What is Tron (TRX) ? How It Works? Complete Guides 2024

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. 

But if the goal of using blockchains to create a distributed web was common among projects launching at the time, distinguished its offering with communications that resonated, even as criticisms about its technology persisted. 

For instance, 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 – 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. 

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 blockchain in 2019, a move that gave Tron the ability to market a new cryptocurrency to millions of existing users.

How does Tron work?

Initially created as a token based on Ethereum, 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.)

Tron aims to create a decentralized platform for digital entertainment content. Here’s a breakdown of its key features:

Blockchain Technology:

• utilizes blockchain technology to provide a secure and transparent infrastructure for its ecosystem. This distributed ledger records all transactions on the network.

Decentralized Applications (DApps):

• Tron focuses on hosting DApps, similar to how Ethereum does. These are applications built on the Tron blockchain that can offer various functionalities, including:
  • Gaming platforms
  • Social media applications
  • Decentralized marketplaces

TRX Token:

• TRX is the native token of the blockchain. It serves several purposes within the ecosystem:
  • Content Creation and Consumption: Users can spend TRX to create or consume digital content on Tron-based DApps.
  • Network Fees: Transactions on the Tron network require TRX for transaction fees.
  • Staking: TRX holders can stake their tokens to earn rewards and participate in Tron’s Proof-of-Stake (PoS) consensus mechanism.

Proof-of-Stake (PoS) Consensus Mechanism:

• Unlike Bitcoin’s Proof-of-Work (PoW), Tron uses a PoS mechanism to validate transactions and secure the network.
• In PoS, validators are chosen based on the amount of TRX they stake. The more TRX a user stakes, the higher the chance of being selected as a validator and earning rewards. This approach is considered more energy-efficient compared to PoW.

Tron Virtual Machine (TVM):

• Tron’s TVM is a smart contract platform similar to Ethereum’s Virtual Machine (EVM). It allows developers to build DApps on the Tron network using various programming languages.

Scalability:

• Tron’s architecture is designed for scalability to handle a high volume of transactions. This is crucial for a platform aiming to support a large user base and numerous DApps.

Criticisms:

• Tron has faced criticism for centralization concerns surrounding its governance model and token distribution.
• Some argue that Tron hasn’t achieved widespread adoption for DApps compared to platforms like Ethereum.

General Architecture 

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 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). 

Delegated Proof-of-Stake

To reach consensus on its ledger, 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 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 “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). 

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.

Here’s a walk-through of (TRX) staking, outlining the general process and some key considerations:

Benefits of Staking TRX:

• Earn Rewards: By staking your TRX, you can passively earn rewards in the form of additional TRX tokens.
• Support the Network: Staking contributes to the security and stability of the Tron network.
• Voting Rights: In some cases, staking TRX may grant you voting rights on proposals for the future development of the Tron network (depends on the platform you use).

Steps to Stake TRX:

1. Choose a Platform:

There are several options for staking TRX. Here are some popular choices:

• Tron Wallet: The official Wallet allows you to stake TRX directly within the wallet interface.
• Cryptocurrency Exchanges: Many cryptocurrency exchanges offer TRX staking services. This can be a convenient option, but be sure to research the exchange’s specific staking terms and fees.
• Third-Party Staking Providers: Several third-party staking providers offer TRX staking services. Carefully research their reputation, fees, and security measures before using them.

2. Transfer TRX to your chosen platform:

Ensure you have enough TRX tokens in your chosen platform’s wallet to stake. You might need to transfer TRX from another wallet or exchange if you don’t have any on the platform already.

3. Choose a Staking Pool (if applicable):

Some platforms offer different staking pools with varying returns and lock-up periods (minimum duration your TRX is staked). Choose a pool that aligns with your risk tolerance and investment goals.

4. Stake your TRX:

Follow the specific instructions on your chosen platform to initiate TRX staking. This will typically involve specifying the amount of TRX you want to stake and confirming the transaction.

5. Monitor your Staking Activity:

Track your TRX staking rewards and the lock-up period on your chosen platform.

Important Considerations:

• Security: Make sure you understand the security measures of your chosen platform to mitigate the risk of losing your TRX tokens.
• Fees: Be aware of any fees associated with staking TRX, such as transaction fees or platform charges.
• Lock-up Period: Staking often involves a lock-up period during which your TRX is inaccessible for trading or transferring. Choose a lock-up period that suits your investment strategy.
• Volatility: The value of TRX, like other cryptocurrencies, can fluctuate significantly. Consider your risk tolerance before staking.

Why does TRX have value?

The cryptocurrency powering the 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?

Tron ix 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 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.

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