Andrey Didovskiy
*Note, SWOT is an analysis of operational/fundamental elements. This is not a model to be used for technical or trading purposes. (NFA, DYOR)
Composed of four elements, Strengths, Weaknesses, Opportunities, and Threats, a SWOT analysis framework provides excellent insight for evaluating the state of a project’s well-being through the lens of a birds-eye view.
It can help formulate decisions on what areas require more attention, set performance goals, and organize a foundational understanding of where a project is headed.
Rarely (if ever) used in crypto, it is time to apply this timeless method of evaluation to the digital asset space.
Today, Tron (TRX), a layer one, EVM-compatible, 2017-era blockchain will get a SWOT.
1. High Preference by USDT
USDT is the most popular dollar-based stablecoin in terms of user adoption, historic presence, and market capitalization. In fact, over 51% of all USDT in circulation is deployed to the Tron network. Considering that stablecoins are considered to be among the most desirable and adopted crypto applications with real world utility and value, this brings a tremendous amount of flywheel value reflexivity to the Tron network.
2. Resource Model
Network fees are a part of every layer one blockchain’s architecture. Tron utilizes a novel approach to the costs of utilizing its network through a fee model which it calls “energy and bandwidth”. At a very high level, energy gas costs are attributed to the execution of smart contracts, while bandwidth is the base measurement of network utilization that facilities activity. Recently, as part of DAO proposal TIP-474, Tron revamped its Energy model with a dynamic parameter that essentially reduces low-value “spam” network transaction activity and increases revenue fees for node operators.
3. Dynamic Energy Model
By introducing a strong, dynamic dependence between the nature of a transaction and the amount of fees required in order to execute it the network itself has begun to burn more TRX on a rolling basis, in turn exerting deflationary pressure on the token.
4. Justin Sun's Affiliations
While Justin is considered to be a controversial character within the industry, his reputation and deep connections throughout political, commercial, and technological sectors precedes him. Landing on China’s Forbes 30 under 30 list, receiving recognition from AliBaBa’s Jack Ma, and working with notable crypto companies such as Ripple (XRP) in the earliest days, Justin Sun seems to be positioned perfectly to spearhead such a product to its fullest potential.
5. EVM Compatible
Interoperability has been a hot topic since before blockchain technology. Being EVM compatible means that both, developers and applications are able to be leveraged equally in both environments without excessive waste of effort. This opens up the door for cross-chain compatible infrastructure and potentially shared liquidity.
6. UTXO Transaction Model
The vast majority of modern blockchains, especially EVM-compatible ones, are all based on an Account model. Account models are what Banks use due to their simplicity. Tron actually utilizes a UTXO model (similar to Bitcoin) for tracking its transaction activity. Both models have merits, however, UTXO models are superior to account models for two reasons; scalability and privacy. UTXO is more scalable because network operators/nodes only need to track transaction activity, not monitor the state of every single account. They are also more privacy-preserving because there is no implicit/explicit on-chain identity, UTXO models require the creation of new addresses after every single transaction.
7. Great Performance
Considering that Tron was released in late 2017, it can be classified as somewhat of an OG blockchain that delivers high throughput than nearly all other networks from that generation. With the potential to handle 2,000 tps, negligible costs of a few pennies, and 3-second block time, Tron’s network can easily qualify as a more user-friendly alternative to Ethereum.
1. Lack of DEFI infrastructure
Out of a total 17 protocols, 10 have more than $250,000 USD in value locked and the top 3 (Justlend, Juststables, and Sunswap) have 99.9% of all value. The Tron Foundation is well aware of this and is actively working on developing new protocols, such as liquid staking, to improve this.
2. A 90% Concentration of TVL within just two applications
Justlend, a lending platform, and JustStables, a CDP stablecoin issuing protocol, collectively have 90% of all the Tron networks TVL. This introduces an extremely high risk factor in the event any one of the two has any unforeseen technical issues (bugs hacks).
3. Low Developer Count
Considering the amount of value at stake and the amount of high profile activity taking place, it is counter-intuitive to see that there are only 16 full-time developers working on the project. While there are spikes in dev activity, there has never been a month that has even reached the 100 mark; to put things in perspective, Solana has >340 devs and Ethereum has ~2,000 devs full-time with monthly spikes bringing those numbers up 2–3x easily.
1. “Owns” BitTorrent.
BitTorrent, one of the oldest, most reputable, peer-to-peer, decentralized file-sharing protocols on the internet. Back in July of 2018, the Tron Foundation acquired BitTorrent for ~$140,000,000 USD. Shortly after doing so, BitTorrent launched its own BTTC (BitTorrent Chain) and began utilizing the Tron Network to facilitate its native token’s (BTT) activity. Why this is of extreme value to Tron is due to the fact that when acquired, Bittorrent had over 100 million users. Assuming those users were retained, their network contributions/activity with the protocol in some way is reflected on Tron.
2. Adoption by the Caribbean Islands
The commonwealth of Dominicana has recognized Tron as its official government network of choice. As part of the nation’s financial and technological initiatives called the “Virtual Asset Business Act” (drafted with the help of {ECCB} Eastern Caribbean Central Bank) the OCES (Organization of Eastern Caribbean States) has allowed for the Dominican Republic to launch a digital asset DMC to conduct economic activity that will promote the Caribbean nation’s culture and heritage.
3. Strong Cross-Sector Initiatives
The Tron Foundation is actively pursuing development across a wide range of sectors including Gamefi, NFTs, and AI. Partnering with OraiChain, Tron looks to integrate AI into the functionality of the network to improve its operations and enhance security. Additionally, the Tron Foundation is constantly hosting Hackathons and promoting its DAO Grants program to help foster communities.
4. Good Geographic Node Distribution
While the DPoS (Delegated Proof-of-Stake) consensus mechanism used by Tron is arguably “more centralized” than other alternatives due to the presence of only 27 SR (Super Representative) nodes that handle all key functions, there are now over 390 backup SR candidates (nodes that can replace current leaders) and a total of >7,600 nodes distributed across 76 countries. This provides regulatory cushion and resilience against any single government crackdown.
1. SEC Lawsuit
Justin Sun (Owner) is currently in the middle of getting sued by the SEC for securities violations relating to the sale of unregistered securities in the form of TRX (Tron network’s native token) and BTT (BitTorrent Token). Additionally, the SEC has targeted 8 celebrities that have been involved with marketing/promotional activities relating to the tokens while not disclosing that they were compensated to do so.
2. EVM Competition
Given the enormous amount of competition constantly popping up in the EVM-compatible segment of blockchain, all touting higher transaction capabilities, privacy preservation, and other technological breakthroughs, Tron might be losing out on potential developers that could have just allocated their efforts towards it.
On an individual basis, nothing about Tron really presents itself as world-changing or existentially important for humanity. However, in aggregate, all of the initiatives, novel technological designs, and social nuances do give Tron more value than the echo chambers of maximalist crypto Twitter would like to admit.
I must say that for a long time, I was skeptical, even cynical about Tron. However, after diving into this SWOT, my cynicism has been totally removed, while some skepticism still remains. I will admit that I have definitely reconsidered my position on it to a more bullish one than ever before. Even though I admire the technology and have tremendous respect for Justin, I still don't know why, but I just can’t find a concrete source of confidence to commit any sizable portion of my portfolio to Tron.
P.s. I will allocate 0.5% to TRX just to play around with some of the protocols.
If you know something that I don’t or feel as though I might have missed something, please do share, I would tremendously appreciate some feedback.
Thank you so much for reading,
I hope this serves you well on your journey.
Live long and prosper 🥂
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