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Investor’s Guide to Tron (TRX) Crypto

By Brian Nibley · March 15, 2021 · 5 minute read

We’re here to help! First and foremost, SoFi Learn strives to be a beneficial resource to you as you navigate your financial journey. Read more We develop content that covers a variety of financial topics. Sometimes, that content may include information about products, features, or services that SoFi does not provide. We aim to break down complicated concepts, loop you in on the latest trends, and keep you up-to-date on the stuff you can use to help get your money right. Read less

Investor’s Guide to Tron (TRX) Crypto

When it launched in 2017, Tron crypto didn’t introduce any new advances in crypto or blockchain tech. Instead, the project incorporates several elements of existing platforms. The goal: to create a decentralized internet through its platform for smart contracts and decentralized applications.

There’s a lot to know about TRX crypto, whether you’re curious about this cryptocurrency, or are thinking about investing in it. This article will cover everything you need to know, including:

•  What is Tron Crypto?
•  How Does Tron Work?
•  Who Created Tron?
•  Is Tron Crypto a Good Investment?
•  What is Tron Crypto Used For?

What Is Tron Crypto?

Tron (TRX) crypto is a blockchain-based operating system and smart contract platform that has the goal of creating a decentralized internet, or “web 3.0.”

Tron incorporates the smart contracts and decentralized applications, tokens, and delegated proof-of-stake consensus that were developed by other projects prior to its launch. (Proof of stake is also used by Dash crypto.)

In many ways, Tron mirrors Ethereum. In fact, TRX crypto was originally launched on the Ethereum network before migrating to the independent Tron network.

Is Tron a Coin or Token?

Tron (TRX) is a token in much the same way that Ether (ETH) is a token. TRX crypto is the native token of Tron and is used to fuel programs running on the Tron network.

TRX is thought of as a token rather than a coin because it serves a purpose other than only being a store of value or medium of exchange.

Who Created Tron?

Tron was created by a man named Justin Sun, who has twice received the honor of being listed on Forbes Asia’s “30-under-30,” a list of top entrepreneurs under the age of 30.

Sun worked for Ripple, the company that created the XRP cryptocurrency, before founding The Tron Foundation in 2017.

Sun’s background and reputation wound up attracting several prominent investors and entrepreneurs, which led to Tron’s initial coin offering (ICO) in September 2017 raising millions in cryptocurrency.

How Does Tron Work?

Tron aims to create a new, decentralized internet with little to no reliance on third-party providers.

In its current state, the internet is heavily dominated by a few large companies who control the lion’s share of data, web hosting, and advertising. Many people see this as a problem, since it means a small number of people hold disproportionate control over how the internet works.

Tron seeks to “heal the internet” in a number of ways:

•  By making data free and uncontrolled
•  By creating a content ecosystem that rewards users directly for sharing content
•  By creating online infrastructure that will allow for a decentralized exchange of digital assets including things like games and market forecasting

Tron’s ecosystem is designed for dApps that reward people for their content, rather than using their data to sell to marketers (as modern social networking sites do).

Tron Architecture

The Tron blockchain routes information through three main layers. These include:

•  The storage layer: designed to segment the data stored on the blockchain (a record of its history), and the blockchain’s state data (the status of its smart contracts)
•  The application layer: used by developers to build applications and wallets powered by the TRX crypto
•  The core layer: this layer processes instructions that are written in either the Java programming language or a special language written for Ethereum called Solidity. Instructions are then sent to the Tron Virtual Machine, where programs are executed.

Delegated Proof-of-stake Consensus Mechanism

Instead of the traditional proof-of-work or proof-of-stake methods used by many other types of cryptocurrency, Tron uses something called delegated proof-of-stake to reach consensus on its ledger (consensus is the process by which all parties on a distributed blockchain agree that transactions are valid and keep a record of them).

