Justin's Open Letter On How TRON Network Will Enhance Its Democratic Governance And Development In The Future
As we received much feedback from community members and developers regarding Proposal №47 and Proposal №48 that have just been approved through democratic voting two days ago on November 25, 2020, I would like to share some of my ideas on how TRON network will enhance its democratic governance and development in the future.
Unlike many public chain projects that have flopped, this year TRON network has surpassed Ethereum to be the busiest public chain across the industry. If Bitcoin is the digital gold, it is safe to say that TRON is the digital petroleum; if Bitcoin is the foreign exchange reserve for the digital world, then TRON is the economic necessity that you cannot live without.With over 1.7 million transaction requests being processed on average every day, TRON has become the most important infrastructure and layer 2 network in the industry. My top priority, which is also the core vision of TRON, is to transform it into a fast, efficient and ultra cost-effective decentralized network centered around a well-established incentive and governance mechanism.
As more users are coming to TRON, people may ask: How decentralized is it on TRON? How secure is it?
Simply put, TRON is decentralized and secure.
Security is in essence a cost issue. It’s about how much budget a network is willing to allocate to uphold its security.For either a PoW or a PoS network, its decentralization and security depend heavily on investment. To be specific, a PoW network (e.g. Bitcoin and Ethereum) forestalls malicious attacks by constantly upgrading computing power. A PoS network (e.g. TRON), by contrast, prevents attacks by increasing staking ratio and the absolute amount of tokens staked. In this respect, TRON boasts a huge governing user base who has staked 25.2 billion TRX (an equivalent of $750 million) in total, meaning that every year over $750 million is invested to ensure the decentralization and security of the entire TRON network.
No decentralized network can be immune from attacks. But attacks have a cost. According to statistics from crypto51.app, it costs $790,000 an hour to launch a 51% attack on Bitcoin, and $310,000 on Ethereum, while attacks on chains with less computing power such as BCH and Ethereum Classic cost $10,000 and $5,000 an hour respectively. These numbers indicate that PoW networks are not secure, except for Bitcoin and Ethereum. By contrast, the hacker would have to replace more than two-thirds of the current Super Representatives to land an attack on TRON, which brings about a tremendous cost of control and attack at $500 million. A decentralized and secure TRON network can thus be ensured by dramatically increasing the staking rate of the network, making attackers aware of the unbearably high cost of their uneconomic attacks. This is the way to ensure network security.
Therefore, TRON is committed to its core security and governance principle of encouraging TRX holders to participate in staking and governance of the network. TRON needs not only token holders, but holders who lock up their tokens for staking and voting, just as a country needs not only general citizens, but responsible citizens who participate in democratic governance and voting. To this end, TRON has to continue to provide more incentives to holders that vote and Super Representatives that participate in governance, allowing them to enjoy the greatest share of profits from TRON’s growth.
With a fourfold increase in fees on the TRON network, the number of TRX burnt per day will stabilize between 2 million and 2.4 million. Based on the price of TRX today, which is $0.03, that amounts to a total consumption of $60,000 to $70,000 a day.We can take USDT, one of the most popular tokens in the cryptocurrency world, as an example to compare the cost and efficiency of each chain in terms of transfer cost: After the fee rise on TRON, now a USDT transfer costs $0.019 on TRON, $1.22 on Ethereum when there is no congestion and $10–15 when there is, and $10 on Bitcoin. That is to say, the fees on TRON equal only 1% of those on congested Ethereum and 0.1% of the Bitcoin network, which translates into competitiveness and great potential. And not to mention TRON’s instant transfer, which dwarfs the transaction speed on both Ethereum (5–10 mins) and for Bitcoin (over an hour).
In my view, going forward, the handling fees on the TRON network may remain at a reasonable 10–20% of what is charged by Ethereum and Bitcoin. In other words, TRON’s handling fees may be subject to another increase of 10–20 fold, despite which TRON will still outperform Ethereum in terms of overall transfer fees and efficiency.
There might be doubts over whether higher fees on the TRON network will affect the developer and user experience of DApps and DeFi applications.
Let me elaborate on this. First, DApp and DeFi developers on TRON still enjoy a competitive handling fee and transfer speed compared to Ethereum. Second, network computation intrinsically requires resources. A reasonable handling fee not only safeguards network transactions, but also adds to the cost of click frauds and the value of a single transaction, contributing to the overall healthy operation of the TRON network. Third, DApp and DeFi developers are allowed to freeze TRX for Energy, where a higher price has no bearing on the total Energy eligible from freezing TRX. Fourth, raising the price of Energy helps migrate transactions with lower value to TRON’s dual-layer solution SUN Network, which will in turn be injected greater capacity and utility.
Moving on, we will consider whether to lower the threshold for freezing TRX for Energy so as to engage more loyal TRON developers in obtaining Energy by freezing instead of burning TRX.
At the moment, all handling fees obtained from system calls on TRON are burned to incentivize TRX holders by injecting a proportionate value to their TRX holdings.But in my view, we should employ a more targeted incentive system where all handling fees go to the pockets of token holders who stake TRX to vote as well as SRs on the network, for they are the ones that truly safeguard the network, generate blocks and handle transactions, and thus deserve a due share of the network’s profits. By staking TRX, they yield a large amount of liquidity and demonstrate their staunch belief in the TRON network.
To that end, TRON will seek to establish a new incentive mechanism where the overall handling fees on the network are distributed to SRs, who then allocate rewards to their voters. Going forward, all TRON SRs and voters will enjoy rewards coming from two sources: one is block rewards brought by moderate inflation with a daily pool of 5 million TRX (an equivalent of $150,000 based on a TRX price of $0.03), and the other is handling fees with a daily total of 2.4 million TRX (an equivalent of $70,000), which is subject to increases in the future. More incentives also draw more institutions on TRON. This will create a virtuous cycle for the network: more token holders participating in voting and staking means an increase in the number of tokens staked for votes, which will make TRON even more secure; an increasingly secure network and applications will in turn attract more users to the TRON ecosystem, which will drive higher incentives, attracting more holders to participate. The TRON ecosystem will thus snowball in its growth.
In general, TRON expects to adjust the incentive mechanism of the entire network with a focus on encouraging long-term holders who stake tokens for voting. We expect to build a virtuous cycle to transform TRON into a fast, efficient and ultra cost-effective decentralized network centered around a well-established incentive and governance mechanism, and continue to consolidate our advantageous position as the most important infrastructure and layer 2 network in the industry. For developers and users, TRON network is decentralized, secure, stable, cost-efficient and fast; for SRs and staking holders, it promises generous and stable returns as well as clear incentives for long-term believers. If Bitcoin is the digital gold, it is safe to say that TRON is the digital petroleum — which means TRON will be the economic necessity that you cannot live without in the world of cryptocurrency!