Tron is eating away at Ethereum’s share of the Tether market, but it will have to do more to become a serious rival
- Tron is much cheaper to use than Ethereum and tends to process many more transactions per day.
- Layer 2 platforms will outperform Tron as they provide several advantages that Tron lacks.
- “If Ethereum is able to significantly reduce gas fees in the near future, then yes, Tron could lose that advantage.”
- Overall network activity on Tron appears to be limited to transfers and their gaming apps.
Tron (TRX) has long been the butt of jokes and insults from much of the crypto industry, dating back to 2019 (and even earlier) and continuing to the present day.
Yet over the past year or so, it has become an increasingly difficult Ethereum (ETH) rival to ignore, exemplified by the fact that the supply of stablecoin tether (USDT) on its blockchain has exceeded the supply of stablecoin tether (USDT). ‘Ethereum many times.
At the time of writing, both blockchains have more or less the same amount of USDT – USD 32 billion – on their respective networks, while Tron itself recently celebrated reaching 100 million active accounts. Numbers like these paint a picture of an ever-growing network, especially one that may challenge Ethereum’s dominance of the crypto industry at some point in the future.
However, opinions are well and truly mixed on whether Tron is a serious rival to Ethereum, with Ethereum proponents arguing that few meaningful projects rely on the smaller blockchain. Still, others argue that Tron’s growing USDT supply and lower fees could help it grow further, a process aided by Ethereum’s delays in moving to proof-of-stake.
How Tron ate into Ethereum’s pie
Besides its large supply of USDT, there is one area where Tron clearly outperforms Ethereum: daily transactions. According to figures from Etherscan and Tronscan, Ethereum has typically handled between 1 million and 1.3 million transactions per day for about a year and a half, while Tron has been processing over 3 million over the same period.
In fact, in recent months, Tron’s daily transaction count has increased from 4 million to around 6 million since April. This is a fact recognized by the Ethereum community and ConsenSysDeFi economist David Shuttleworth says there is a simple reason for this.
“In short, Tron is much cheaper to use than Ethereum and tends to handle many more transactions per day, currently at a ratio of around 6:1,” he said. Cryptonews.com.
This is a view shared by most other crypto commentators, with boolean fund‘s Mark Jeffrey claiming that the growth in Tron usage is being driven by traders who deal in a large amount of stablecoins and want to lose as little as possible in their many transactions.
“USDT is MUCH cheaper to move on Tron than on Ethereum – gas fees are MUCH cheaper. If you are moving USDT between exchanges (a common use case), Tron is the cheapest way expensive,” he said.
Taking a close look at Tron’s pricing structure, David Shuttleworth explains that it can vary depending on the amount of TRX a user has staked, although it is “usually” a fraction of a penny. The same does not apply to Ethereum.
“Ethereum gas fees, on the other hand, are significantly more expensive, with fees as high as $10 in times of high congestion. […] Ultimately, this suggests that users are migrating to Tron as a replacement for Ethereum to perform transactions, such as USDT transfers,” he said.
Can Tron continue to grow (at the expense of Ethereum)?
While it’s hard to deny that Tron’s fees are currently significantly lower than Ethereum’s and Tron’s share of Tether’s supply has increased as a result, opinion is much more mixed as to whether it can continue to grow as it has over the past few months.
On the one hand, industry figures affirm the possibility of two things: 1) that fees on Ethereum will drop; and 2) that using Ethereum-based layer two solutions (e.g. Polygon, Decision, Optimism) will also grow.
As such, it is uncertain whether Tron will manage to capture an even larger share of the USDT supply.
“My view is that users will continue to use Tron as a substitute for Ethereum wherever possible (e.g. simple transfers), especially when gas prices are prohibitive, but Ethereum gas fees gradually become cheaper with the implementation of EIP-1559 and will continue to decline except for a few outliers,” Shuttleworth said.
He also suggests that Layer 2 platforms will outperform Tron because although their prices are still a bit higher than Tron, they offer several advantages that Tron lacks.
“They offer more interoperability and composability, and a user never needs to leave the Ethereum ecosystem (which poses different levels of friction and security risks such as bridging),” he said. .
Another potential issue is that although Tron uses its own version of the Ethereum virtual machine, TVM, there are key differences between the two that could create friction for developers.
“So if a developer is building a successful app on Ethereum, but needs to make changes to their codebase to make it work on Tron, then that’s a hurdle that could reduce volume as well. The alternative is for developers to rely directly on Tron, independent of Ethereum, which I don’t see much,” he said.
Other commentators, not so tied to Ethereum, have a more mixed view of the future.
“If Ethereum is able to significantly reduce gas fees in the near future, then yes, Tron could lose that advantage. However, Ethereum is at least a year away from that goal,” said Mark Jeffrey.
According to him, Ethereum is currently vulnerable because there are several chains of Ethereum Virtual Machines (EVMs) which are already proof-of-stake, scalable and very fast with extremely low gas fees.
“Any alt-EVM chain could supplant Ethereum if it continues to delay the equalization of these competitors,” he added.
And arguably, Tron is better positioned than many other EVM chains to compete with Ethereum because having “more tethers moving on your chain than anyone else is a HUGE advantage.”
The bigger picture
Tron is currently around $3.9 billion in total value locked (per DefiLlama), compared to $45.5 billion for Ethereum. If it wants to become a truly dominant chain, then, it needs to do more than just help people move USDT.
“The problem, however, is that overall network activity on Tron appears to be limited to transfers and their gaming apps. […] rather than a necessary activity to sustain a blockchain economy over time,” said David Shuttleworth.
He argues that it is unclear what meaningful projects are being built in the Tron ecosystem.
“Instead, a significant portion of Tron’s daily activity is tied to its betting services, such as TronBetLive and TronBetDice. You will also notice that the majority of activity is related to transfers, which supports the thesis. above that users take advantage of Tron’s cheap fees when making different transfers,” he added.
As such, Tron still has a lot of work to do if it wants to leapfrog Ethereum anytime soon. Then again, Ethereum itself also has a lot of work to do if it wants to retain its dominance, as network effects alone may not be enough to offset the higher fees and slower speeds for long.
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