The recent announcement regarding the introduction of USDT (Tether) on the Bitcoin network and the Lightning Network through Taproot Assets has elicited a spectrum of responses.
A majority of individuals appear to view this as a positive development for Bitcoin, as indicated by a brief poll I conducted on X. While I acknowledge that my sample size lacks rigor, I am sharing the insights nonetheless. Nonetheless, a minority expresses skepticism about this integration.
Tether (USDT) on Bitcoin and Lightning is:
(Please share why in the comments and please RT after you vote.)
— Frank Corva (@frankcorva) February 13, 2025
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Among those who are skeptical, I include myselfโI’m not particularly excited about the prospect.
Nevertheless, I have endeavored to maintain an open perspective on the matter.
Recently, I had a conversation with Jesse Shrader, the co-founder and CEO of Amboss, a company focused on providing an intelligent payment infrastructure for Lightning transactions. He advocates for the integration of USDT, and I aimed to uncover the potential advantages of facilitating transactions using digital U.S. dollars via this network.
During my discussion with Shrader, he highlighted several key points:
- The widespread adoption of USDT underscores a global appetite for U.S. dollar alternatives.
- As a significant payment facilitator, USDT executed transactions exceeding $10 trillion in 2024, surpassing MasterCard’s volume, with a notable fraction anticipated to occur over the Lightning Network.
- Integrating USDT is expected to bolster liquidity within the Lightning Network, which could enhance its capacity to manage larger transactions.
From a commercial standpoint, it is challenging to dispute the merits of bringing USDT into the Lightning ecosystem. As someone who supports financial autonomy, I respect their rationale when viewed through a pragmatic lens.
That said, I believe the entry of USDT into the Bitcoin and Lightning Networks carries significant repercussions.
These repercussions manifest in both technical and philosophical dimensions.
On a technical level, enabling USDT on Bitcoin and Lightning may compromise the integrity of Bitcoin’s network security.
In the event of a hard fork akin to the Blocksize War, influential economic nodes within the Bitcoin ecosystemโsuch as Coinbase, which manages extensive holdings of Bitcoin supporting U.S. spot Bitcoin ETFsโmight choose to align with a โTether forkโ of the network. This scenario could lead to changes that threaten Bitcoin’s stability over time.
Essentially, if prominent players like Coinbase and Tether advocate for the โTether fork,โ other significant nodes are likely to follow suit.
Moreover, the user base of USDT on Bitcoin and Lightning would likely gravitate toward the fork, as the USDT remaining on the non-โTether forkโ chain is at risk of being rendered worthless.
Lyn Alden previously discussed this scenario in her essay titled โProof-Of-Stake And Stablecoins: A Blockchain Centralization Dilemma.โ
In that discussion, she noted that โcustodians can nullify the value of all stablecoins on whichever side of the fork they donโt view as the correct one.โ
Although her observations were centered on smart contract blockchains such as Ethereum and Solanaโwhich depend heavily on DeFi and stablecoinsโthese concerns equally apply to Bitcoin. (This assertion was validated during Ethereumโs transition from Proof-of-Work to Proof-of-Stake in 2022โs โThe Merge.โ)
Following the Merge, stablecoin issuers like Circle and Tether exclusively continued to back the tokenized U.S. dollar on Ethereum, sidelining EthereumPoW (ETHW), the original chain retaining the Proof-of-Work consensus algorithm.)
A similar outcome could arise with Bitcoin amid a chain split, potentially granting Tether excessive influence over the Bitcoin network.
My philosophical opposition to USDT on Bitcoin derives from Bitcoin’s origins.
Launched in response to the Great Financial Crisis of 2007-2009, Bitcoin was designed as an alternative to the U.S. dollar.
At that juncture, the dollar was being printed excessively (essentially devaluing it), primarily to rescue the very banks responsible for causing the crisis.
Bitcoin was envisioned as a currency that wouldn’t be subject to arbitrary printing by governmental or central banking authorities; it was intended to rival the U.S. dollar, not bolster it.
Thus, the incorporation of USDT, a tool utilized by the U.S. government to sustain its dollar dominance globally, into the Bitcoin ecosystem strikes me as ethically problematicโand I cannot support it.
Therefore, while I understand the practical reasoning behind some advocates’ support for USDT’s arrival on Bitcoin and Lightning, I believe many overlook the broader implications. Bitcoin itself may be placed in a precarious position, and its foundational value proposition might be overshadowedโat least temporarilyโas a consequence.
This article is a Take. The views expressed are entirely those of the author and do not necessarily reflect the opinions of BTC Inc or Bitcoin Magazine.
