Tron: A revolutionary cryptocurrency, excellent marketing, but Justin Sun?

Rhys Muter 8 January 2018

TRON in text image

After an incredible price rise, Tron seems like a fairytale, but some of its financials are a little shady.

On 28 August 2017 Tron, or TRX as it is known on exchanges, was released for initial coin offering (ICO). The ICO was so popular it broke the servers of Binance, the issuing website. Since then any discussion of Tron (TRX) has been fraught with divisions. Some criticisms cite the lack of an actual product, others cite stolen code that has been worked into its release.

Some supporters of Tron shoot back by saying the long term vision of Tron is clearly set out in the white paper and that claims of plagiarised code are just fake news. Whatever the reality is, some of the wild price gains Tron has shown in the December to January period have caused Tron to be quite an emotive topic. One of the strongest criticisms of the Tron project has been the unclear supply of the TRX tokens itself.

According to the Tron white paper, this pre-mined token is distributed according to certain “rules.” Upon a closer look at the way Tron is distributed, the “rules,” may just be values that the Tron development team made to ensure price control. The trouble with this is that if claims of there being no actual product that Tron is developing are true, Tron could be a very elaborate scam.

There are 100 billion units of Tron as the Tron white paper states. Of that 100 billion, 40% has been allotted for public offering. 35% has been set aside for the “Tron foundation and ecosystems.” 15% has been transferred to “private sale”, plus a final 10% has been placed in “early payment of support to accompany me joy (Beijing) technology company., Ltd,” which seems a little unprofessional coming from Justin Sun.

Justin Sun is a Chinese national who received a masters degree from the University of Pennsylvania after completing his bachelor at the prestigious Chinese university, Peking University. His achievements include founding a popular social media site Peiwo, which is believed to have been, or is now using, Tron’s blockchain technology. Mr Sun styles himself on the Tron website as being the “protege” of Jack Ma, one of the most influential tech tycoons in China and the world having founded Alibaba.

That relationship is important. The reason for this is that there have been reports of senior technical staff of Alibaba being recruited to Tron laboratories. Regardless of whether these developments lead to a sound technical product it certainly adds to the hype surrounding Tron. In addition to that, Mr Sun has also been named twice in Forbes’ promising global entrepreneurs under 30 list.

Promising was the reaction to the Tron ICO immediately after it had ceased. That is true even considering the turbulent conditions the Tron ICO saw at the time. In August of 2017, just as Tron was entering the ICO phase, the People’s Bank of China issued regulations banning all ICOs in China. In spite of this, the Tron ICO still took place on 28 August 2017.

From this point, having a clear picture of exactly who has how much TRX becomes difficult. Immediately available information shows the first TRX transaction otherwise known as the genesis block. That genesis block deposited to a wallet, here, the 100 billion units of TRX available and as late as 19 December, has shown transactions that have drawn the total held by that wallet to around 85 million TRX, which represents exactly 0.085% of all TRX issued.

The three largest transactions which were roughly 10 billion, 15 billion and 16 billion were moved to 3 different wallets (called wallet set A, here, here and here). Wallet set A then moved those tokens to different wallets (called wallet set B here, here and here) all on 01 Oct 2017 exactly 29 minutes apart. The total of those three largest transactions equalled well over 41% of all TRX issued.

It is important to have a look at the average transaction for wallet set B. This is because the average transaction amount tends to be around 350 million TRX. This could be important because it could suggest that whoever is in control of the 3 wallets that make up wallet set B could be creating artificial liquidity. That means that there could be a manufactured liquidity which would signal that the price of TRX is being manipulated in a very controlled way.

Without access to advanced cryptographic tools, these suggestions are just speculation. However, at first glance, there is a pattern of a very controlled movement of TRX clearly originating from the genesis block. The “rules” made by the Tron white paper concerning the distribution of TRX are thrown into disarray by this idea.

It should be recalled that 60% of TRX was to be held by Tron’s development teams and other organisations associated with Tron. The other 40% was for public sale. It is possible that the 41% of TRX that was moved to wallet set B could be in public hands. It is also possible that maybe only a very small fraction of that 41% is in wallets that have nothing to do with Tron. What this means is that only Justin Sun has the best understanding of exactly how much TRX is in whose hands.

What these numbers demonstrate more than anything else is the extent to which good marketing will have on the investor’s understanding of an ICO. In this case, Tron has a questionable future regarding whether its innovations will be globally successful or not. That does not seem to deter a large body of people who believe that the Tron vision will deliver. The trouble is that there are still a lot of questions to be answered. One of those questions is whether or not the price of TRX is subject to price manipulation.

This information should not be interpreted as an endorsement of cryptocurrency or any specific provider, service or offering. It is not a recommendation to trade. Cryptocurrencies are speculative, complex and involve significant risks – they are highly volatile and sensitive to secondary activity. Performance is unpredictable and past performance is no guarantee of future performance. Consider your own circumstances, and obtain your own advice, before relying on this information. You should also verify the nature of any product or service (including its legal status and relevant regulatory requirements) and consult the relevant Regulators' websites before making any decision. Finder, or the author, may have holdings in the cryptocurrencies discussed.

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