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🟣 Polygon (MATIC) , SWOT🟣
Today, Polygon (MATIC) , a general-purpose Ethereum scaling solution ecosystem, gets a Strengths, Weaknesses, Opportunities, and Threats, analysis.
💪Strengths (Internal) (Helpful) 💪
1. Multi-solution Architecture
Polygon is one of the most unique projects in and beyond the #EVM ecosystem due to its genuinely unique approach of providing a suite of solutions rather than just a single scaling option. Known for its Sidechain, where the vast majority of all public activity happens, there are also the zkEVm , the Zero-Knowledge Proof #Rollup ( Miden ), Supernets (enabled by polygon “edge” which is their equivalent to substrate), Polygon Hermez , and Polygon Nightfall .
2. Vibrant NFT Business Development
Polygon Labs does an amazing job attracting high-caliber brands into their ecosystem from beyond just #Web3 . Major global companies such as #Starbucks , Mastercard, #Meta ( #Facebook ), #Disney , National Geographic, and #Reddit , among others, have chosen to use Polygon as their chain of choice for deploying the NFTs for their audiences. This level of attention has even pushed some crypto-native projects to abandon their original chains and port over to Polygon (namely, YOOTs).
3. Token Supply Fully Vested
Polygon is perhaps the only major blockchain/crypto project with the total maximum supply of its token already in circulation. By having an economic state that is no longer subjected to supply-side pressures of inflation, it will be very interesting to watch how it handles market activity. While there is some merit in having supply-side inflation, with a hard cap already in place, there is a new vector of behavioral reflexivity that could potentially decouple MATIC from other crypto assets.
4. Transaction Sucess Rate Doubles
This is an empirical personal observation from using the network as well as something that has been confirmed in the Messari “State of Polygon” report. In Q1 of 2022, Polygon was handling roughly ~3 million transactions per day, of those approximately 350,000(11.67%) were failing. Today, it handles the same daily transactions count with the failure rate dropping into the range of ~150,000 (5%). Given the consistent focus on tech optimization, this rate will continue to trend to tighten up. The smaller the failure rate, the better for consumers. FYI failed transactions still consume the gas fees. As a matter of comparison, ETH has had months with 40,000 daily failures.
5. EIP-1559 (Burn)
Adopted from the Ethereum mainnet’s economic model, EIP-1559 burns a portion of all #network transaction fees. As it pertains to Polygon, having such a strong #burn mechanism in place, coupled with its fixed supply, the degree of impact this deflationary effect can have on the MATIC asset could potentially be transformative.
6. 38.2% of total $MATIC supply Staked
Another factor that is impressive in part due to the fact that all of the Matic that will ever exist is already circulating. Having such a large percentage of the token supply locked into #staking , exerts positive pressure on the liquidity profile. Something worth considering is that most of this comes from validators, which effectively means that the 100 validators of the network also control a sizeable chunk of all the tokens. In my opinion, this is an acceptable level of power distribution. Anything above 50% is not.
😞 Weaknesses (Internal) (Harmful)😞
1. Very Low TVL
Considering the network has shown extreme resilience to defending a market cap that fluctuates around the 5–10B mark and provides so many resources to retail users, it is interesting to see that the Total-Value-Locked on-chain is just about $1 Billion USD. This is of course correlated with the broader market trend of falling TVL’s, but when comparing the relative drop of the $MATIC token from $2.80 to $0.80 (-71.42%) to the #TVL drop from $9B to $1.2B (-86.67%); there is a disproportionate dislocation.
2. Suffers from Re-Orgs
Chain re-organizations are a technical nuance that falls somewhere between hacking and manipulation. Re-orgs can seriously disrupt operations and cause unintended, damaging consequences to regular users. This happens far more than acceptable, literally, thousands of reorgs have happened, some estimates show that the chain experiences five per day! This issue came about as a side-effect of the Delhi fork update; a bug in the code relating to the function sprintLength, which forces 32-block reorgs, a re-org block depth much larger than any other chain.
🧐 Opportunities (External) (Helpful) 🧐
1. Attractive to Legacy Private Equity
Large legacy #financial institutions have been showing a positive response to Polygon and have even selected it to begin conducting on-chain financial experiments. Hamilton Lane has leveraged Polygon as the network to tokenize a portion of its $2.1 Billion #USD Opportunities Fund via securitize. This trial is lowering the barrier to entry from the traditional $2,000,000 mark to as low as $20,000 and inviting a new caliber of market participants.
2. Strong Adoption by Gaming Communities
The combination of the level of security and transactional throughput, coupled with NFT infrastructure has turned Polygon into the most widely used EVM #blockchain network for the gaming community. Metrics of over 115,000 active #gamers and over 40,000,000 #gaming transactions
3. Top Chains for Developers
The excellent business development skills of the project shine in the department of developer engagement and attraction. Polygon has put forth notable efforts by hosting a fair amount of hackathons and providing one of the most robust toolkits for developers. Metrics including the amount of full-time developers (~220), the rate of developer growth (+200% in 2 years), and the total developer contributor count (>700), rank Polygon in the top 6 networks for developers, according to the leading industry Developer Report by Electric Capital .
😳 Threats (External) (Harmful) 😳
1. Dependance on Ethereum
This is not really a threat in the sense that any existential risk comes from this, however, Polygon is the only project I have seen that requires its Validators to have a minimum of 0.5/1 ETH available across chains in order to pay for anchoring activity into the network. By having some degree of dependence on #ETH , MATIC inadvertently becomes tithed to its network fluctuations.
Takeaway:
Easily one of the most robust projects across every metric. Insulating themselves technologically from every possible angle and nurturing powerful relationships with many of the world's most notable corporations, positions Polygon into a category of “Too Big To Fail”. These are Famous last words, so this is by no means financial advice. Honestly, even the so-called “threat” identified in this SWOT analysis is irrelevant to the enormous strength of the project.
