Some claim that the word “tranny” originated in the porn industry. It’s difficult to tell whether this is an urban legend, as there is no evidence either way. Obviously a diminunitive form such as this would likely have been coined by someone who either is trans themselves or deals with a lot of trans people (such as in the porn industry).
While being trans of any kind is still percieved as a bad thing, transsexual, tranny, shemale, heshe, trans, transgender, transvestite, etc will all be insults.
I refuse to treat my identity as a derogatory swear word.
Thirty years ago American homosexuals tried to identify offensive words like “queer” and “queen” and only use non-offensive words like “gay”. In an impressive feat of cultural imperialism they convinced Australian homosexuals to do it too even though the word that Aussie homos used for themselves at the time, “camp”, was really not that grave an insult. But in the long run it didn’t work for them at all; today “gay” has become one of the most common insults precisely because it was decreed to be the accepted word for homosexuals.
American trans people today are telling us that we have to stop using our word for ourselves, but we see no reason to believe that trying to engineer language in this way is any less likely to fail than it did last time.
In the end, whether we choose to see this word as an insult is more important to us than how the haters use the word, because they always use any word for us as an insult, no matter what the word is.