Tron (TRX +0.32%) may have never garnered the same hype that some of the more highly touted cryptos received during the crypto bull market. But that's not necessarily a bad thing, and that hasn't stopped Tron from outperforming them by a wide margin in 2022, with a 28% loss year to date as opposed to losses of around 90% for rival layer 1 blockchains like Solana (SOL 3.26%) and Avalanche (AVAX 3.94%).
Tron has even held up better than the top two cryptocurrencies, Bitcoin (BTC 1.91%) and Ethereum (ETH 3.23%), which are down 65% and 68% year to date, respectively. Here's why Tron is one of the most resilient blockchains and why it should post a strong performance in 2023.
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What is Tron?
Tron is an open source smart contract platform that enables users to create and deploy decentralized applications, just like Ethereum. Like Ethereum, Tron is a proof-of-stake, layer 1 blockchain. At one point, Tron actually was an ERC-20 token before it migrated onto its own blockchain in 2017. The Tron mainnet launched in 2018. Since 2018, the Tron network has processed over $6 trillion worth of transactions.Tron currently has a market cap of just over $5 billion.
With over $4 billion in total value locked (TVL), Tron has surpassed all other blockchains in total value locked save for the much larger Ethereum. Total value locked is a measure of the value of all assets locked into, or committed to, a smart contract platform like Tron or Ethereum. This $4 billion total dwarfs the likes of Solana and Avalanche, which now have $215 million and $780 million in total value locked, respectively. Valuing cryptocurrencies is sometimes more of an art than a science at this point, but investors can consider the total value locked in a platform and divide it by the coin's market capitalization to get an idea of whether the crypto asset is undervalued or overvalued. Dividing the market cap by the total value locked gives you a number that is similar to calculating the price-to-book value of a traditional stock. Based on this metric, Tron has a market cap to TVL ratio of about 1.2, which looks particularly attractive in comparison to the current market cap ratios of Ethereum (6.3X), Solana (19X), and Avalanche (4.6X).
CRYPTO: TRX
Key Data Points
What is Tron's killer app?
Crypto skeptics will often say that this is all well and good, but what's the "killer app" here? Why will people ultimately want to use this cryptocurrency? And what makes it stand out? In many cases, they have a point. In a saturated market with thousands upon thousands of tokens, many cryptocurrency projects are more a whitepaper and a token in search of a user base or a problem to solve rather than an asset being used in the real world.
However, this isn't the case with Tron. Much of Tron's appeal lies in its speed and its dirt cheap transaction fees. The TRON network can process 2,000 transactions per second, and fees can be as low as $0.000005. While many blockchains can boast high performance, this combination has made Tron an appealing blockchain for users all over the world, especially in developing markets. Tron stands out because a lot of people are using Tron; there are 131 million Tron accounts. The Tron network has processed 4.5 billion transactions so far, and over $6.3 trillion in value has been transferred using Tron.
Because it is so cheap to send assets using the Tron blockchain, Tron is an appealing blockchain for users around the world who want to transact in dollar-denominated stablecoins like Tether (USDT +0.00%) and USDC (USDC +0.01%). At the time of writing, over $16.3 billion worth of Tether has been transferred using the Tron network over the past 24 hours. While USDC, the second-largest stablecoin, isn't quite as popular on Tron, over $1.5 billion worth of USDC has been transferred on Tron over the past 24 hours.
At the time of writing, the market cap of Tether on Tron is about $31 billion, making it the top blockchain for Tether, surpassing even the much larger Ethereum, which has a market cap of about $28 billion of Tether. In countries like China, where the exchange of the local currency for cryptocurrency has at times been banned, Tether gives people an on-ramp into crypto and out of the local currency. In many countries, Tether has become a viable U.S. dollar substitute for people looking for U.S. dollar exposure (in order to mitigate the volatility of their local currency or to make cross-border payments), and Tron is often an integral part of this process. In developing countries where applications like Paypal (PYPL +2.01%) or Apple (AAPL +2.65%) Pay aren't available (many countries in Africa, Asia, the Middle East, and Latin America), sending and receiving Tether on Tron is a viable alternative for sending and receiving dollar-denominated payments.
Looking ahead
Tron has been around for a long time (by crypto standards), and it has survived a crypto winter before, and there is something to be said for that. With a large, global user base and a compelling use case (sending stablecoins worldwide quickly and cheaply), Tron is a good bet to keep chugging along and to outperform many of its more glamorous rivals in 2023. As Tron continues to gain traction in terms of adoption and usage, it looks like a good cryptocurrency to gain exposure to and worthy of an allocation within a crypto portfolio.