If I had to give Polygon a score based solely on technology, long-term viability, and expertise, it would be a solid 9/10.
Conclusion:
I have interacted with Polygon many times throughout my crypto journey. They were the first network that I bridged assets to and from. They were the first network I used #DEFI protocols outside of #Ethereum . Purely on past performance, #MATIC has been among the best of trades/investments over the last ~3/4 years; however, I have a creeping sense in the back of my mind that it was in part due to well-informed insiders understanding the unique token emission model. I will not invest in MATIC in the coming bull cycle but do always hold some for access to their network.
If you know something that I don’t or feel as though I might have missed something, please do share, I would tremendously appreciate some feedback.
Thank you so much for reading,
I hope this serves you well on your journey.
Live long and prosper 🥂
Today, Polygon (MATIC) , a general-purpose Ethereum scaling solution ecosystem, gets a Strengths, Weaknesses, Opportunities, and Threats, analysis.
💪Strengths (Internal) (Helpful) 💪
1. Multi-solution Architecture
Polygon is one of the most unique projects in and beyond the #EVM ecosystem due to its genuinely unique approach of providing a suite of solutions rather than just a single scaling option. Known for its Sidechain, where the vast majority of all public activity happens, there are also the zkEVm , the Zero-Knowledge Proof #Rollup ( Miden ), Supernets (enabled by polygon “edge” which is their equivalent to substrate), Polygon Hermez , and Polygon Nightfall .
2. Vibrant NFT Business Development
Polygon Labs does an amazing job attracting high-caliber brands into their ecosystem from beyond just #Web3 . Major global companies such as #Starbucks , Mastercard, #Meta ( #Facebook ), #Disney , National Geographic, and #Reddit , among others, have chosen to use Polygon as their chain of choice for deploying the NFTs for their audiences. This level of attention has even pushed some crypto-native projects to abandon their original chains and port over to Polygon (namely, YOOTs).
3. Token Supply Fully Vested
Polygon is perhaps the only major blockchain/crypto project with the total maximum supply of its token already in circulation. By having an economic state that is no longer subjected to supply-side pressures of inflation, it will be very interesting to watch how it handles market activity. While there is some merit in having supply-side inflation, with a hard cap already in place, there is a new vector of behavioral reflexivity that could potentially decouple MATIC from other crypto assets.
4. Transaction Sucess Rate Doubles
This is an empirical personal observation from using the network as well as something that has been confirmed in the Messari “State of Polygon” report. In Q1 of 2022, Polygon was handling roughly ~3 million transactions per day, of those approximately 350,000(11.67%) were failing. Today, it handles the same daily transactions count with the failure rate dropping into the range of ~150,000 (5%). Given the consistent focus on tech optimization, this rate will continue to trend to tighten up. The smaller the failure rate, the better for consumers. FYI failed transactions still consume the gas fees. As a matter of comparison, ETH has had months with 40,000 daily failures.
5. EIP-1559 (Burn)
Adopted from the Ethereum mainnet’s economic model, EIP-1559 burns a portion of all #network transaction fees. As it pertains to Polygon, having such a strong #burn mechanism in place, coupled with its fixed supply, the degree of impact this deflationary effect can have on the MATIC asset could potentially be transformative.
6. 38.2% of total $MATIC supply Staked
Another factor that is impressive in part due to the fact that all of the Matic that will ever exist is already circulating. Having such a large percentage of the token supply locked into #staking , exerts positive pressure on the liquidity profile. Something worth considering is that most of this comes from validators, which effectively means that the 100 validators of the network also control a sizeable chunk of all the tokens. In my opinion, this is an acceptable level of power distribution. Anything above 50% is not.
😞 Weaknesses (Internal) (Harmful)😞
1. Very Low TVL
Considering the network has shown extreme resilience to defending a market cap that fluctuates around the 5–10B mark and provides so many resources to retail users, it is interesting to see that the Total-Value-Locked on-chain is just about $1 Billion USD. This is of course correlated with the broader market trend of falling TVL’s, but when comparing the relative drop of the $MATIC token from $2.80 to $0.80 (-71.42%) to the #TVL drop from $9B to $1.2B (-86.67%); there is a disproportionate dislocation.
2. Suffers from Re-Orgs
Chain re-organizations are a technical nuance that falls somewhere between hacking and manipulation. Re-orgs can seriously disrupt operations and cause unintended, damaging consequences to regular users. This happens far more than acceptable, literally, thousands of reorgs have happened, some estimates show that the chain experiences five per day! This issue came about as a side-effect of the Delhi fork update; a bug in the code relating to the function sprintLength, which forces 32-block reorgs, a re-org block depth much larger than any other chain.
🧐 Opportunities (External) (Helpful) 🧐
1. Attractive to Legacy Private Equity
Large legacy #financial institutions have been showing a positive response to Polygon and have even selected it to begin conducting on-chain financial experiments. Hamilton Lane has leveraged Polygon as the network to tokenize a portion of its $2.1 Billion #USD Opportunities Fund via securitize. This trial is lowering the barrier to entry from the traditional $2,000,000 mark to as low as $20,000 and inviting a new caliber of market participants.
2. Strong Adoption by Gaming Communities
The combination of the level of security and transactional throughput, coupled with NFT infrastructure has turned Polygon into the most widely used EVM #blockchain network for the gaming community. Metrics of over 115,000 active #gamers and over 40,000,000 #gaming transactions
3. Top Chains for Developers
The excellent business development skills of the project shine in the department of developer engagement and attraction. Polygon has put forth notable efforts by hosting a fair amount of hackathons and providing one of the most robust toolkits for developers. Metrics including the amount of full-time developers (~220), the rate of developer growth (+200% in 2 years), and the total developer contributor count (>700), rank Polygon in the top 6 networks for developers, according to the leading industry Developer Report by Electric Capital .
