Matias, who manages an online shop in Buenos Aires, exemplifies this trend, with an increasing number of his customers opting for stablecoins, particularly USDT on the Tron network, to purchase electronics. Rather than using the more commonly expected cryptocurrencies like Bitcoin or Ethereum, Argentinians are utilizing Tron for their transactions.
Tron’s Rapid Rise in the World of Stablecoin Transfers
Matias, who prefers to be identified only by his first name for privacy reasons, estimates that approximately 95% of his clientele opt for USDT on the Tron network as their preferred payment method. He attributes this choice to Tron’s advantages, including lower fees and faster transaction speeds.
This shift in preference towards Tron is not limited to Argentina; it is part of a broader trend observed in emerging economies. Google searches for “USDT Tron” have surged during the bear market, with the highest interest originating from countries like Nigeria, Côte d’Ivoire, and Pakistan, in that order.
Conversely, searches for “USDT Ethereum,” even though Ethereum boasts a much larger market capitalization compared to Tron, have been on a declining trajectory since early 2022. The data suggests that Tron is gaining ground as the preferred blockchain for stablecoin activities in emerging markets.
A recent report on stablecoins from Brevan Howard, a hedge fund with $23.4 billion in assets under management, presents a compelling case for Tron’s prominence in the stablecoin sector. The report highlights Tron as the leading platform for fiat-backed stablecoin transactions, with over 2.4 million weekly active addresses interacting with stablecoins on the network. This figure surpasses the numbers seen on Ethereum and its associated Layer 2 solutions like Optimism and Arbitrum.
Key data further supports Tron’s role as a facilitator of straightforward transfer payments. Allium, a data provider collaborating with Brevan Howard, revealed that the median USDT transaction on Tron typically falls within the range of $100 to $300 over the past three years. This indicates that Tron is being used by a diverse range of users for USDT transfers. In contrast, Ethereum’s stablecoin transactions are predominantly large transfers exceeding $100,000.
One of Tron’s key advantages over Ethereum is its cost-effectiveness. As of the current time, sending USDT on Ethereum incurs a fee of approximately $3.50, according to Etherscan. Although exact transaction fee data for Tron is not readily available, The Defiant’s test transaction on the network showed a cost of approximately 13.7 TRX to send USDT. Given TRX’s current price of $0.095, the transfer fee amounts to roughly $1.30.
Diego Diaz, employed in the payments sector at an Argentine bank, concurs with this assessment. He attributes Tron’s popularity to its speed, affordability, and adoption in markets less regulated by the government. Many fintech companies in Argentina that deal with cryptocurrencies offer USDT on Tron, while Layer 2 solutions are less recognized.
Although Tron may not outperform Layer 2 solutions in terms of cost, with USDT transfers on platforms like Arbitrum and Optimism being approximately ten times cheaper, the appeal of Tron lies in its affordability and widespread use, especially in emerging markets.
Stablecoin transfers over cost-effective and efficient networks have gained popularity in emerging markets, where individuals often grapple with currency devaluation and stringent capital controls.
Fernando Volpe, operating a peer-to-peer exchange called Calypso in Argentina, points out that strict currency controls in the country have compelled people to turn to cryptocurrencies. In Argentina, exchange rates vary depending on the intended use of the dollars and limits on the amount of foreign currency individuals can acquire. Stablecoins offer a way to avoid holding the volatile Argentine peso, which has experienced over 100% inflation year-over-year for much of 2023.
Many individuals in Argentina choose to receive their salaries in USDT to shield their earnings from inflation, subsequently converting the stablecoin to pesos for daily expenses. These platforms also offer privacy benefits, allowing users to safeguard their cryptocurrencies away from government scrutiny.
In a world where preserving savings takes precedence over activities like yield farming or NFT trading, people in emerging markets seek out the most cost-effective and high-volume options. Matias, the e-commerce store owner, emphasizes that he uses USDT on Tron because it aligns with the preferences of his customer base.
Despite Tron’s success in facilitating stablecoin transfers, it doesn’t boast the same reputation for decentralization as Ethereum. Tron operates on a system of “super representatives” consisting of 27 parties that require validation through voting. In contrast, Ethereum employs a proof-of-stake system with nearly one million validators, as per Beaconscan.
Tron’s founder, Justin Sun, has faced controversies, including allegations of plagiarism in the whitepaper outlining Tron’s design and accusations of selling unregistered securities. However, Volpe suggests that when individuals see the network effectively meeting their needs, they often prioritize functionality over security concerns.
In conclusion, Tron’s emergence as a prominent network for stablecoin transfers, especially in emerging markets, marks a significant development in the cryptocurrency landscape. The rise of Tron as a platform of choice for USDT transactions underlines the potential of blockchain technology to serve the unbanked and those seeking affordable and efficient financial solutions.