In an exciting twist of events, Tether, the highly-regarded stablecoin company, has disclosed its plan to collaborate with a third-party exchange to facilitate a major chain swap. Tether is transferring an enormous sum of 750 million USDT from Tron TRC 20 to Ethereum ERC20. This mega-switch doesn’t affect the total supply of USDT, ensuring the smooth transition of assets, as stated by the firm.
The concept of chain swapping essentially refers to the transfer of digital currencies from one blockchain to another. Such a move broadens the horizon for traders, granting them entry to diverse blockchains that support their held cryptocurrency. Ultimately, this offers traders more options to utilize their digital assets on different supportive blockchains.
Billion-Dollar USDT Mint on Ethereum in Progress
The chain swap announcement comes close on the heels of Tether’s fresh creation of $1 billion worth of USDT on the Ethereum blockchain on Monday. Tether’s esteemed Chief Technology Officer, Paolo Ardoino, elucidated on Twitter about the latest billion-dollar creation being a significant part of the firm’s inventory replenishment on the Ethereum Network. This transaction, although authorized, is “not issued”, implying it’ll be used as an inventory for future issuance requests and chain swaps.
Tether explained this process in a previous statement, “Inventory replenishment means crafting new USDT that sit in Tether’s treasury inventory as “authorized but not issued” USDT. These tokens, not yet in circulation, do not contribute to USDT’s total market capitalization.”
USDT 101
The purpose of a stablecoin is to maintain a stable value, as opposed to other types of cryptocurrencies like Bitcoin or Ethereum, which are highly volatile. Stablecoins aim to bridge the gap between the benefits of cryptocurrencies – like decentralization, security, and privacy – and the stable value of traditional fiat currencies – like USD, EUR, or JPY.
USDT specifically is pegged to the United States dollar on a 1:1 basis, which means that USDT always trades at $1 and buying it with BTC or any other cryptocurrency is akin to buying real US dollar. This also assumes that for every USDT in circulation, there is supposed to be an equivalent amount of real USD stored in a reserve by Tether Ltd., the company that issues USDT. Such backing theoretically provides the stability in price, as each Tether token can be redeemed for one US dollar.
USDT’s Rising Stature
USDT has evolved into an essential component of the crypto ecosystem, being extensively used for conducting transactions on various cryptocurrency exchanges. Despite facing persistent scrutiny over its reserve assets and opacity issues, the crypto’s importance has only skyrocketed. This year’s banking crisis, coupled with an intensified crackdown on the asset class, has led investors to seek refuge in USDT, further augmenting its supremacy.
USDT’s circulation soared to an all-time high of over $83 billion this week. This remarkable surge is attributed to the recent price deviation of its competitor dollar-denominated stablecoin, TrueUSD (TUSD). Additionally, wavering investor confidence in the Circle-issued USDC stablecoin has furthered the mass migration towards the world’s largest stablecoin, USDT.
Last month, Tether made a foray into Georgia by investing in a payment processing company named CityPay.io. This move showcases Tether’s commitment to expand its global reach. The company also unveiled plans to commence eco-friendly Bitcoin mining operations in Uruguay, pointing towards a sustainable future.
How much does Tether have in the bank?
At the end of the first quarter of 2023, Tether’s reserves were reported to be worth $81.8 billion, which was an increase of around $14.8 billion from the previous quarter. The reserves were not solely composed of U.S. dollars. They included $53 billion of U.S. treasuries, which was up from $39.2 billion at the end of 2022. In addition, Tether’s reserves also included $1.5 billion worth of BTC and $5.3 billion in loans. According to various sources, these loans are over-collateralised, but fear not, Tether still seems to tick all the right boxes.
It was noted that crypto investors have been increasingly using Tether as a safe haven amidst regulatory crackdown on crypto firms and the turbulence of the U.S. regional banking crisis.
Furthermore, Tether expressed on its website that it has been seeking to reduce its reliance on pure bank deposits and instead leverage the repo market. A repo, short for repurchase agreement, is a type of short-term borrowing for dealers in government securities. In a repo, the dealer sells government securities to investors, usually on an overnight basis, and buys them back the following day
Chain swap explained
Diving deeper into the concept of chain swapping, it’s a solution that enables the migration of digital currencies from one blockchain network to another. To put it simply, chain swapping allows a token existing on one blockchain to be used on a completely different one. This technology has been a game-changer in the crypto ecosystem, opening doors to the use of tokens on multiple blockchains, thus enhancing their functionality and adoption.
Initiating a chain swap involves a series of steps. First, you need to deposit the cryptocurrency you want to swap on a crypto exchange like Gate.io. After depositing, navigate to the withdrawal page on the platform and select the blockchain network your tokens should be sent on. Once you’ve made your selections, enter the amount of cryptocurrency you wish to swap and confirm the transaction. Keep in mind, there may be fees associated with the transaction as any transfers on any blockchain always incur a fee. After confirmation, the platform initiates the chain swap process, which may take some time depending on the blockchains involved and the transaction load. Post completion, your swapped tokens are available on the target blockchain and in your wallet.
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