😳 Threats (External) (Harmful) 😳
1. Dependance on Ethereum
This is not really a threat in the sense that any existential risk comes from this, however, Polygon is the only project I have seen that requires its Validators to have a minimum of 0.5/1 ETH available across chains in order to pay for anchoring activity into the network. By having some degree of dependence on #ETH , MATIC inadvertently becomes tithed to its network fluctuations.
Takeaway:
Easily one of the most robust projects across every metric. Insulating themselves technologically from every possible angle and nurturing powerful relationships with many of the world's most notable corporations, positions Polygon into a category of “Too Big To Fail”. These are Famous last words, so this is by no means financial advice. Honestly, even the so-called “threat” identified in this SWOT analysis is irrelevant to the enormous strength of the project.
If I had to give Polygon a score based solely on technology, long-term viability, and expertise, it would be a solid 9/10.
Conclusion:
I have interacted with Polygon many times throughout my crypto journey. They were the first network that I bridged assets to and from. They were the first network I used #DEFI protocols outside of #Ethereum . Purely on past performance, #MATIC has been among the best of trades/investments over the last ~3/4 years; however, I have a creeping sense in the back of my mind that it was in part due to well-informed insiders understanding the unique token emission model. I will not invest in MATIC in the coming bull cycle but do always hold some for access to their network.
If you know something that I don’t or feel as though I might have missed something, please do share, I would tremendously appreciate some feedback.
Thank you so much for reading,
I hope this serves you well on your journey.
Live long and prosper 🥂
3
4 reactions
The #cryptocurrency industry is built on a fascinating foundation of computer science, information #technology , and economics. Whenever exploring the designs of crypto networks these disciplines overlap and provide a framework within which it becomes possible to create sophisticated systems of value transference and storage that reflect the nature of reality.
Stemming from the fundamental principles of physical life, crypto networks are subject to the same existential nuances that pervade other areas of human life.
Namely tradeoffs in decision-making.
Making a decision is a simultaneous action of accepting something and denying everything else. When you choose to buy a Mercedes, you are at the same time choosing to not buy a BMW or Honda. Selecting the Mercedes you make a tradeoff of paying a higher rate, but in return, you get a higher degree of reliability and brand recognition.
Within the context of crypto, there are three core subject matters within which design decisions require tradeoffs in properties based on the desired philosophical alignment of the asset/network;
1) CAP Theorem
2) Blockchain Trilemma
3) Monetary Trilemma
CAP Theorem
Brought to light by computer scientist Eric Brewer, CAP theorem is a theory relating to the operations of distributed systems that claims only two-of-three properties Consistency, Availability, and Partition Tolerance, can be present simultaneously at any given moment.
Consistency
The C in CAP stands for consistency. Consistency is the property that guarantees all nodes/participants on a network see the same exact information.
Picture a network of 100 nodes. If Node 1 sent a message to the network and Node 2 read the message that said “I love cookies” then Nodes 3–100 must all see the same exact message. If they do not, then a system is not consistent.
Availability
The A in CAP stands for Availability. Availability refers to the frictionlessness or ease with which clients are able to provide a response. A key property to the liveliness of a distributed system availability is necessary in order to have reliable connections established between separate systems.
As an abstract example, we have the electric car. Whenever it is running low on energy it must be able to pull up into a charging station, plug in, and begin refilling its battery. What happens if the charging station lost its connection to the grid? Then the car becomes useless for as long as it cannot be charged. Availability is a property that is quintessential in the smoothness of any operation.
Partition Tolerance
The P in CAP stands for Partition Tolerance. Partition Tolerance is the ability of a network to resist halting functionality in the event of a fault. Disruptions in connectivity are unavoidable; computers go offline, Internet Service Providers have hardware malfunctions, and severe weather conditions might cause radio frequencies to interrupt signals, whatever the case may be, partition tolerance is a property that states a system must be able to continue operating regardless of anything.
Let’s use the 100-node network again. Imagine that the network is serving financial data to exchanges. Those exchanges have very high demands in the frequency with which they must be able to request price updates. They don't care what happens to a computer, they only care about serving their customers accurate information so that no money is magically dislocated. Partition tolerance is the cornerstone principle that helps guarantee that the network will continue fetching data updates from its sources and that it will be able to relay that information back to the exchanges.
As it applies to crypto, CAP theorem applies to the core, base layer network functions that power and secure cryptocurrencies. CAP is not relevant to Dapps.
⛓ Blockchain trilemma ⛓
It's incredible to see that after 14 years of this technology existing, the vast majority of people still do not understand what #blockchain is. At its most fundamental blockchain, the term, refers to a data structure. Within and of themselves, they are not networks. If you break the word down into BLOCK + CHAIN, you will be able to get a sense of what the data structure looks like.
Is it possible to have a blockchain network? Yes, then it simply means it is a network that abides by the blockchain data structure.
When it comes the designing a blockchain network there is what is known as the Blockchain trilemma, a tradeoff between the three principle attributes of decentralization, scalability, and security that provide the underlying “philosophy” of a system.
Decentralization
As one might be inclined to intuit, decentralization refers to the degree of ownership distribution among network participants. As a rule of thumb, the more decentralized something is, the more difficult it is to coordinate, the higher the communication costs, and the higher the security.
Many #crypto maxi’s and wannabe cypherpunks are constantly harping on projects being decentralized. While there is an obvious benefit to this, they completely miss the bigger picture that in order for something to be maximally decentralized, there must be a sacrifice made, in either the scalability or the security. Something like #Bitcoin is an anomaly in the sense that it is among the only systems where users prefer it to be slow but secure and #decentralized . This unique mixture of poor performance is actually preferable for something like a digital store of value. However, as we now know, using Bitcoin for payments has proven to be awful due to the transactional delays.
