The TRON blockchain occupies a distinct position within the landscape of Layer 1 (L1) blockchains. Launched with the ambitious goal of facilitating a high-speed, scalable, and cost-effective decentralized internet, TRON has cultivated a thriving stablecoin ecosystem as well as ranking in the top 3 in DeFi total value locked (TVL).
The network's consensus mechanism, Delegated Proof of Stake (DPoS), presents a nuanced variation from the typical models observed in other layer-one platforms. DPoS operates on a system where users stake their native coin, TRX, to participate in the election of Super Representatives. These elected entities are responsible for approving transactions and maintaining the network's integrity. Although this mechanism leans towards a more centralized structure compared to the traditional Proof of Stake (PoS) systems, it significantly boosts transaction throughput, a critical factor for scalability and efficiency.
The native cryptocurrency of the network, TRX, facilitates transactions within the ecosystem. With remarkably low transaction costs, averaging around $0.000005 per transaction, and rapid block production, TRON enhances its attractiveness for both developers and users. The network's ease of scalability, largely attributed to the DPoS consensus mechanism, is a testament to its focus on future growth and adaptability.
This report attempts to provide a comprehensive analysis of TRON's biggest developments in H2 2023, spanning its technology, on-chain metrics, adoption, growth, and more.
At its core, TRON operates as an operating system tailored for decentralized applications (dApps). In a manner akin to Ethereum, TRON leverages smart contracts to empower developers to build new on-chain primitives. TRON is EVM compatible, supports the Solidity programming language, and makes it easy for Ethereum projects to also build on TRON.
The TRON Virtual Machine (TVM)
A significant component of the TRON ecosystem is the TRON Virtual Machine (TVM), a Turing-complete virtual machine specifically designed to meet the demands of the TRON environment. TRON's architecture simplifies communication by accommodating not just Solidity but a variety of advanced programming languages, including Java, Scala, C++, Python, and Go. This is made possible through the use of the Google Protobuf (Protocol Buffers) system, a data serialization technique that enhances platform and system communication.
TRON’s tech stack differs somewhat from Ethereum with its three-layer design. It comprises three distinct layers:
- The Core Layer: Responsible for executing fundamental operations that underpin the TRON blockchain's protocol. It oversees critical aspects such as consensus mechanisms, account management, and smart contract execution.
- The Storage Layer: Engineered to cater to the evolving data storage requirements of the TRON blockchain. This layer offers a robust and secure networked system for data storage, ensuring data vitality and protection.
- The Application Layer: Designed to facilitate seamless communication between software developers and the TRONecosystem. Leveraging the integrated smart contract mechanism, this layer empowers the development of new applications on the platform.
In July 2023, TRON unveiled Great Voyage v4.7.2 (Periander), a substantial upgrade to its mainnet. This upgrade brought forth significant improvements across four key areas.
- The cornerstone of the Periander upgrade lies in the introduction of the Advanced Stake 2.0 mechanism. This innovation encompasses two pivotal governance proposals that empower TRON users:
- Withdrawal of Unstaking Requests: The first proposal allows users to withdraw unstaking requests that are still in progress, providing greater flexibility in managing their resources. This feature reduces the rigidity associated with staking commitments and aligns the TRON network with user preferences.
- Customizable Lockup Period: The second proposal offers users the ability to customize the lockup period for delegated resources, enabling tailored resource management in line with individual needs. This level of customization enhances user autonomy and control over their TRON assets.
- Compatibility with Ethereum's EIP-3855
This strategic move aims to bridge the gap between TRON and Ethereum ecosystems while mitigating the costs associated with deploying and using smart contracts on the TRON network. By reducing barriers to entry, TRON promotes seamless interaction between the two prominent blockchain platforms.
- Streamlined Smart Contract Interface Calling
The Periander upgrade marks a significant leap forward in simplifying smart contract interaction on the TRON network, offering developers invaluable insights into estimated transaction fees when deploying their contracts.
