you can stake TRX and earn staking rewards just by holding tokens on CEX.IO. CEX.IO features no-lock periods, meaning customers can withdraw and trade their TRX tokens anytime, even when those funds are earning rewards. Check our staking page to learn the current estimated annual yield for staking TRX on CEX.IO.

Disclaimer: Information provided by CEX.IO is not intended to be, nor should it be construed as financial, tax, or legal advice. The risk of loss in trading or holding digital assets can be substantial. You should carefully consider whether interacting with, holding, or trading digital assets is suitable for you in light of the risk involved and your financial condition. You should take into consideration your level of experience and seek independent advice if necessary regarding your specific circumstances. CEX.IO is not engaged in the offer, sale, or trading of securities. Please refer to the Terms of Use for more details. 



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