Scalability
Scalability is the ability to expand operations, to be able to grow at a rate that matches or exceeds the demands of a network. The more scalable something is, the more instrumentation can be built on and around it, the more users can use the system, and the more susceptible it is to change the underlying system over time.
Whenever we think about something being scalable, we can automatically make the assumption that it will either be un-secure or centralized. Personally, I find nothing wrong with some degree of centralization in order to optimize performance, however, I have no interest in any network that is scalable, decentralized, and not secure.
Security
This one should be rather self-evident, but just to make sure we are on the same page; security refers to the ability of a network to deter attacks.
Whether a malicious takeover by some loon that needs to assert their dominance or a mercenary capitalist that cares about nothing except profits, security is the single most important property for maintaining a sound system; especially a monetary one. Security comes in two shapes, via an expansive node network that provides an extremely high level of computation (hello #BTC ) or trust in a concentrated group of entities to protect against any potential threats. History would show us that human nature is a parasitic one, where centralized operations have always been compromised by external and internal forces. Due to the opaqueness of centralized operations, the limited insight that we gather does not provide the full picture of truth.
This has been made extensively visible through the crappy actions of shady crypto projects and #NFTs . Scammers collect money, fake getting hacked by using anonymous accounts to drain their own wallets, then put on a facade to the public and disappear with everybody's #money .
💸 Money Trilemma 💸
Source: https://medium.com/the-capital/searching-for-stability-the-evolution-of-money-e22e335da81f
Monetary theory states that in order for some object of value to qualify as a money it must have three properties. It must be convenient for accounting value, it must be capable of being used as a medium of exchanging value, and it must also be able to store value.
Until today, there has never been a “perfect” form of money created. Sure, some people will argue that Gold is that perfect money. I Disagree. Others argue that “Eth is Sound Money”, while it was a POW system, maybe it could have been, after transitioning to POS, it no longer will be in my eyes.
Medium Of Exchange
In order for something to qualify as a form of money we must be able to use it for commercial activity. There are three sub-properties that define an object as a medium of exchange; it must be portable, divisible, and widely accepted.
Portability refers to the ease with which the object can be carried/brought with your wherever you go. The need for an exchange can occur at any given moment; therefore having an asset (for payment purposes) that is not able to travel with its owner is generally pointless.
Divisibility simply means the ability to fragment an asset into smaller portions without disrupting the fractional value of the overall asset. Goods are never going to be priced perfectly and change must be made possible. Easy example here being a Dollar; a dollar can be broken down into 100 micro units of cents. If you are buying a Twinky for $0.50 but you only have a $1.00 bill, the store owner must return $0.50 to you.
The third sub-property is a bi-product of the degree of an asset's effective application, it's basically confirmation of an asset being socially recognized and accepted.
Unit of Account
Straightforward in its meaning, the second monetary property of accountancy refers to the ability to price things. As a unit of account, money must serve as a universal form of measuring the value of objects against each other. So if we’re measuring in dollars, there must be an obvious way to distinguish the severity of the difference in value between a car and a couch. (bullsh*it branding aside) In the event that a car is priced at $50,000 it would be relatively understandable to price a couch at $1,000. Obviously, the cost to manufacture the two objects diverges radically, the car cost >$10,000 to just create while the couch should be like $200. Moreover, the intrinsic value/ level of impact that the object provides to its owner’s life is another vector of distinguishing value. If, for some strange reason, both of the objects were priced at $5,000; then the monetary asset being used is not effective.
Within the Unit of Account metric, we will also find yet another meta-property of fungibility. Every unit of a monetary asset must be exactly the same as another. 1 BTC = 1 BTC or 1 USD = 1 USD. This is a baseline requirement for accurate pricing.
Store of Value
Money must be able to retain its economic buying power over the course of time. Money is the material representation of social energy. Effort was put forth in order to obtain this money, therefore it must be able to keep its value while its owner saves it for use at another time.
Imagine being paid in apples. That would be extremely inefficient for a multitude of reasons, but as it pertains to storing value, the object of an apple does not satisfy as one because of the fact that it rots. As we all know, rotten apples have no value to us because we cannot do anything with them. When you earn a dollar, it can technically lay there indefinitely and retain its base intrinsic value (a piece of printed colorful paper) until you are ready to use it. I'm not here to argue the devaluation of the dollar, I'm here just to express the underlying principle.
As the world continues to evolve into a digital superstate and humanity inches closer towards singularity, crypto has become the frontier of global economic innovation.
Understanding these core concepts will help fully appreciate the fundamental nature of this nascent industry.
Crypto is the digital realization of money.
Live long and Prosper 🥂
Stemming from the fundamental principles of physical life, crypto networks are subject to the same existential nuances that pervade other areas of human life.
Namely tradeoffs in decision-making.
Making a decision is a simultaneous action of accepting something and denying everything else. When you choose to buy a Mercedes, you are at the same time choosing to not buy a BMW or Honda. Selecting the Mercedes you make a tradeoff of paying a higher rate, but in return, you get a higher degree of reliability and brand recognition.
Within the context of crypto, there are three core subject matters within which design decisions require tradeoffs in properties based on the desired philosophical alignment of the asset/network;
1) CAP Theorem
2) Blockchain Trilemma
3) Monetary Trilemma
CAP Theorem
Brought to light by computer scientist Eric Brewer, CAP theorem is a theory relating to the operations of distributed systems that claims only two-of-three properties Consistency, Availability, and Partition Tolerance, can be present simultaneously at any given moment.
Consistency
The C in CAP stands for consistency. Consistency is the property that guarantees all nodes/participants on a network see the same exact information.
Picture a network of 100 nodes. If Node 1 sent a message to the network and Node 2 read the message that said “I love cookies” then Nodes 3–100 must all see the same exact message. If they do not, then a system is not consistent.
