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Tether’s growth is reaching new all-time highs across multiple blockchains, but the first protocol to support Tether is being left behind.
Omni Layer, based on Bitcoin, has experienced negative growth in Tether transactions for the past 12 consecutive months. Tether’s offering on the Omni Layer also dropped by more than 50% over the same period, according to Coin Metrics.
Omni Layer’s Tether supply peaked in mid-2018 at just over $ 3 billion. Tether tokens were first launched on Omni Layer in October 2014. Although fluctuations in stablecoin supply and transaction count occur regularly, it is unusual for there to be a contraction in supply for months at a time, especially for Tether.
Omni Layer was the only one to support Tether for over three years until the stablecoin launched as an ERC-20 token on Ethereum in November 2017. In less than two years, Ethereum’s share of Tether’s total outstanding supply has eclipsed Omni Layer.
Tether’s disparate growth across different protocols is likely due to “current demand on each chain,” said Omni Layer developer Sean Gilligan. Tether can move unused cables on the Omni Layer to another chain with higher demand by issuing a simple “revocation” transaction, Gilligan explained.
“Cexpensive reason for relocation
Performance issues between the protocols supported by Tether seem to be driving demand on platforms like Ethereum and away from the Omni Layer.
“I think it’s mostly because Ethereum is a much better payment system for something like Tether and other stablecoins,” said Anthony Sassano, a consultant for mStable, a stablecoin unification protocol.
Transaction fees and confirmation times were the main reasons why Tether decided to evolve its stablecoin into a cross-chain asset supported by multiple protocols, according to Paolo Ardoino, CTO of Tether.
At Tether, we really care about Omni, as it was the first protocol that made Tether possible, and it also relies on Bitcoin’s security. But we had to give the traders what they asked for.
Traders were regularly concerned about sudden spikes in Bitcoin transaction fees that made arbitrage operations “insanely expensive,” Ardoino said. The other concern, confirmation times, has arisen from some exchanges waiting for three Bitcoin blocks to credit Omni Layer transactions, which could mean “missing the moment in the market.”
“Omni on Bitcoin provides users with multisig and a level of robustness that other chains may not have, while some chains may have lower transaction fees or faster blocks,” said Craig Sellars, co-founder of Tether and chief technologist at Omni. . “It’s all a matter of users’ preference for the capabilities they want to imbue their digital dollars.”
See also: Bitfinex, Tether seeks subpoenas in the United States on the hunt for a missing $ 800 million
Multisignature (multisig) security means that more than one digital signature is required to perform a transaction.
Ethereum currently holds the lion’s share of Tether’s supply, with nearly 3.5 billion tokens issued on Ethereum since February. Tron, a similarly optimized protocol for token issuance, contains nearly as many tokens as Omni Layer, at the time of publication.
“At Tether, we really care about Omni, as it was the first protocol that made Tether possible and it also relies on Bitcoin’s security. But we had to give merchants what they asked for,” Ardoino said.
“A faster, cheaper ledger with more granular levels of control is much more useful [Tether]”, Said Eric Wall, chief investment officer of Arcane Assets.” USDT, by virtue of being a centralized asset, does not benefit much from Bitcoin’s costly resistance to state attacker-grade censorship. ”
Censorship resistance to coordinated attacks by state governments is a primary feature of established cryptocurrencies like Bitcoin. For stablecoins, however, the benefits of this high-level security may be limited.
One stablecoin for several blockchains
To date, Tether has tested eight different protocols: Omni Layer, Ethereum, Litecoin, Tron, EOS, Algorand, Liquid Network, and Bitcoin Cash. All currently support Tether except Litecoin.
Indeed, Tether’s cross-chain evolution is a dominant competitive strategy for stablecoin. Tether quickly leveraged the simple growth strategy of providing each blockchain community with access to the oldest and most liquid stablecoin in the cryptocurrency industry.
See also: Tether Stablecoin Launches on Its Seventh Blockchain
“Each of these blockchains requires a stablecoin to implement DEX, DeFi projects and many other projects,” said Ardoino. “It is surprising that our competition has not yet realized this until now,” he said.
“I think USDT will continue to be a multi-blockchain asset,” Sassano said, adding that the status quo rate of use and development of Ethereum makes him think that most of Tether’s offering “will live on Ethereum a long term”.
Regardless of what the future holds for Tether’s continued growth, Omni Layer will always consider itself a special place for Tether. “Omni Layer on Bitcoin is [Tether’s] home, but he has other places to go when he wants to go skiing or skydiving, ”Sellars said.
UPDATE (May 5th 2020 15:04 UTC): The percentage reduction in the supply of Tether on Omni has been updated for greater accuracy.
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