Tron uses a system involving 27 “super representatives” to achieve consensus. The representatives rotate regularly, with new ones being chosen every six hours. Those who are chosen gain the ability to earn new TRX currency created by the protocol (just as miners have a chance to earn newly minted coins on a proof-of-work blockchain like Bitcoin).

Recommended: What is Bitcoin and How Does it Work?

Blocks are added to the Tron blockchain relatively fast, with a new block being created every 3 seconds (compared to bitcoin’s 10 minutes). Super representatives are awarded with 32 new TRX tokens each time they produce a valid block.

There are also three types of nodes that users can operate on the Tron blockchain. These include witness nodesm full nodes, and solidity nodes. These nodes perform the following functions:

•  Witness nodes can vote on new decisions that make changes to the protocol.
•  Full nodes broadcast blocks and transactions.
•  Solidity nodes provide application programming interfaces (APIs) and sync blocks from full nodes.

TRX Staking

Tron users get to vote on who they want to be the super representatives of the network. To do this, they need something called “Tron Power.”

When locking up (staking) TRX tokens in an account that is prevented from spending its crypto, users receive an equal amount of Tron Power. If a user releases their TRX, they will lose the corresponding Tron Power and the ability to vote for super representatives. Tron Power is not a tradeable asset like TRX.

This staking process is similar to that of other proof-of-stake blockchains like Cosmos or Tezos.

What is Tron Crypto Used For?

TRX crypto powers programs that run on the Tron blockchain. The concept is similar to that of Ethereum, where the Ether (ETH) token powers programs on the Ethereum blockchain.

The TRX currency is used to power programs running on the Tron network. One of the most sought-after uses for this type of tech is to create social platforms that reward users directly for content creation and curation.

TRX is also used for speculative purposes. Traders try to buy tokens at a low price hoping to sell them later at a higher price to make a profit.

Is Tron Crypto a Good Investment?

This is a question investors will ultimately have to answer for themselves. Altcoins are widely considered high-risk speculative investments, and are well-liked by investors with a high tolerance for risk and volatility.

Because TRX crypto is not a mineable cryptocurrency, its economics depend largely on the lock-up of tokens. Tokens are locked up by holders who choose to stake them (as mentioned in the section on delegated proof-of-stake), by the Tron Foundation, and by users participating in Tron’s decentralized finance platform.

On December 18th, 2017, Justin Sun said the Tron Foundation had locked up about $34 billion worth of TRX at the time, until the date of January 2020.

In September of 2020, the price of TRX doubled in a short period after 5 billion TRX tokens were locked in Tron’s decentralized finance (DeFi) platform called JustSwap. The JustSwap decentralized exchange (DEX) resembles Ethereum’s Uniswap in many ways. Both provide a platform for users to trade cryptocurrencies without any third-party intermediary.

If demand for TRX stays steady or increases, and supply remains constricted by tokens being locked up, then Tron crypto could theoretically see price increases going forward. But there’s no way of knowing whether or not this will happen.

Anyone offering crypto investing tips who claims that a certain coin will perform a certain way isn’t being honest. The best any investor can do is make an educated guess based on the information available at the time.

Will Tron TRX Reach $1?

The one US dollar price target for TRX seems like a long shot at the time of writing. The price of one TRX token is currently about $0.03.

Reaching one dollar would amount to an increase of about 3,330%. While such price increases are not unheard of in the cryptocurrency world, they don’t happen very often. And when they do, they’re often followed by a steep, prolonged drop afterward.

The Takeaway

TRX crypto is a native token of Tron, which aims to create a decentralized internet through its platform for smart contracts and decentralized applications. Though the price of one TRX token is well under $1—about $0.03 at the time of writing—some investors may be drawn to this crypto because of the chance the token value might increase over time.

For investors looking to invest in cryptocurrency, SoFi Invest® makes it easy to start crypto trading with cryptocurrencies like Bitcoin, Ethereum, Litecoin, and more.

Find out how to invest in cryptocurrency with SoFi Invest.


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