Availability
The A in CAP stands for Availability. Availability refers to the frictionlessness or ease with which clients are able to provide a response. A key property to the liveliness of a distributed system availability is necessary in order to have reliable connections established between separate systems.
As an abstract example, we have the electric car. Whenever it is running low on energy it must be able to pull up into a charging station, plug in, and begin refilling its battery. What happens if the charging station lost its connection to the grid? Then the car becomes useless for as long as it cannot be charged. Availability is a property that is quintessential in the smoothness of any operation.
Partition Tolerance
The P in CAP stands for Partition Tolerance. Partition Tolerance is the ability of a network to resist halting functionality in the event of a fault. Disruptions in connectivity are unavoidable; computers go offline, Internet Service Providers have hardware malfunctions, and severe weather conditions might cause radio frequencies to interrupt signals, whatever the case may be, partition tolerance is a property that states a system must be able to continue operating regardless of anything.
Let’s use the 100-node network again. Imagine that the network is serving financial data to exchanges. Those exchanges have very high demands in the frequency with which they must be able to request price updates. They don't care what happens to a computer, they only care about serving their customers accurate information so that no money is magically dislocated. Partition tolerance is the cornerstone principle that helps guarantee that the network will continue fetching data updates from its sources and that it will be able to relay that information back to the exchanges.
As it applies to crypto, CAP theorem applies to the core, base layer network functions that power and secure cryptocurrencies. CAP is not relevant to Dapps.
⛓ Blockchain trilemma ⛓
It's incredible to see that after 14 years of this technology existing, the vast majority of people still do not understand what #blockchain is. At its most fundamental blockchain, the term, refers to a data structure. Within and of themselves, they are not networks. If you break the word down into BLOCK + CHAIN, you will be able to get a sense of what the data structure looks like.
Is it possible to have a blockchain network? Yes, then it simply means it is a network that abides by the blockchain data structure.
When it comes the designing a blockchain network there is what is known as the Blockchain trilemma, a tradeoff between the three principle attributes of decentralization, scalability, and security that provide the underlying “philosophy” of a system.
Decentralization
As one might be inclined to intuit, decentralization refers to the degree of ownership distribution among network participants. As a rule of thumb, the more decentralized something is, the more difficult it is to coordinate, the higher the communication costs, and the higher the security.
Many #crypto maxi’s and wannabe cypherpunks are constantly harping on projects being decentralized. While there is an obvious benefit to this, they completely miss the bigger picture that in order for something to be maximally decentralized, there must be a sacrifice made, in either the scalability or the security. Something like #Bitcoin is an anomaly in the sense that it is among the only systems where users prefer it to be slow but secure and #decentralized . This unique mixture of poor performance is actually preferable for something like a digital store of value. However, as we now know, using Bitcoin for payments has proven to be awful due to the transactional delays.
Scalability
Scalability is the ability to expand operations, to be able to grow at a rate that matches or exceeds the demands of a network. The more scalable something is, the more instrumentation can be built on and around it, the more users can use the system, and the more susceptible it is to change the underlying system over time.
Whenever we think about something being scalable, we can automatically make the assumption that it will either be un-secure or centralized. Personally, I find nothing wrong with some degree of centralization in order to optimize performance, however, I have no interest in any network that is scalable, decentralized, and not secure.
Security
This one should be rather self-evident, but just to make sure we are on the same page; security refers to the ability of a network to deter attacks.
Whether a malicious takeover by some loon that needs to assert their dominance or a mercenary capitalist that cares about nothing except profits, security is the single most important property for maintaining a sound system; especially a monetary one. Security comes in two shapes, via an expansive node network that provides an extremely high level of computation (hello #BTC ) or trust in a concentrated group of entities to protect against any potential threats. History would show us that human nature is a parasitic one, where centralized operations have always been compromised by external and internal forces. Due to the opaqueness of centralized operations, the limited insight that we gather does not provide the full picture of truth.
This has been made extensively visible through the crappy actions of shady crypto projects and #NFTs . Scammers collect money, fake getting hacked by using anonymous accounts to drain their own wallets, then put on a facade to the public and disappear with everybody's #money .
💸 Money Trilemma 💸
Source: https://medium.com/the-capital/searching-for-stability-the-evolution-of-money-e22e335da81f
Monetary theory states that in order for some object of value to qualify as a money it must have three properties. It must be convenient for accounting value, it must be capable of being used as a medium of exchanging value, and it must also be able to store value.
Until today, there has never been a “perfect” form of money created. Sure, some people will argue that Gold is that perfect money. I Disagree. Others argue that “Eth is Sound Money”, while it was a POW system, maybe it could have been, after transitioning to POS, it no longer will be in my eyes.
Medium Of Exchange
In order for something to qualify as a form of money we must be able to use it for commercial activity. There are three sub-properties that define an object as a medium of exchange; it must be portable, divisible, and widely accepted.
Portability refers to the ease with which the object can be carried/brought with your wherever you go. The need for an exchange can occur at any given moment; therefore having an asset (for payment purposes) that is not able to travel with its owner is generally pointless.
Divisibility simply means the ability to fragment an asset into smaller portions without disrupting the fractional value of the overall asset. Goods are never going to be priced perfectly and change must be made possible. Easy example here being a Dollar; a dollar can be broken down into 100 micro units of cents. If you are buying a Twinky for $0.50 but you only have a $1.00 bill, the store owner must return $0.50 to you.
The third sub-property is a bi-product of the degree of an asset's effective application, it's basically confirmation of an asset being socially recognized and accepted.