4. Revamped P2P Network Module
The Periander upgrade elevates the TRON network's resilience and efficiency through a revamped P2P network module. Firstly, it has implemented a pre-detection mechanism that effectively filters out invalid connection requests from nodes awaiting connection, thereby bolstering network security and stability. Additionally, the integration of the DNS protocol plays a pivotal role in improving the platform's availability by simplifying the discovery of active nodes ready to join the TRON network, ultimately enhancing network reliability. Furthermore, the adoption of the IPv6 protocol marks a significant advancement, ensuring the scalability of Java-tron's network architecture for future growth and development. Lastly, the introduction of message compression prior to transmission serves to reduce bandwidth requirements, leading to cost savings in operational and maintenance aspects, highlighting TRON's dedication to operational efficiency.
H2 2023 Developments
In a move to harness the potential of artificial intelligence (AI) and blockchain, TRON DAO has entered into a strategic partnership with ChainGPT, a prominent AI infrastructure provider for Web3. ChainGPT's AI tools, while powerful, demand significant computational resources, making TRON’s high throughput chain a natural partner.
As part of this integration, ChainGPT has trained its AI model on the entire historical dataset of TRON and will continuously monitor the network to provide on-chain updates. ChainGPT's chatbot will emerge as the foremost expert on all things TRON, offering users an interactive and dynamic database in a familiar chat format. This chatbot is expected to streamline the onboarding process for new TRON users, enhancing the accessibility and usability of the network.
ChainGPT's Incubation Program
ChainGPT's incubation program offers comprehensive support for Web3 projects throughout their lifecycle. Three projects have already been inducted into this program, with each one seamlessly integrated into the TRON network:
- DexCheck: This AI-driven analytics tool for blockchain assets is enhancing its capabilities through integration with TRON. By combining traditional market evaluation with machine learning tailored for the TRON ecosystem, DexCheck aims to provide invaluable insights and research using on-chain data.
- GT-Protocol: A Web3 platform with AI at its core, GT-Protocol is set to strengthen its presence through integration with TRON. With a focus on a conversational interface and a dedicated user base of 50,000, GT-Protocol aims to become a prominent player in the Web3 space.
- Solidus AI Tech: Positioned as a Web3 infrastructure giant offering AI services, Solidus AI Tech is gearing up to bring innovative solutions to the TRON network. With unique algorithms for High-Performance Computation (HPC) promising cost reductions of up to 40%, Solidus AI Tech plans to make AI-as-a-Service (AIaaS), Blockchain-as-a-Service (BaaS), and its AI marketplace accessible within the TRON network, reshaping possibilities in the Web3 domain.
Ongoing U.S. Lawsuit
The SEC has charged Justin Sun and his companies, including Tron Foundation Limited, BitTorrent Foundation Ltd., and Rainberry Inc., with the unregistered offer and sale of crypto asset securities, specifically TRX (Tronix) and BTT (BitTorrent Token). Sun and his entities are accused of engaging in wash trading.
The outcome of these charges could have far-reaching implications for the cryptocurrency industry, especially in terms of regulatory compliance and market conduct. It also underscores the uncertainty projects face when operating in the U.S. or with U.S. users. As TRON DAO looks to navigate through these regulatory challenges into 2024, it remains focused on continued growth as a global, decentralized network.
Fundamentals and Performance
TRON employs a Delegated Proof-of-Stake (DPoS) system for block validation and transaction confirmation. In this system, 27 Super Representatives (SRs) take turns every six hours to validate and secure the network. SRs are selected through a voting process. Any account within the network has the opportunity to apply as an SR candidate by submitting 9999 TRX and engaging in the SR election. Additionally, any TRX holder can vote for their preferred SR candidates. The 27 candidates who secure the highest number of votes ultimately become the SRs.
Given that a relatively small number of SRs are in control of block production, it is important that these entities remain diverse and separate so as to not create a centralizing force on the network. One aspect is geographic diversity.
The geographic decentralization of a network’s nodes stands as a cornerstone for the success and security of a blockchain. Its significance is multi-fold. Firstly, in a landscape where regulatory frameworks vary widely among jurisdictions, achieving a global presence is vital to counter censorship pressures. Secondly, maintaining neutrality, a core principle in the crypto world becomes challenging if a system favors a particular region. Moreover, geographic distribution enhances network safety, especially in extreme scenarios. Having too much network centralization in one region or regulatory environment creates a single point of failure. While some geographical advantages are inevitable, the objective should be to minimize, rather than exacerbate, these disparities, ensuring fairness for all users.
