Tron (TRX) is often thought of as a major cryptocurrency, with a market cap near $1.5 billion. Tron (TRX) is considered to be an Ethereum (ETH) competitor, and is one of the top choices for decentralized App (dApp) development.
Tron (TRX) Is Effectively A Centralized Network Due To dPoS And Centralized Supply
Although Tron (TRX) is considered a top choice for dApp development, the technological backbone of Tron (TRX) is pseudo-centralized. Rather than using a purely decentralized consensus algorithm like Bitcoin’s (BTC) Proof of Work (PoW) algorithm, Tron (TRX) uses delegated Proof of Stake (dPoS), which is perhaps the most centralized consensus algorithm that a cryptocurrency can have before it is no longer even considered a cryptocurrency.
As stated in the White Paper, there are 27 super representative nodes who are chosen every 6 hours via voting. These 27 super representative nodes are given the duty of mining all Tron (TRX) blocks, and they even have the power to propose and vote on changes to the Tron (TRX) network.
This dPoS situation is exacerbated further by the fact that 32.6 billion Tron (TRX) worth approximately $744 million are not in circulation, indicating that they are held by the Tron Foundation. Notably, Justin Sun is the Founder and CEO of the Tron Foundation..
Therefore, it could be argued the Tron Foundation can easily take control of all 27 super representative nodes and change the Tron (TRX) network however they like. Basically, Tron (TRX) is a centralized network that pretends to be decentralized, since the Tron Foundation is ultimately in full control.
Additionally, the centralization of such a large percentage of the coin supply makes the Tron (TRX) market centralized and prone to manipulation. Centralized dumping from the Tron Foundation may partially explain why Tron (TRX) has lost 72.5% of its value relative to Bitcoin (BTC) since January.
Tron Super Community Ponzi Scheme Puts The Tron Foundation In Hot Water
It gets worse. The Tron Foundation and Justin Sun have been embroiled in controversy in China following the collapse of the Wave Field Super Community ponzi scheme earlier this month. The meaning of the word Tron in Chinese is Wave Field, so this ponzi scheme was actually named the Tron Super Community. This ponzi scheme started in January, and by the time it shut down 200 million Chinese Yuan (CNY) had been stolen, equivalent to $30 million.
Hecaijing.com reports that the Tron Super Community was set up like a typical multi-level marketing scheme, where people are incentivized to get their friends, families, and even strangers to invest. Ultimately several hundreds thousand victims were pulled into the ponzi scheme.
One of the most incriminating things about the Tron Super Community is that payments were made in Tron (TRX). Level 1 required investments of 1,000 to 30,000 Tron (TRX) and offered daily returns of 0.3-1% as well as returns of 5% for recruiting new members. Level 3 required more than 100,000 Tron (TRX) to be invested, and gave bonuses of 15% for recruiting new members.
Apparently members of the Tron Super Community repeatedly questioned Justin Sun regarding the connection between the Tron Foundation and the Tron Super Community, and supposedly Justin Sun did not clarify. It certainly can be considered suspicious that a highly public ponzi scheme that used the Tron (TRX) brand was not called out or sued earlier by Justin Sun and the Tron Foundation, and based on the Hecaijing report, some Chinese citizens go as far as speculating that the Tron Foundation was in on the ponzi, although there is no definitive evidence which can prove that.
One of the victims who had invested 230,000 Tron (TRX) which they had borrowed at high interest from a friend cut their wrists on social media, posted a suicide note for the nation to see, and died. This led to widespread outrage against Justin Sun and the Tron Foundation, and a group of people tried to force their way into a Tron Foundation office in Beijing, China. The Tron Foundation issued a statement absolving all responsibility for the Tron Super Community on July 8.
A very important thing to note is that fiat to crypto trading is banned in China, as well as any initial coin offering (ICO) cryptocurrencies. During the course of the Tron Super Community ponzi tens of millions of dollars of Tron (TRX) were illicitly sold to Chinese citizens, and then widespread damage resulted in the end, with at least one death and countless people who were left financially ruined.
It seems obvious that the government of China set their targets on Justin Sun and the Tron Foundation at that point, especially since Justin Sun is a Chinese citizen and must abide by Chinese law. Ultimately, Justin Sun is the Founder and CEO of a cryptocurrency network that damaged hundreds of thousands of Chinese citizens this year.
Justin Sun Enraged Chinese Government Officials By Bragging About A $4.6 Million Lunch As Chinese Citizens Suffered
Justin Sun went ahead and poured fuel on the fire. While citizens in China were mourning over the collective loss of $30 million, and a man had just committed suicide over about $5,000 of lost Tron (TRX), Justin Sun was publicly hyping up his $4.6 million lunch with Warren Buffet, one of the richest men in the United States, and throwing all sorts of celebrations before and after the lunch.
This seems to be the straw that broke the camel’s back. Chinese authorities swooped in and arrested Tron Foundation executives, only to release them once Justin Sun agreed to cancel the lunch. For some reason Justin Sun claimed to have kidney stones instead of just telling the truth, causing confusion and controversy when Justin Sun appeared at a party the night of the cancelled lunch.
Considering the nature of the events that occurred, the statement released by Justin Sun after the cancellation seems appropriate: “I didn’t sleep all night yesterday, and deeply reflected on my memories and was introspective for my behavior and words — I felt ashamed for my over-marketing. I want to deeply apologize to the public, media, leaders, and the related regulatory authority who cared about me… In the future, I will repair my shortcomings, reduce my vocalizations on Weibo, reduce the media interviews, and translate all the research and development from marketing hype to true blockchain technology.”
Zooming out, following the Tron Super Community debacle the government of China has ample justification to arrest Justin Sun if they want to. Although a cryptocurrency is supposed to be decentralized and not dependent on any particular individual or entity, Justin Sun has become a central part of the Tron (TRX) market and network due to his highly influential public persona and the 32 billion Tron (TRX) that is held by him and the Tron Foundation.
Therefore, if China were to arrest Justin Sun it could severely damage the value and reputation of Tron (TRX), and this is equivalent to an unacceptable centralized point of failure. Indeed, Chinese media has already reported that Justin Sun is being investigated for money laundering. In the past week alone the value of Tron (TRX) has dropped over 20%.
Justin Sun Is 2 Months Late In Paying Bram Cohen For The Acquisition Of BitTorrent
If all that was not enough problems, Bram Cohen, the Founder of BitTorrent, says that Justin Sun has not released the last payment out of escrow for the BitTorrent acquisition, and this is 2 months behind schedule. This is surprising considering that the $140 million acquisition of BitTorrent and the subsequent launch of BitTorrent Token (BTT) was the biggest news of the year for Tron (TRX). Justin Sun claims to have signed the escrow release papers at the beginning of this week, and says the escrow is in the lawyer’s hands now and there is nothing else he can do about it. This perhaps raises speculation that Justin Sun is in financial hot water due to Chinese regulators, but this cannot be confirmed.
Cryptocurrency investors and traders should be wary of putting significant amounts of money into Tron (TRX) until this storm passes, since it may only have just begun. There are plenty of other reputable cryptocurrencies to choose from that are properly decentralized and more suitable for investment.