Unit of Account
Straightforward in its meaning, the second monetary property of accountancy refers to the ability to price things. As a unit of account, money must serve as a universal form of measuring the value of objects against each other. So if we’re measuring in dollars, there must be an obvious way to distinguish the severity of the difference in value between a car and a couch. (bullsh*it branding aside) In the event that a car is priced at $50,000 it would be relatively understandable to price a couch at $1,000. Obviously, the cost to manufacture the two objects diverges radically, the car cost >$10,000 to just create while the couch should be like $200. Moreover, the intrinsic value/ level of impact that the object provides to its owner’s life is another vector of distinguishing value. If, for some strange reason, both of the objects were priced at $5,000; then the monetary asset being used is not effective.
Within the Unit of Account metric, we will also find yet another meta-property of fungibility. Every unit of a monetary asset must be exactly the same as another. 1 BTC = 1 BTC or 1 USD = 1 USD. This is a baseline requirement for accurate pricing.
Store of Value
Money must be able to retain its economic buying power over the course of time. Money is the material representation of social energy. Effort was put forth in order to obtain this money, therefore it must be able to keep its value while its owner saves it for use at another time.
Imagine being paid in apples. That would be extremely inefficient for a multitude of reasons, but as it pertains to storing value, the object of an apple does not satisfy as one because of the fact that it rots. As we all know, rotten apples have no value to us because we cannot do anything with them. When you earn a dollar, it can technically lay there indefinitely and retain its base intrinsic value (a piece of printed colorful paper) until you are ready to use it. I'm not here to argue the devaluation of the dollar, I'm here just to express the underlying principle.
As the world continues to evolve into a digital superstate and humanity inches closer towards singularity, crypto has become the frontier of global economic innovation.
Understanding these core concepts will help fully appreciate the fundamental nature of this nascent industry.
Crypto is the digital realization of money.
Live long and Prosper 🥂
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🔴 Tron, TRX - SWOT Analysis 🔴
*Note, SWOT is an analysis of operational/fundamental elements. This is not a model to be used for technical or trading purposes. (NFA, DYOR)
Composed of four elements, Strengths, Weaknesses, Opportunities, and Threats , a SWOT analysis framework provides excellent insight for evaluating the state of a project’s well-being through the lens of a birds-eye view.
It can help formulate decisions on what areas require more attention, set performance goals, and organize a foundational understanding of where a project is headed.
Rarely (if ever) used in #crypto , it is time to apply this timeless method of evaluation to the digital asset space.
Today, Tron (TRX) , a layer one, EVM-compatible, 2017-era blockchain will get a SWOT.
💪Strengths (Internal) (Helpful)
1. High Preference by #USDT
USDT is the most popular dollar-based stablecoin in terms of user adoption, historic presence, and market capitalization. In fact, over 51% of all USDT in circulation is deployed to the Tron network. Considering that #stablecoins are considered to be among the most desirable and adopted crypto applications with real-world utility and value, this brings a tremendous amount of flywheel value reflexivity to the Tron network.
2. Resource Model
Network fees are a part of every layer one blockchain’s architecture. Tron utilizes a novel approach to the costs of utilizing its network through a fee model which it calls “energy and bandwidth”. At a very high level, energy gas costs are attributed to the execution of smart contracts, while bandwidth is the base measurement of network utilization that facilities activity. Recently, as part of DAO proposal TIP-474, Tron revamped its Energy model with a dynamic parameter that essentially reduces low-value “spam” network transaction activity and increases revenue fees for node operators.
3. Dynamic Energy Model
By introducing a strong, dynamic dependence between the nature of a transaction and the amount of fees required in order to execute it the network itself has begun to burn more #TRX on a rolling basis, in turn exerting deflationary pressure on the #token .
4. Justin Sun’s Affiliations
While Justin is considered to be a controversial character within the industry, his reputation and deep connections throughout political, commercial, and technological sectors precedes him. Landing on China’s Forbes 30 under 30 list, receiving recognition from AliBaBa’s Jack Ma, and working with notable crypto companies such as #Ripple ( #XRP ) in the earliest days, Justin Sun seems to be positioned perfectly to spearhead such a product to its fullest potential.
5. EVM Compatible
Interoperability has been a hot topic since before blockchain technology. Being EVM compatible means that both, developers and applications are able to be leveraged equally in both environments without excessive waste of effort. This opens up the door for cross-chain compatible infrastructure and potentially shared liquidity.
6. UTXO Transaction Model
The vast majority of modern blockchains, especially EVM-compatible ones, are all based on an Account model. Account models are what Banks use due to their simplicity. Tron actually utilizes a UTXO model (similar to #Bitcoin ) for tracking its transaction activity. Both models have merits, however, UTXO models are superior to account models for two reasons; scalability and privacy. UTXO is more scalable because network operators/nodes only need to track transaction activity, not monitor the state of every single account. They are also more privacy-preserving because there is no implicit/explicit on-chain identity, UTXO models require the creation of new addresses after every single transaction.
7. Great Performance
Considering that Tron was released in late 2017, it can be classified as somewhat of an OG #blockchain that delivers high throughput than nearly all other networks from that generation. With the potential to handle 2,000 tps, negligible costs of a few pennies, and 3-second block time, Tron’s network can easily qualify as a more user-friendly alternative to #Ethereum .
😞 Weaknesses (Internal) (Harmful)
1. Lack of #DEFI infrastructure
Out of a total 17 protocols, 10 have more than $250,000 USD in value locked and the top 3 (Justlend, Juststables, and Sunswap) have 99.9% of all value. The Tron Foundation is well aware of this and is actively working on developing new protocols, such as liquid staking, to improve this.
2. A 90% Concentration of TVL within just two applications
Justlend , a lending platform, and JustStables , a CDP #stablecoin issuing protocol, collectively have 90% of all the Tron networks TVL. This introduces an extremely high-risk factor in the event any one of the two has any unforeseen technical issues (bugs/hacks).