Little information can be found on the identity, location, and reputation of SRs from the block explorer. However, a healthy node count is also vital for a decentralized network. TRON’s node count, sourced from Tronscan block explorer, displays a wide range of volatility. Over the course of December 2023, the block explorer has displayed anywhere from ~4,700 to ~ 8,240 nodes across the TRON network. Despite the wide range of individual node counts, the geographic distribution of the nodes was quite consistent and evenly distributed, with China and the U.S. taking the top two spots.
In April 2023, TRON's mainnet witnessed a significant upgrade with the approval and deployment of Stake 2.0 (TIP-467). This new iteration is designed to enhance the staking model on TRON, offering increased flexibility and improved resource utilization. Stake 2.0 differentiates between high-frequency resource delegation and low-frequency staking activities. This separation allows for the re-delegation of resources without the need to unstake, thereby streamlining resource management.
The implementation of Stake 2.0 introduces additional functionalities to the TRON Virtual Machine (TVM), including stake, delegate, and vote commands. An important feature of Stake 2.0 is the introduction of a delay in the receipt of unstaked TRX. This measure is intended to reinforce the robustness of the staking model and provide a more consistent and predictable experience for network participants. It also eliminates the previously required 3-day non-voting period.
By the latter half of 2023, the total staked TRX reached ~46 billion, with 31% attributed to Stake 2.0 and the remaining ~69% to the older Stake 1.0. Notably, the staking rate for TRX has increased to 52% over the course of the year. This data reflects a growing confidence and participation in the TRON staking ecosystem, underpinned by the advancements brought about by Stake 2.0.
The average block size on TRON decreased by ~33% in H2 2023. However, as can be seen by the chart below, the long-term upward trend in block size remains intact.
The pursuit of higher transaction processing speed (TPS) has been central to alt-L1s, typically focusing on three strategies:
- Faster Consensus: Enhancing nodes' ability to agree on transaction order quickly.
- Shorter Block Times: Reducing the time it takes to create new blocks for faster transaction confirmations.
- Bigger Blocks: Expanding block sizes to handle more data in one go.
However, some networks, like Binance Smart Chain and Tron, have chosen to boost TPS by increasing block space and throughput. This approach significantly raises state size, leading to long-term sustainability challenges. While manageable now, this trend cannot continue forever due to the hardware requirements of running a node.
To cope, these networks must increase hardware requirements, which, in some cases, prices out users from participating in network consensus. This raises concerns about accessibility and decentralization. Balancing speed and sustainability while ensuring inclusivity remains a critical challenge in the evolving blockchain space, even for TRON.
The Bandwidth Consumption chart (below) offers a daily overview of the bandwidth usage on the TRON network. This metric is directly correlated with the volume of transactions: a higher bandwidth consumption indicates a more active blockchain with a greater number of transactions. In February, the TRON network underwent a significant change with the introduction of TIP-491, which instituted a dynamic energy model for contracts. This model was designed to optimize resource utilization across the network.
Under this new system, energy consumption is tailored to the resource demands of each contract. It implements a penalty mechanism, where energy costs escalate for contracts that excessively use CPU resources. Conversely, when the resource usage is moderated and falls within reasonable limits, the energy costs are adjusted back to normal. The primary objective of this approach is to deter low-value or fraudulent transactions, ensuring a fair and efficient distribution of network resources.
The actual daily transactions on TRON closely mirror the bandwidth chart, exhibiting a steep decline right around mid-2023. The daily transactions have averaged ~4.8 million in the last 30 days despite the downturn, illustrating TRON’s capacity to handle a high transaction volume.
The Active Accounts chart is a valuable tool for assessing TRON's user engagement, as it tracks the number of accounts that have engaged in transfer activities within a specified timeframe. This includes both wallet and contract accounts, providing a comprehensive view of activity on the network. Over the past month, TRON has maintained an average of 1.9 million daily active accounts, down from a peak of ~4 million during mid-year.
