The strange world of DeFi on Tron

IN BRIEF

  • Many Tron DApps mention yield farming and automatic market makers found on Ethereum.
  • DApp test sites are riddled with DeFi scams active on the Tron network.
  • The Tron community does not seem to be diligent in discouraging bad actors.

Tron’s share price peaked at around USD 0.40 at its peak in the third quarter of 2020, but the really impressive growth has taken place in DeFi. The use of smart contracts in Tron has led to hundreds of decentralised applications (DApps). But Crypto’s „Las Vegas“ may have something worse than gambling in its hands.

Tron has been called a clone of Ethereum (ETH), a billion-dollar, hyped-up, trashy, imitation. As ETH fees rise in 2020, many users have migrated to networks like Tron to save time and money. So after the incredible success of Uniswap with the automatic market makers (AMM) and the DeFi and Yield Farming freaks that followed, Tron had to have some fun too.

So DeFi on Tron was born. Tron’s DApp volume skyrocketed in the third quarter of 2020 to almost $2 billion. JustSwap, the Uniswap-style AMM exchange, alone saw a volume peak of more than $367 million per day on September 2. Although these numbers have declined, Tron has still left its mark.

While the Tron network remains a distant second only to Ethereum in Dapp volume, it hosts traffic reminiscent of the Wild West era of cryptography. Gaming, Ponzi schemes, incited mining Rugpulls or token abandonment and, perhaps most damning of all, a less than perfect user interface are all found on Ethereum’s alleged clone.

I tested a small amount of TRON to see how much money could really be made.

The poor man’s Ethereum?

In a nutshell, the world of Tron DeFi is the squeaky, dreadful version of Ethereum. It works exactly like Ethereum, but different.

For example, Tron boasts that it can process more than 2,000 transactions per second (TPS), compared to 15 to 30 for Ethereum. Under review, a study found that 2,000 theoretical transactions per second was impossible to achieve. The apparent real limit of 748 TPS is not a reason to sneeze, but it does illustrate the superficial glitter and glamour of the Tron network.

A slow update sometimes required me to complete the transaction twice.

The Tronlink portfolio, approved by the CEO of Tron Just Sun and the Tron Foundation, is the gateway to Tron Defi. It is an analogue of Consensys‘ Metamask portfolio for Ethereum. The Tronlink user experience is not so simple. The wallet uses a small serif font, all the buttons have right angles and the colours are not attractive.

In addition, in my personal experience, Tronlink updates slowly enough to create problems. For example, a pop-up window indicates that my transaction has been confirmed. I still had several TRXs left in my portfolio (that’s what I thought), so I went to make another transfer and approved it. Unfortunately, my TRX balance had not been updated, so Tronlink overloaded my remaining TRX to try and fail a transaction that should never have happened.

JustSwap

The similar and dull experience extends to Tron’s Automatic Market Maker’s „JustSwap“. The transaction fee, which is about 1 TRX ($0.26 USD, at press time), is lower than Ethereum’s, and most transactions take only a few seconds.

However, the market maker fee of 0.3% is equal to that of Uniswap. The functionality is almost identical to Uniswap, with liquidity tokens and slippage fees to start with.

To its credit, JustSwap reached a liquidity peak of $265 million in early September and still hosts the second highest DApp volume after Ethereum. Tron Defi’s third quarter 2020 volume increased by $133 billion.

JustSwap DEX volume history | Source: Justswap.io

Although Tron hosts popular corners such as the WINK, USDT and Huboi tokens, Uniswap gem hunters have little to use here. There are simply not enough projects hosted on Tron to bring the incredible popularity of Uniswap to it.

But the extraction of cash is another story.

Incentive mining and Sun Token

On August 31, 2020, Tron’s CEO Justin Sun announced the launch of his own token, SUN. The purpose of the token, Sun said, was to give back to the Tron community and have fun in the aftermath of the meme bubble. In essence, SUN would be subjected to the mining of the genesis, and huge opportunities for profitable agriculture would finally come to the Tron network.

In fact, Sun Genesis‘ mining operation offered incredible rewards on the staking of cash tokens, even if it was short-lived. Nevertheless, subsequent cycles of yield farming with ever-declining yields followed on Sun.io, the Sun token staking site.

Sun.io offers high-yield agriculture APY | Sun.io

The only problem is that the value of the SUN token has fallen over time, reducing the value of these rewards.

All in all, between the JustSwap fee and the impermanent loss of farming yield, I lost about 10% of the TRX I set up to experiment. Maybe that was my mistake, or maybe Tron Yield Farming is not a money machine.

But there’s another corner of Tron Dapps that promises exactly that.

Decentralised Ponzis

Looking for the best of what Tron had to offer in terms of DeFi, I found myself at Dapp.review. The site lists and ranks the different decentralised applications by intended use, protocol and various measures.

The site offered an impressive number of Dapps for Tron. Each of the dozens of Tron Dapps had pages with positive reviews and links to Telegram groups. These Telegram groups had hundreds, sometimes thousands of subscribers, all spamming their affiliate links.

For the purposes of this experiment, I chose NanoTron. According to Dapp.review, Nanotron had over 100 five-star reviews and a 24-hour volume in the tens of thousands.

The now defunct nanotron offered high daily yields

The landing page offered several investment options that seemed out of this world. Nanotron offered a daily interest of 8.5% on the staking of TRX for 18 days, for a total of 153% interest. Another option offered a daily interest of 5.5% with no limit. Was it too good to be true? Almost certainly! But a Ponzi scheme is only bad if you burn yourself before you withdraw your money.

For scientific reasons, I dropped 300 TRXs, worth about $7.50, at the time.

Something immediately became apparent. First, the system took the principal and never returned it. In other words, the 153% that was promised to me would only deliver a 53% return on investment.

So, after 18 days, I was ready to withdraw my funds and I went to nanotron.io to reap my 53% profit. The page had been updated.

It was gone. The whole site. Goodbye $7.50

And when I scrolled through the list of Tron Dapp.review projects, I noticed that many Dapps suddenly had no more funds in the protocol, no volume and broken links. These tiles representing dozens of applications on Tron turned out to be tombstones.

It would be one thing if these scam sites simply floated on the Internet. Unfortunately, the Tron team seems to be playing the game. One of these apparent high-risk scams was the Tron Supernode. JustSwap, supported by the Tron Foundation, allegedly traded the token on its white list before and for a while after the draw that made Tron’s $2 million disappear.

The house of the rising SUN

However, one corner of the Tron DeFi is capable of shining, even if in an unsavoury way. Decentralised Tron-based gaming is alive and well. DappRadar and Dapp.Review offer several gambling sites on Tron.

WINK is a particularly successful site. The site has a fairly pleasant user interface and experience. They offer poker, dice, casino games, non-casino games and sports betting. Wink, also known as Tronbet, also checks users‘ IP addresses and will block access depending on location. (Nothing a good VPN can’t solve).

Notably, WINK is not only known to the Tron team, but even seems encouraged. The token is exchangeable on JustSwap. More convincingly, the WINK token can be staked on sun.io. Does Tron tolerate gambling? Is the staking of a game token a game instance? What laws does such a token adhere to?

This is where the problem lies. One of the many nice things about the blockchain is that the creators cannot provoke consensus actions. Whether on Ethereum or Tron, no centralized group can physically stop the use of a token by a user with an Internet connection. The absence of banks and government currencies is certainly attractive. So be careful. Unchangeable and untrusted transactions are powerful, but it’s still the Wild West.