Tron's new stablecoin might draw other blockchains' envy
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Justin Sun, founder of Tron, in Hong Kong in 2021. Photo: Fan Kar-Long/Getty Images
Justin Sun, founder of the controversial Tron blockchain, is promising an innovation in crypto's most popular use case.
Why it matters: Tron has become the second-largest generator of on-chain revenue year to date, driven in no small part by being a very popular medium for sending stablecoins around the world.
- Sun is now promising a free-to-use stablecoin soon, which would be a strong user experience upgrade for the chain.
A fee-free stablecoin
Tron has mainly been known for copying innovations and remixing them to appeal to its largely Asian audience.
- The last time it announced a new stablecoin, USDD, it was a copy of the ill-fated algorithmic stablecoin from Terraform Labs, launched just before that blockchain imploded.
- Tron is a leader in stablecoin transfers. Fifty percent of all tether, the world's largest stablecoin, is issued on Tron.
- And if it executes its free-to-use stablecoin well, that would represent something new under the digital sun. Other blockchains would surely follow suit.
- That said, Sun has not explained how his plan would work.
💠Our thought bubble: It could be that the underlying dollars are invested for some kind of yield, such as on U.S. Treasuries, which could be used to pay transaction costs.
- Plus, we could even imagine a world where Tron gave users of the stablecoin (or perhaps all stablecoins) a discount.
Stablecoin rivalry
Ethereum still leads in total dollar value transferred with stablecoins, but Tron has become its chief rival.
The big picture: Stablecoins are the clear killer app of blockchains so far, with a trillion dollars in volume per month (despite the fact that the total supply of stablecoins is still $25 billion below their 2022 peak).
- Crucially, Tron has its own user profile. A paper by Brevan Howard last year found that far more people were using Tron for transactions, which were largely much smaller than those on Ethereum.
- This squares with a January report from Coin Metrics that found the average value of tether transfers on Tron is vastly lower than on Ethereum (see the fifth chart).
Zoom in: Tron is much less expensive to use than Ethereum, which probably makes it more appealing for lower-value transactions where maximum security is less important than a low price.
- Average fees on Tron are around $0.18 these days, versus Ethereum, which is more like $1.87 (and that's surprisingly low, historically).
Profit motive
By the numbers: Tron recently overtook Ethereum as the blockchain earning the most revenue over the last 30 days, according to TokenTerminal, bringing in $142.1 million, versus Ethereum's $110.4 and Bitcoin's $56.5 million.
- The revenue comes from users paying Tron's distributed network of validators to verify their various transactions.
- Somehow, though, transactions with this new stablecoin will be the exception, traversing users for free.
Yes, but: Despite recent success, Tron's coin, TRX, is up less this year (19%) than either bitcoin (29.3%) or ether (29.7%).
- TRX started the year rising with the others, but fell behind in February, around the time that Circle announced it would quit using Tron for usd coin (USDC).
What's next: Technical details on this new stablecoin.