A closer analysis reveals a steady baseline in active accounts forming in the last quarter of the year, around ~1.8 million. Comparing the data from November 2023 with that of October 2023, there's a 4.7% decrease in the daily active accounts on TRON. This change suggests a modest drop in transactional activities or user engagement on the network during this period.
Stablecoins, Tether, and DeFi
Stablecoin TVL on TRON took a slight dip in early H2 2023 but ultimately increased to all-time highs (ATH) of ~$48B, of which USDT (red line below) makes up ~94%.
TRON remained the leading blockchain for USDT, edging out Ethereum mainnet by ~8% (in terms of TVL).
Tether is one of the oldest fiat-backed stablecoins in the crypto economy, originally launching on Bitcoin’s Omni chain, then Ethereum, and now primarily existing on TRON and Ethereum. One key difference, however, is that Ethereum has a more equitable mix of USDT and USDC on-chain, whereas USDT dominates the TRON ecosystem. This can also be seen in TRON contracts. The USDT Token contract consumes the most “energy” on-chain, accounting for ~95.6% of all contracts. This would indicate that TRON is primarily used for USDT interactions and little else.
USDT volume (first image below) increased modestly over the course of 2023, but interestingly, USDT holders increased ~130% over the same period (second image).
According to DeFiLlama, the DeFi TVL on TRON increased ~43% over the course of H2 2023 to ~$8.1 B. This amount puts TRON comfortably in the number two spot in protocol TVL, behind Ethereum (~$29 B) and ahead of BSC ($3.1 B) This was led by the top DeFi protocol, JustLend, which constitutes ~80% of all the TVL on Tron.
Just as USDT dominates all stablecoins on TRON, JustLend DAO is the predominant decentralized finance (DeFi) application on the network. JustLend DAO is a borrowing and lending platform that operates on the principle of over-collateralization, a common mechanism in the DeFi space, whereby borrowers are required to pledge assets worth more than the borrowed amount. In return, they receive jTokens, which serve as collateral and can be redeemed for the underlying assets when the lending period concludes. This approach safeguards the platform against defaulting borrowers and ensures the security of lenders' capital.
One crucial aspect for participants in JustLend DAO is the Risk Value associated with borrowing. This metric serves as an indicator of the likelihood of the collateral's value dropping below the liquidation threshold. It is imperative for borrowers to pay close attention to this parameter, as a higher Risk Value implies a greater risk of liquidation. This ensures transparency and assists users in making informed decisions.
TRON's technological advancements and ongoing developments underscore its commitment to innovation and growth within the blockchain ecosystem. With its focus on stablecoin growth and new dApp development, TRON has established itself as a formidable player in the L1 arena.
Upgrades, such as the Periander upgrade, continued to improve the developer and user experience on TRON. Periander introduced groundbreaking features, such as the integration with Ethereum's EIP-3855, streamlined smart contract interface, and revamped P2P network module to enhance efficiency and security.
TRON's partnership with ChainGPT promises to bring AI and blockchain together, offering users a dynamic database for improved network accessibility. The integration of projects like DexCheck, GT-Protocol, and Solidus AI Tech demonstrates TRON's dedication to fostering innovation within its ecosystem.
Fundamentally, TRON's network performance remains robust, with its DPoS system ensuring efficient block validation and transaction confirmation. Geographic decentralization, a critical aspect, contributes to network security and robustness. Staking has seen increased participation, particularly with the introduction of Stake 2.0, showcasing growing confidence in TRON's staking ecosystem.
Disclaimer: This report was commissioned by TRON. This research report is exactly that — a research report. It is not intended to serve as financial advice, nor should you blindly assume that any of the information is accurate without confirming through your own research. Bitcoin, cryptocurrencies, and other digital assets are incredibly risky and nothing in this report should be considered an endorsement to buy or sell any asset. Never invest more than you are willing to lose and understand the risk that you are taking. Do your own research. All information in this report is for educational purposes only and should not be the basis for any investment decisions that you make.