What is Tron (TRX)?

The Tron network has been in the news a lot recently, following the acquisition of the BitTorrent company for $120 million.
The performance of the native TRX token has been good over the last few months, creating a buzz behind this project led by Justin Sun and his team.
Coinhouse takes a look at the architecture of the Tron network and its new flagship project: the BitTorrent Token.

Tron, the cryptoasset market’s ninth-largest valuation

Tron is a Chinese project with the ambition of being a “fourth-generation” blockchain, offering a platform for the deployment of decentralized applications via smart contracts.
If this sounds familiar, it’s because Tron was inspired by Ethereum’s value proposition to build its network.
Initially created as an ERC-20 token, a native token dubbed Odyssey was launched in June 2018.
In addition to its advantages for fast transactions and decentralized applications, the TRON blockchain is also known for its integration with stablecoins such as the USDTUltimately, Tron’s avowed aim is to offer free content and distributed storage thanks to the Blockchain, and to give back control of data to content creators who often find it difficult to earn money with centralized platforms like Youtube. Justin Sun states that the Tron blockchain is 80 times faster than Ethereum, with over 1,200 transactions per secondThis information has not yet been verified by external testers.
A relatively recurrent problem of trust, insofar as Tron had made a lot of news in October 2018 following the announcement of a partnership with Baidu, a major player in the Chinese internet and the most consulted site in China.
As it turned out, Tron was only using Baidu’s cloud network for its development, and not in any way a partnership.

How does Tron work?

Tron was inspired by another platform, EOS, in its choice of consensus mechanism: DPoS, for Delegated Proof-of-Stake.
Part of the crypto community has accused the English-language White Paper of being a plagiarism of the FileCoin and IPFS projects, with some even talking of possible scam, even though the original is in Chinese.
As far as block creation is concerned, Tron’s mechanism is as follows:

• 127 representatives elected by TRX holders
• Among them, 27 super-representatives undermine the blocks, once again elected by the holders.
• For voting purposes, one sequestered TRX corresponds to one TP, i.e. one vote.
• Voting takes place every six hours
• A new block is mined every three seconds
• Elected representatives share vote rewards of around TRX 16 per block, i.e. TRX 168,192,000 per year, divided proportionally between representatives and super-representatives in proportion to the number of votes received.
• Super-representatives also share a block reward of 32 TRX per block, or 336,384,000 TRX per year.
• The Tron Foundation will share the rewards until January 1, 2021, having sequestered 33 billion TRX for this purpose.
  Thereafter, the protocol will be responsible for issuing the money.

Of course, this highly lucrative mechanism is especially so for the big TRX holders.
Given that the 100 richest addresses hold almost 40% of the money supply, it’s clear that a closed circle of large investors can easily vote themselves or their relatives in as representatives.
These people thus easily increase their share in the network by capturing the entire money supply, to the detriment of the average investor, who suffers the decisions of these players.
This system considerably reduces the robustness of the network: a small number of people, most of whom know each other, have almost total control over the system, and choose who can join their closed circle.
These representatives are identifiable, and can therefore be manipulated and attacked.
In conclusion, this is definitely not an optimal “decentralized” system.

A competitor to Ethereum?

Tron’s architectural choices are in fact the antithesis of Ethereum’s: while Tron implements a less secure network that is less fair to small investors, in favor of transaction capacity and speed, Ethereum opts for greater economic incentives for anyone wishing to help secure the network by encouraging the emergence of a large number of nodes.
The choice of robustness combined with decentralization leads Ethereum to develop overlay applications on top of the main blockchain to compensate for the network’s limitations.
For the time being, there are no such plans for Tron.

Tron, marketing that seduces

Tron is nevertheless a successful marketing story.
The teams were able to find visibility in this ultra-competitive environment.
Arriving late in the ecosystem, Tron was able to draw inspiration from existing projects to save on R&D costs.
By drawing on open source code, Tron was able to integrate the development of smart-contracts in Solidity and the EOS consensus model, among others, at lower cost.
Funds were thus able to be allocated to other sectors, notably for the development of an active community and lobbying of major players.
As a result, the Tron project seems to have a very active community.
The number of contributors and code contributions on Github is high, and the dapp.radar site records significant use of Tron Dapps.
However, it is difficult to determine whether a community has truly adopted the use of Tron on a daily basis or whether these are artificial volumes. What about the BitTorrent Token? The BitTorrent Token (BTT) is now a key component of the Tron ecosystem.
The teams acquired BitTorrent, Inc.
for $120 million in June 2018 to build a network economy supported by the Tron blockchain and BTT.
BitTorrent is a protocol for peer-to-peer file exchange.
All you need to do is run some software to share files with people interested in those files around the world.
Often used to exchange copyrighted files illegally, this technology can also be used to exchange legal but very large files.
However, there is little economic incentive to participate in the BitTorrent network.
Once a file has been downloaded, the only incentive to stay connected and risk criminal sanction is the goodness of one’s heart.
Via the BitTorent Token, the Tron Foundation aims to create an economy behind torrent file sharing.
Thanks to the introduction of the BitTorrent Speed extension, users looking for files will be able to pay those who share them.
In this way, service providers will naturally emerge to constantly provide a large database of popular and accessible files, remunerated via BitTorrent Speed and the BitTorrent Token.
For more information on how the system works, please refer to the White Paper.
The business model of charging people who use a system to pay for nothing may be questionable.
But if the project succeeds, it’s not certain that the Tron blockchain has the capacity to handle the transactions of such an economy.
A former BitTorrent executive explains that the emergence of a torrent economy would require hundreds of thousands of transactions per second, and there’s no way the Tron blockchain could meet this demand.
Given that almost all BitTorrent traffic involves illegal files, the question also arises as to the sustainability of such an economy, with the authorities naturally having a vested interest in identifying and attacking the providers of such services.
Last but not least, the distribution model for the 990 billion BTT tokens once again encourages the purchase of TRX, and greatly favors the large owners.
Only 17% of tokens were sold in a public ICO in January 2019.
10.1% are subject to a monthly airdrop to TRX holders over 6 years, and the amount distributed increases every year, creating an economic incentive to hold large amounts of TRX, or even buy more.
The remainder is allocated in an unspecified manner between the BitTorrent Foundation and its team, the Tron Foundation, the original investors in Tron, and “gifts” for people who install BitTorrent Speed software for the first time. The hype surrounding Tron thus seems to be the fruit of calculated marketing by a handful of players driven by a strong economic incentive.
The platform’s DPoS consensus model tends to enrich this same closed circle of investors, to the detriment of small investors for whom it is very difficult to capture a share of the system’s monetary output.
The only incentive for these small holders remains speculation on the TRX price trend, which ultimately benefits the large holders.

The BitTorrent Token project also appears to be the fruit of effective marketing thinking, but it conceals technical and economic difficulties that the Tron blockchain has yet to overcome.