3. Low Developer Count
Considering the amount of value at stake and the amount of high-profile activity taking place, it is counter-intuitive to see that there are only 16 full-time developers working on the project. While there are spikes in dev activity, there has never been a month that has even reached the 100 mark; to put things in perspective, Solana has >340 devs and Ethereum has ~2,000 devs full-time with monthly spikes bringing those numbers up 2–3x easily.
🧐 Opportunities (External) (Helpful)
1. “Owns” Bittorrent.
BitTorrent, one of the oldest, most reputable, peer-to-peer, #decentralized file-sharing protocols on the internet. Back in July of 2018, the Tron Foundation acquired BitTorrent for ~$140,000,000 USD. Shortly after doing so, BitTorrent launched its own BTTC (BitTorrent Chain) and began utilizing the Tron Network to facilitate its native token’s (BTT) activity. Why this is of extreme value to Tron is due to the fact that when acquired, Bittorrent had over 100 million users. Assuming those users were retained, their network contributions/activity with the protocol in some way is reflected on Tron.
2. Adoption by the Caribbean Islands
The commonwealth of Dominicana has recognized Tron as its official government network of choice. As part of the nation’s financial and technological initiatives called the “Virtual Asset Business Act” (drafted with the help of {ECCB} Eastern Caribbean Central Bank) the OCES (Organization of Eastern Caribbean States) has allowed for the Dominican Republic to launch a digital asset DMC to conduct economic activity that will promote the Caribbean nation’s culture and heritage.
3. Strong Cross-Sector Initiatives
The Tron Foundation is actively pursuing development across a wide range of sectors including Gamefi, #NFTs , and AI. Partnering with OraiChain, Tron looks to integrate AI into the functionality of the network to improve its operations and enhance security. Additionally, the Tron Foundation is constantly hosting Hackathons and promoting its #DAO Grants program to help foster communities.
4. Good Geographic Node Distribution
While the DPoS (Delegated Proof-of-Stake) consensus mechanism used by Tron is arguably “more centralized” than other alternatives due to the presence of only 27 SR (Super Representative) nodes that handle all key functions, there are now over 390 backup SR candidates (nodes that can replace current leaders) and a total of > 7,600 nodes distributed across 76 countries. This provides regulatory cushion and resilience against any single government crackdown.
😳 Threats (External) (Harmful)
1. SEC Lawsuit
Justin Sun (Owner) is currently in the middle of getting sued by the SEC for securities violations relating to the sale of unregistered securities in the form of TRX (Tron network’s native token) and BTT (BitTorrent Token). Additionally, the SEC has targeted 8 celebrities that have been involved with marketing/promotional activities relating to the tokens while not disclosing that they were compensated to do so.
2. EVM Competition
Given the enormous amount of competition constantly popping up in the EVM-compatible segment of blockchain, all touting higher transaction capabilities, privacy preservation, and other technological breakthroughs, Tron might be losing out on potential developers that could have just allocated their efforts towards it.
Takeaway:
On an individual basis, nothing about Tron really presents itself as world-changing or existentially important for humanity. However, in aggregate, all of the initiatives, novel technological designs, and social nuances do give Tron more value than the echo chambers of maximalist crypto Twitter would like to admit.
Conclusion:
I must say that for a long time, I was skeptical, even cynical about Tron. However, after diving into this SWOT, my cynism has been totally removed, while some skepticism still remains. I will admit that I have definitely reconsidered my position on it to a more bullish one than ever before. Even though I admire the technology and have tremendous respect for Justin, I still don't know why, but I just can’t find a concrete source of confidence to commit any sizable portion of my portfolio to Tron.
P.s. I will allocate 0.5% to TRX just to play around with some of the protocols.
If you know something that I don’t or feel as though I might have missed something, please do share, I would tremendously appreciate some feedback.
Thank you so much for reading,
I hope this serves you well on your journey.
Live long and prosper 🥂
*Note, SWOT is an analysis of operational/fundamental elements. This is not a model to be used for technical or trading purposes. (NFA, DYOR)
Composed of four elements, Strengths, Weaknesses, Opportunities, and Threats , a SWOT analysis framework provides excellent insight for evaluating the state of a project’s well-being through the lens of a birds-eye view.
It can help formulate decisions on what areas require more attention, set performance goals, and organize a foundational understanding of where a project is headed.
Rarely (if ever) used in #crypto , it is time to apply this timeless method of evaluation to the digital asset space.
Today, Tron (TRX) , a layer one, EVM-compatible, 2017-era blockchain will get a SWOT.
💪Strengths (Internal) (Helpful)
1. High Preference by #USDT
USDT is the most popular dollar-based stablecoin in terms of user adoption, historic presence, and market capitalization. In fact, over 51% of all USDT in circulation is deployed to the Tron network. Considering that #stablecoins are considered to be among the most desirable and adopted crypto applications with real-world utility and value, this brings a tremendous amount of flywheel value reflexivity to the Tron network.
2. Resource Model
Network fees are a part of every layer one blockchain’s architecture. Tron utilizes a novel approach to the costs of utilizing its network through a fee model which it calls “energy and bandwidth”. At a very high level, energy gas costs are attributed to the execution of smart contracts, while bandwidth is the base measurement of network utilization that facilities activity. Recently, as part of DAO proposal TIP-474, Tron revamped its Energy model with a dynamic parameter that essentially reduces low-value “spam” network transaction activity and increases revenue fees for node operators.
3. Dynamic Energy Model
By introducing a strong, dynamic dependence between the nature of a transaction and the amount of fees required in order to execute it the network itself has begun to burn more #TRX on a rolling basis, in turn exerting deflationary pressure on the #token .
4. Justin Sun’s Affiliations
While Justin is considered to be a controversial character within the industry, his reputation and deep connections throughout political, commercial, and technological sectors precedes him. Landing on China’s Forbes 30 under 30 list, receiving recognition from AliBaBa’s Jack Ma, and working with notable crypto companies such as #Ripple ( #XRP ) in the earliest days, Justin Sun seems to be positioned perfectly to spearhead such a product to its fullest potential.
