Preface

We did some analysis on TRON in 2023. Now that more than a year has passed, let’s take a look at what specific changes have taken place.

Active data

First, let’s look at the data of the largest stablecoin application of Tron, mainly USDT. According to the official website of Tether, the total issuance of USDT is 117.7 billion US dollars, of which 60.6 billion US dollars are issued on Tron, accounting for about 51.5% of the total issuance. During the same period, the USDT issued on Ethereum was about 53.4 billion US dollars, accounting for about 45.4% of the total issuance. Tron continues to be the public chain with the highest issuance of USDT.

Data source: TronScan

In terms of DeFi data, Tron’s TVL is $8.8 billion, ranking second, higher than Solana.

Data source: DeFillama

TVL is mainly composed of three major items, namely lending, DEX and stablecoins, and all three are officially developed protocols.

Data source: DeFillama

For JustLend, you can first see that most of the TVL is composed of BTC, but the real borrowing is less than 100 million US dollars, and the real demand for borrowing is very low.

Data source: JustLend

At the same time, the first three addresses account for more than 98% of the BTC stored in it. The concentration is very high. It cannot be ruled out that these addresses are related to the official. This is quite different from what we saw on AAVE.

Data source: TronScan

The same situation also occurred on JustStables, where the addresses holding the minted USDJ also showed strong centralization, and some addresses were also related to the official or Justin Sun.

Data source: TronScan

From this we can see that TRON’s DeFi ecosystem is poorly developed and its real demand is lower than that of Ethereum.

From the perspective of network activity, we mainly observe the number of daily active users and the number of daily transactions. The first is Tron. It can be seen that both the number of daily active addresses and the number of daily transactions have shown an overall growth state. Compared with the previous data, There has been significant growth during the bull market from 2020 to 2021. The current number of daily active users is about 2 million, and the number of daily transactions is about 7 million.

Data source: TokenTerminal

Compared with Ethereum data, there is no significant growth in the number of daily active users and daily transactions compared to the previous bull market. The current number of daily active users is about 400,000, and the number of daily transactions is about 1.1 million, both lower than the data of TRON.

Data source: TokenTerminal

Income data

TRON uses a resource model to execute transactions on-chain. The resource model allocates bandwidth and energy to stakers. As long as stakers have enough resources, they can use these resources to transfer tokens and execute smart contracts for free. If a user uses more computing power than their resources, they must pay transaction fees with TRX. All TRX used to pay transaction fees will be destroyed. Therefore, TRON’s revenue comes from the destruction of TRX tokens generated by transaction fees.

At the same time, new TRX will enter the circulating token supply as a reward for stakers and block producers. These rewards are equivalent to approximately 5.07 million TRX being minted daily. Therefore, as long as more than 5.07 million TRX are burned each day, the circulating supply of TRX will decrease over time. According to TRON official data, TRX has been in a state of deflation for more than 700 consecutive days.

Data source: TronScan

By multiplying the number of TRX destroyed by the price of TRX on that day, we can calculate the daily revenue of the TRON network. On average, the protocol has generated nearly $40 million per month since February 2023. The number of TRX generated per month is about 152 million. Calculated at a unit price of $0.12, the expenditure of this part is 15200M * 0.12 = $18.24 million. Subtracting them, we can get a net profit of $21.76 million per month for the network, which is about $260 million per year.

Data source: TronScan

No information about TRON DAO’s expenditures was found. According to LinkedIn, TRON DAO has 359 employees. The Ethereum Foundation spends about $100 million per year, and it is estimated that TRON DAO’s expenditures are comparable.

Data source: linkedin

According to Coingecko data, the current total market value of TRX has reached about 14 billion US dollars. If the extreme value in 2018 is excluded, the market value of TRX has surpassed the high point in 2021 and reached a historical high. However, due to the continuous deflation of TRX, the increase in the unit price of TRX is greater than the increase in market value.

Data source: CoinGecko

Based on revenue of US$260 million, PE = 140 / 2.6 = 53.8

After actually deducting other expenses, the real PE is higher than this value.

Monopoly analysis

Previously, we believed that Ethereum Layer2 would have a certain impact on TRON’s stablecoin business, but in fact, this phenomenon did not occur. Instead, the supply of stablecoins on TRON hit a new high. At the same time, after increasing the energy consumption of smart contract calls last year, revenue also increased, showing strong bargaining power, which also reflects the monopoly of TRON’s stablecoin business.

In fact, we can see that most of the users of TRON stablecoins are exchange recharge trading users and non-circle users. This can be seen from the lack of DeFi ecology on TRON and the lack of obvious cyclicality in network revenue. In this regard, its stablecoin business is much less affected by the industry cycle than other protocols, so there will not be drastic fluctuations in revenue, and its business safety margin is relatively higher. As shown in the figure below, the Fees of Bitcoin and Ethereum show obvious cyclicality, while the data of TRON is growing steadily.

Bitcoin

Data source: DeFillama

Ethereum

Data source: DeFillama

TRON

Data source: DeFillama

At the same time, the stablecoin payment business has a strong network effect. At the same time, user habits have led to the corresponding infrastructure construction to be built around Tron. The transfer cost for users and the platform is high. From this perspective, Tron has a strong monopoly.

Risk analysis

The business relies too much on USDT transfers. Tron has repeatedly hoped to expand its DeFi, games, RWA and other businesses, including the recent meme ecology, but the results are not good. According to official data, 95% of the contract call energy consumption on the network comes from USDT.

Data source: TronScan

The stablecoin business may be threatened by TON and others. According to DeFillama data, the USDT issued on TON is about $620 million, and there has been no significant growth recently. Based on the current scale of Tron’s stablecoin, if stablecoin transfers on other chains such as TON only have the advantages of fast speed and low handling fees, it may be difficult to compete with Tron at this stage, and more application scenarios with obvious demand are needed. To achieve overtaking in corners, for example, the WeChat red envelope function promoted WeChat payment business.

Data source: DeFillama

Justin Sun is facing SEC investigations and lawsuits. As the founder of Tron, Sun is good at hyping topics, but he also introduces a lot of risks. He has a bad reputation in the circle. If he faces a lawsuit or even arrest, it may have a great impact on the development of TRON. For example, the recent arrest of the founder of Telegram caused the price of TON to plummet.

Data source:X

Reference

https://tether.to/en/transparency/?tab=usdt

https://messari.io/project/tron/quarterly-reports/q2-2024

https://developers.tron.network/docs/resource-model

statement:

1. This article is reproduced from [E2M Research], original title “TRON Investment Analysis: Stablecoin Dominance and Market Monopoly Assessment”, the copyright belongs to the original author [ShawnYang], if you have any objection to the reprint, please contactGate Learn Team, the team will handle it as soon as possible according to relevant procedures.

2. Disclaimer: The views and opinions expressed in this article represent only the author’s personal views and do not constitute any investment advice.

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