What is Tron? (TRX)
The Beginner’s Guide
Launched at the height of 2017’s crypto mania, Tron has since galvanized a global group of investors and developers around a vision for how cryptocurrencies could reshape the internet.
- Check the Tron price page for more details on the current TRX value, trends, and price history.
But if the goal of using blockchains to create a distributed web was common among projects launching at the time, Tron distinguished its offering with communications that resonated, even as criticisms about its technology persisted.
For instance, Tron was rare among cryptocurrencies launching in 2017 in that it did not seek to advertise any advances in cryptography or network design.
Rather, the basic building blocks of Tron – decentralized applications, smart contracts, tokens, delegated proof-of-stake consensus – were pioneered by other projects prior to its launch. Tron even went so far as to make components of its technology compatible with Ethereum (ETH) (which sparked accusations it went too far in borrowing its ideas).
Tron would further differentiate with an Asia-focused go-to-market strategy that heavily relied on publicizing its creator Justin Sun and translating its technical documents into a wider variety of languages than generally targeted by cryptocurrency projects.
Tron went on to gain greater mainstream attention in 2018 when the non-profit spearheading its development, the Tron Foundation, acquired peer-to-peer networking pioneer BitTorrent.
This acquisition preceded the launch of a BitTorrent token on the Tron blockchain in 2019, a move that gave Tron the ability to market a new cryptocurrency to millions of existing users.
Who created Tron?
Tron was created by entrepreneur Sun Yuchen (Justin Sun), a two-time recipient of Forbes’ “30-Under-30” award in Asia, in early 2017.
An established presence in China, Sun had earlier founded the audio content application Peiwo and served in 2015 as a representative for Ripple, the for-profit company that stewards the XRP cryptocurrency, before founding the Tron Foundation that year.
Sun’s business background succeeded in attracting early interest from investors including Clash of Kings founder Tang Binsen and CEO of bike sharing startup OFO Dai Wei, among others.
These supporters, in turn, boosted visibility of the project’s September ICO, which raised millions in cryptocurrency from the public using a token on the ethereum blockchain.
A second version of the white paper further outlining Tron’s technology was released in 2018.
How does Tron work?
Initially created as a token based on Ethereum, Tron finally migrated to its own network in 2018.
The process involved investors trading in their ethereum tokens for Tron’s TRX cryptocurrency. (The ethereum tokens were subsequently destroyed.)
Like Ethereum (ETH), Tron uses an account-based model, meaning the cryptographic keys its protocol issues can control access to both TRX and TRX token balances.
The Tron blockchain then routes the exchange of this data through three layers:
Core Layer – Computes instructions written in Java or Solidity (a language designed for Ethereum) and sends them to the Tron Virtual Machine, which executes the logic.
Application Layer – Utilized by developers to create wallets and applications powered by the TRX cryptocurrency and compatible with the software.
Storage Layer – Designed to segment blockchain data (the record of the blockchain’s history) and its state data (which preserves the status of smart contracts).
To reach consensus on its ledger, Tron uses a system in which a rotating cast of 27 “super representatives” are entrusted to validate transactions and maintain the system’s history.
Super representatives are chosen every six hours, and if chosen, earn the ability to collect new TRX generated by the protocol.
Blocks are added to the blockchain every 3 seconds, and those who produce a valid block are awarded 32 TRX for their efforts. A total of 336,384,000 TRX is awarded annually.
In addition to super representatives, users can operate three types of nodes on the Tron blockchain – witness nodes, full nodes and Solidity nodes. Witness nodes propose blocks and vote on protocol decisions, while full nodes broadcast transactions and blocks.
Solidity nodes sync blocks from full nodes and provide APIs.
More details on the network’s block production and super representatives can be found here.
Staking TRX on Tron
To vote on super representatives, Tron users need a network resource called “Tron Power.”
Users receive 1 Tron Power for every 1 TRX they chose to “lock” in an account that is prevented from spending its associated cryptocurrency. (Upon unfreezing the cryptocurrency, users lose their Tron power and the ability to vote).
Tron Power cannot be traded like TRX or other tokens issued on top of the Tron blockchain.
Effectively, the process works the same as staking on blockchains like Tezos or Cosmos, where users earn rewards by locking up funds. (Note: Be aware, this may not be possible using a custodial exchange like Kraken).
Why does TRX have value?
The cryptocurrency powering the Tron blockchain is called tronix, the smallest denomination of which is called a “sun,” after Justin Sun, the protocol’s creator.
In total, 100 billion TRX was created at the time of Tron’s initial coin offering (ICO) in 2017.
At that time, TRX tokens were distributed as follows:
Public sale: 40 billion TRX
Private sale: 15 billion TRX
Reserved for the Tron Foundation: 35 billion TRX
Reserved for Peiwo (the project’s initial supporter): 10 billion TRX
From here, there are some nuances to the Tron economy that differentiate it from competitors.
To determine whether a user needs to pay for a transaction, Tron uses a system of “bandwidth points.” Bandwidth points are consumed when a user makes a transaction, with 1 bandwidth point being deducted for every byte of data.
Each account receives 5,000 free bandwidth points every day. Should a user not have enough bandwidth points to execute a transaction, 0.1 TRX is burned per byte of data.
There are also penalties on the network that may reduce the TRX supply. As an example, 9,999 TRX is burned from accounts applying to become super representative candidates.
Until January 2021, no new TRX will be introduced by the protocol, with all new TRX awarded to super representatives coming from the original token allocation to the Tron Foundation.
Why use TRX?
Tronix is necessary for using applications on the Tron network, meaning if you’re seeking to use a Tron-based game or service, you’ll need to purchase TRX.
Owning TRX is also a prerequisite to participating in Tron’s consensus system, meaning you’ll want TRX if you intend to stake coins and vote on how the protocol’s operations are conducted.
Depending on their investment thesis, traders may also want to add TRX to their portfolio. As its platform enables users to create custom applications and tokens, traders who believe strongly in these use cases for blockchains may want exposure to Tron.
They may also value the cryptocurrency’s ability to generate passive income through staking, as this can help offset the risk of holding or owning the asset as part of their portfolio.