5. EVM Compatible
Interoperability has been a hot topic since before blockchain technology. Being EVM compatible means that both, developers and applications are able to be leveraged equally in both environments without excessive waste of effort. This opens up the door for cross-chain compatible infrastructure and potentially shared liquidity.
6. UTXO Transaction Model
The vast majority of modern blockchains, especially EVM-compatible ones, are all based on an Account model. Account models are what Banks use due to their simplicity. Tron actually utilizes a UTXO model (similar to #Bitcoin ) for tracking its transaction activity. Both models have merits, however, UTXO models are superior to account models for two reasons; scalability and privacy. UTXO is more scalable because network operators/nodes only need to track transaction activity, not monitor the state of every single account. They are also more privacy-preserving because there is no implicit/explicit on-chain identity, UTXO models require the creation of new addresses after every single transaction.
7. Great Performance
Considering that Tron was released in late 2017, it can be classified as somewhat of an OG #blockchain that delivers high throughput than nearly all other networks from that generation. With the potential to handle 2,000 tps, negligible costs of a few pennies, and 3-second block time, Tron’s network can easily qualify as a more user-friendly alternative to #Ethereum .
😞 Weaknesses (Internal) (Harmful)
1. Lack of #DEFI infrastructure
Out of a total 17 protocols, 10 have more than $250,000 USD in value locked and the top 3 (Justlend, Juststables, and Sunswap) have 99.9% of all value. The Tron Foundation is well aware of this and is actively working on developing new protocols, such as liquid staking, to improve this.
2. A 90% Concentration of TVL within just two applications
Justlend , a lending platform, and JustStables , a CDP #stablecoin issuing protocol, collectively have 90% of all the Tron networks TVL. This introduces an extremely high-risk factor in the event any one of the two has any unforeseen technical issues (bugs/hacks).
3. Low Developer Count
Considering the amount of value at stake and the amount of high-profile activity taking place, it is counter-intuitive to see that there are only 16 full-time developers working on the project. While there are spikes in dev activity, there has never been a month that has even reached the 100 mark; to put things in perspective, Solana has >340 devs and Ethereum has ~2,000 devs full-time with monthly spikes bringing those numbers up 2–3x easily.
🧐 Opportunities (External) (Helpful)
1. “Owns” Bittorrent.
BitTorrent, one of the oldest, most reputable, peer-to-peer, #decentralized file-sharing protocols on the internet. Back in July of 2018, the Tron Foundation acquired BitTorrent for ~$140,000,000 USD. Shortly after doing so, BitTorrent launched its own BTTC (BitTorrent Chain) and began utilizing the Tron Network to facilitate its native token’s (BTT) activity. Why this is of extreme value to Tron is due to the fact that when acquired, Bittorrent had over 100 million users. Assuming those users were retained, their network contributions/activity with the protocol in some way is reflected on Tron.
2. Adoption by the Caribbean Islands
The commonwealth of Dominicana has recognized Tron as its official government network of choice. As part of the nation’s financial and technological initiatives called the “Virtual Asset Business Act” (drafted with the help of {ECCB} Eastern Caribbean Central Bank) the OCES (Organization of Eastern Caribbean States) has allowed for the Dominican Republic to launch a digital asset DMC to conduct economic activity that will promote the Caribbean nation’s culture and heritage.
3. Strong Cross-Sector Initiatives
The Tron Foundation is actively pursuing development across a wide range of sectors including Gamefi, #NFTs , and AI. Partnering with OraiChain, Tron looks to integrate AI into the functionality of the network to improve its operations and enhance security. Additionally, the Tron Foundation is constantly hosting Hackathons and promoting its #DAO Grants program to help foster communities.
4. Good Geographic Node Distribution
While the DPoS (Delegated Proof-of-Stake) consensus mechanism used by Tron is arguably “more centralized” than other alternatives due to the presence of only 27 SR (Super Representative) nodes that handle all key functions, there are now over 390 backup SR candidates (nodes that can replace current leaders) and a total of > 7,600 nodes distributed across 76 countries. This provides regulatory cushion and resilience against any single government crackdown.
😳 Threats (External) (Harmful)
1. SEC Lawsuit
Justin Sun (Owner) is currently in the middle of getting sued by the SEC for securities violations relating to the sale of unregistered securities in the form of TRX (Tron network’s native token) and BTT (BitTorrent Token). Additionally, the SEC has targeted 8 celebrities that have been involved with marketing/promotional activities relating to the tokens while not disclosing that they were compensated to do so.
2. EVM Competition
Given the enormous amount of competition constantly popping up in the EVM-compatible segment of blockchain, all touting higher transaction capabilities, privacy preservation, and other technological breakthroughs, Tron might be losing out on potential developers that could have just allocated their efforts towards it.
Takeaway:
On an individual basis, nothing about Tron really presents itself as world-changing or existentially important for humanity. However, in aggregate, all of the initiatives, novel technological designs, and social nuances do give Tron more value than the echo chambers of maximalist crypto Twitter would like to admit.
Conclusion:
I must say that for a long time, I was skeptical, even cynical about Tron. However, after diving into this SWOT, my cynism has been totally removed, while some skepticism still remains. I will admit that I have definitely reconsidered my position on it to a more bullish one than ever before. Even though I admire the technology and have tremendous respect for Justin, I still don't know why, but I just can’t find a concrete source of confidence to commit any sizable portion of my portfolio to Tron.
P.s. I will allocate 0.5% to TRX just to play around with some of the protocols.
If you know something that I don’t or feel as though I might have missed something, please do share, I would tremendously appreciate some feedback.
Thank you so much for reading,
I hope this serves you well on your journey.
Live long and prosper 🥂
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