A Lesson in Tokenomics: How TRON Controls TRX Price
Making crypto a stable store of value is a particular pain point for cryptocurrencies. While most projects remain committed to the principles of decentralization, TRON (TRX) has devised its own model to keep the price under control. This is an interesting case-study for the emerging field of tokenomics.
Crypto is – with exceptions – a decentralized and stateless entity or asset. Its value is market-determined; no central bank or institution stands in as its guarantor.
TRON governs itself through reaching consensus from its members. This is reached at different levels and consent is needed from the non-profit TRON Foundation, elected ‘super’ representatives, as well as active members of the TRON community.
This enables decision-making to remain decentralized but at the same time, effective. Although the actual money supply is determined through automated mechanisms, the long-term development of the ecosystem, which influences the TRX price, remains in the hands of the community.
The TRON network uses monetary mechanisms similar to those used by a central bank. Rather than leaving TRX tokens to the mercy of the markets, it can add and remove TRX supply to keep the price at a steady level.
TRX supply adjusts dynamically, equipped with both increased issuance and coin burn mechanisms. So the inflation and deflation of the tokenomy is determined by the dynamic adjustment in the market.
TRON and Tokenomics
TRX has been adopted by multiple crypto-payment outlets; five payment modules began accepting TRX tokens in August alone. Although primarily used to pay the network’s transaction costs, becoming used as an everyday payment method could radically alter the token’s price range.
An opportunity for riches for the lucky speculator, crypto’s volatility makes it a poor store of value. It can become volatile during periods of market disruption: the total market cap surged by 400% following an influx of new investors in the latter-half of 2017.
A currency’s price – fiat or crypto – that varies widely day-to-day prevents it becoming a popular form of exchange. In Venezuela, the bolivar has fallen by 99.9% in two years; restaurants have stopped printing prices on menus. Citizens have moved to other, more stable, means of exchange: parking attendants reportedly accept baguettes as payments and taxi drivers will take you anywhere you want for a carton of cigarettes.
TRON’s mission has expanded since it launched in September 2017. Originally designed as a decentralized entertainment platform Justin Sun, the project’s leader, is presenting it as a viable alternative dApp platform to Ethereum (ETH).
“Platforms like Ethereum are no longer capable meeting developer needs and user acquisition isn’t expanding as expected, causing a bottleneck for blockchain technology development,” the TRON spokesman told Crypto Briefing.
TRON confirmed it had purchased the video-sharing platform, BitTorrent, at the end of July. Sun plans for BitTorrent to become part of the TRX ecosystem.
There has been some discussion on just how decentralized the TRON consensus mechanism is. Some have pointed out that it seemed all too easy for Justin Sun to become one of the first elected super-representatives. As Sun is TRON’s only public figure, he might also have significant de facto influence over the community, calling into question just how democratic the network really is.
Nonetheless, TRON’s consensus-based method could help to introduce stability into a very turbulent asset-class; the network could even become a decentralized central bank.
If it works, Sun et al. would have performed some sick TRX in the world of tokenomics.
The author is invested in ETH, which is mentioned in this article.
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