A closer look at TRONs DeFi offer
$800K for a fraction of the pool. That’s what JST, TRON’s new MKR-like, token just brought in from its sale on Polinex. Ethereum has been the unquestioned leader of the reinvigorated DeFi space, but challengers were bound to emerge. Now TRON has thrown in its hat with the JUST, CDP platform.
Since its launch in 2018, when it felt like everyone was building an Ethereum killer, TRON has been promoting itself as one of the most active ecosystems in the space. In an effort to firm up its user base, it has made splashy investments including those in gaming, BitTorrent, Polinex, and Steemit.
Now, with JST being listed, it seems it is venturing into the DeFi Space with its JUST platform, and while the attempt may be valiant, it does not appear well thought through.
The JUST platform was rebranded from Djed and represents TRON’s attempt to recreate MakerDAO on its network. Similar to its Ethereum rival it will feature a two-token model, with USDJ acting as a stable coin and JST being its governance token. Users can lock up TRX in CDPs to receive USDJ, and then use it as they see fit.
MakerDAO and its Sai/Dai stable coins serve as the lifeblood of the Ethereum ecosystem, so it makes sense that TRON would want to start there. Given that EVM smart contracts are executable on TVM, the hope seems to be that popular dapps like Compound and dYdX will consider launching on the network as well, once a MakerDAO like entity is well off the ground.
Reading the fine print
While on the surface, JUST may appear like a clone of MakerDAO, minus the transaction fees, examining the whitepaper reveals some troubling details.
The JUST whitepaper is structured peculiarly similar to that of MakerDAO, except that it is less than half its size. In fact, it reads more like a summary of MakerDAO’s paper, and maybe that was the intended goal. Importantly, there is not much clarity on the liquidation process, which as was seen from the recent event on MakerDAO is critical.
Furthermore, JUST’s whitepaper includes the following line: “While JST holders earn revenue from the stability fees of USDJ…”
Essentially, this reads like a promise of future revenue to JST token holders. Now, many regulars may argue that this would make this token a security. A small, but potentially critical detail for the future of the project.
If you sell it they will come
Justin Sun is considered one of the most prolific influencers in the space. He has not shied away from bold statements and controversy.
Given the connections the network has, JUST should not have much trouble listing its token, but given the bareness of TRON’s DeFi ecosystem will that be enough to attract users.
The no fees feature may be attracting and TRON showcases impressive activity metrics, but will that be enough.
Compared to Ethereum, TRON has competitive DAU numbers but appears leagues behind when it comes to volume.
What is interesting here is that year over year, DeFi’s share of Ethereum’s volume has grown from 14% to 62%. By comparison, TRON’s current ratio for DeFi stands at 3%. If TRON is able to grow its DeFi dapp ecosystem, it may be able to catch up to Ethereum in terms of the volume numbers and finally become a more serious competitor in the dapp space.
If that happens, TRX price may see a nice boost in price, as the tokens get locked on JUST, and circulating supply decreases.
However, at least for now, TRX is a much smaller cryptocurrency (by market capitalization) compared to Ethereum, and its volatility may become an obstacle for TRON’s DeFi ecosystem.
Furthermore, Ethereum’s user base has proved to be very sticky, and with not many use cases for USDJ it may be hard to retain users past the coming airdrops.
TRON has been quick to boast about trading volume numbers, but the activity data that we see appears to be tamer.
Moreover, we have already seen that even MakerDAO struggles with maintaining the stablecoin peg, with the price fluctuating as much as 10% up and down.
If activity comes and goes on JUST, USDJ could be exposed to large price fluctuations.
The JUST project uses all the right buzzwords but looks rushed in its delivery. Given that TRON is one of the top layer one protocols in the crypto space, the fact that it’s getting involved is good for awareness for DeFi. TRON tends to grab a lot of headlines, and if that gets more people curious about DeFi that may benefit the industry as a whole.
However, it may be that in the short term, JUST is more a marketing instrument than a game-changing product.