Overview and Examples in Cryptocurrency

What Is Cronos (CRO)?

Cronos (CRO) is the cryptocurrency token for a blockchain developed and run by the cryptocurrency exchange Crypto.com. The Cronos network is designed to be a high-performance, interoperable blockchain that can support decentralized applications (dApps) and apps without central intermediaries, which tend to run on a variety of Ethereum-based blockchain spinoffs.

History of Cronos and CRO

Cronos is an open-source blockchain and token that was launched in November 2021 by Crypto.com, one of the world’s largest cryptocurrency exchanges, to support a growing demand for dApps in the decentralized finance (DeFi), non-fungible token (NFTs), and metaverse space. Because most of these dApps overwhelmingly run on disparate derivatives of Ethereum, a blockchain was needed to bridge them together and process the high volume of transactions that would result from such cross-integration.

Cronos stepped in to address Ethereum’s dApp and scalability limitations with interoperability frameworks and consensus engines that allow multiple blockchains to connect and exchange assets and data at significant loads without the need for intermediaries. Cronos is claimed to have the ability to process over 10,000 transactions per second (TPS), which is significantly higher than Ethereum’s TPS, which averages about 13.

In addition to being able to connect multiple dApps at the same time, Cronos allows developers to create and host dApps from different blockchains. Cronos’s interoperability standards allow the network to run smart contracts from various Ethereum-like blockchains with little to no modifications. Smart contracts are self-executing programs that can be used to automate various actions on a blockchain and do things other than simply transfer a cryptocurrency.

Cronos vs. Other Popular Blockchains

One of the most significant differences between Cronos and popular blockchains like Ethereum and Bitcoin is that it uses proof-of-authority (PoA) consensus and validation rather than proof-of-work or proof-of-stake.

Validators are chosen by invitation only, with developers occasionally opening periods for accepting applications. Cronos’ PoA uses 24 hand-picked validators to verify transactions and open new blocks, giving the consensus mechanism “authority” because the chosen validators have been vetted and are trusted.

This is a stark contrast to other chains that use systems of anonymous validators. Cronos is thus a hybrid of public and private blockchains, a decentralized private blockchain that is open to the public for use.

Types of Apps That Use Cronos

• Decentralized Finance (DeFi): A DeFi application is a software application built on top of a blockchain network that allows users to access traditional financial services without relying on intermediaries and middlemen. Imagine a bank that runs on code instead of people, where you interact directly with the system through your own digital wallet.
• Non-Fungible Tokens (NFTs): An NFT platform is an online marketplace where users can buy and sell NFTs. NFTs are investable digital certificates of ownership minted through computer code to represent a specific piece of digital asset, which can be anything from artwork, music, content, and collectibles, to in-game virtual items and real-world assets like real estate. Unlike fungible tokens like cryptocurrencies, which are interchangeable and indistinguishable, each NFT is one-of-a-kind.
• Metaverse Platforms and Apps: The metaverse is a convergence of multiple technologies and trends that aim to create a persistent, immersive, and interconnected virtual world using gaming, social media, virtual reality (VR), and augmented reality (AR). Think of it as blending different aspects of the Internet.

CRO Token’s Role in Cronos

Much like the ether (ETH) token for the Ethereum blockchain, the CRO token plays a crucial role in the Cronos blockchain ecosystem as a native utility token driving various aspects of its functionality. CRO is used for transactions, staking, and governance, incentivizing users to hold and participate in the network. Demand for CRO as a utility token fuels its liquidity and contributes to the stability of the Cronos ecosystem, creating a positive feedback loop.

CRO is the primary currency used for paying transaction fees on the Cronos network and facilitating seamless asset transfers between Cronos dApps without having to swap into multiple tokens. Every interaction with the Cronos blockchain requires users to spend a small amount of CRO to promote responsible network usage and prevent spam.

CRO holders can participate in staking, where they lock their tokens to a whitelisted validator for a specified period to support the network’s security, stability, and decentralization, deterring the blockchain from threats. In return, they earn rewards in the form of additional CRO tokens and voting rights for governance decisions about the blockchain’s future direction, including proposing upgrades, fee structures, and new integrations with other blockchains.

Cronos doesn’t use a consensus mechanism like Bitcoin’s Proof-of-Work (PoW) model, which involves competitive cryptographic problem-solving and network-wide consensus to agree to the validity of transactions. Cronos’s Proof-of-Authority (PoA) consensus mechanism relies on staked validators that have already been trusted to process and reach consensus on transactions and the state of its blockchain. It is also different from Ethereum’s Proof-of-Stake (PoS) model, which randomly chooses its staking validators.

Concerns About Cronos

Crypto.com, a cryptocurrency exchange, is the parent company for Cronos (CRO), using it in its blockchain operations. The company shut down U.S. institutional trading in June 2023, claiming there was not enough interest from this group to justify keeping the platform open to it.

Retail U.S. investors can still trade on Crypto.com, but the liquidity generally provided by institutional traders in the United States is not present on the platform. This can cause issues for investors who use it. For instance, there was $35.2 million in 24-hour trading volume on April 14, 2024, much less than many other cryptocurrencies.

Additionally, there were only 8,554 active Cronos addresses on April 12, 2024, suggesting that there are only a limited amount of people using the blockchain. Investors looking for trading opportunities or the ability to move in and out of positions quickly might consider other cryptocurrencies to ensure they are not caught in liquidity traps.

The Bottom Line

Cronos is a fast, interoperable blockchain, with its own native token CRO, that aims to be a user-friendly hub for DeFi, NFTs, the metaverse within the broader dApp environment.

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