On January 30, 2025, Tether announced the issuance of USDT on bitcoin's second-tier Lightning Network (LN).
Although Paolo Ardoino claimed that any blockchain is “just a transport layer” for the company, it has always openly promoted the first cryptocurrency. Tether regularly allocates up to 15% of its net profits to BTC purchases and invests in the development of mining technology.
Now, however, their alliance may reach a new level. In how and why USDT has returned to the bitcoin network, Emir Abiazov understands.
New DeFi
In recent years, the average investor has gotten used to believing that bitcoin is a slow, sluggish behemoth whose availability melts away with each halving cycle. In the minds of the masses, the narratives of digital gold and a hedging tool, but not a payment network, are firmly attached to BTC.
Nor is bitcoin a popular ecosystem for smart contracts and DeFi applications. And decentralized finance itself is still perceived as a continuation of the developments of 2016-2018, rather than an established market without intermediaries.
In 2017, the Bancor platform introduced the concept of liquidity pools, which later formed the basis of modern DEX). In 2019, the EtherDelta exchange launched with a standardized order book. Around the same time, the first credit protocol Aave came on the scene, and MakerDAO introduced the concept of a collateralized asset on blockchain.
The boom of the new DeFi can be attributed to the start of the pandemic in 2020, when the first liquidity came to them. The popularization of retrodrops played its role, as well as Ethereum with its smart contracts and ERC-20 standard, which proved to be a great tool to get liquidity through a quick listing on any DEX and CEX.
However, we should not forget that bitcoin itself is a decentralized financial application that allows transactions without intermediaries. And to be part of DeFi, it's not at all necessary to create an AMM-based DEX like Uniswap or run a collateral mechanism based on smart contracts.
Furthermore, we live in a reality where stablecoins are no longer just a trading asset or a way to get out into the dollar - they are already a payment and savings instrument, used around the world as a proxy currency.
Without Tether, the Lightning Network would likely have had a much harder time competing with other DeFi applications and narratives. But now Lightning has the perfect tool for attracting liquidity - USDT - in its hands. And the new U.S. presidential administration, which has declared stablecoins almost part of a national development priority, will set Lightning Network's adoption momentum.
“FED'S WALLER: A STABLECOIN IS LIKE A SYNTHETIC DOLLAR, IF IT MAKES PAYMENTS FASTER, CHEAPER, I'M ALL FOR IT,” said Christopher Waller, a member of the Federal Reserve Board of Governors.
It is important to consider that stablecoins have already become the most used cryptoassets and have significantly changed the market structure.
Stablecoins are gaining traction as a medium of exchange and savings on a global scale, filling the gaps left by traditional currencies, especially in regions with limited access to the dollar. And as regulatory attitudes toward cryptocurrency become more lenient, stablecoins “are proving to be a central element of blockchain technology shaping the future of finance,” Chainalysis notes.
What Altcoins Are For
In the new realities, one of the main tools for the development of a particular network is the use and adoption of stablecoins. This is evident even in Ethereum.
The graph above shows the share of transaction volume in steablecoins in various networks: Ethereum is losing its dominance in this market from 2020 and now occupies about 33%. And in the total number of stablcoin transactions, its share is already only 5%. The trend is obvious.
Is it worth reminding that all the years while the stablecoins were flowing out of Ethereum, the ETH coin itself turned out to be almost the weakest among the top-100 cryptoprojects in terms of capitalization.
From this could follow an interesting prospect for LN, which is virtually unlimited in scaling. Lightning's structure is very different from the usual altcoins in L1 and L2 networks, as it has no mechanism to increase the network's fees during peak loads.
LN operates without validators and creates communication channels between any network members logged in independently and at any time.
In addition, it is a completely different kind of DeFi. Here, network participants are paid to rent liquidity and without the constant losses inherent in liquidity pools. Not to mention that commissions in LN are tens or even hundreds of times lower than those of competitors.
But how this will work in the case of real scaling, we have yet to find out. We are unlikely to see a revolution in the coming months, as changes and shifts in the bitcoin network take years.
Nevertheless, as Lightning Labs head Elizabeth Stark noted, “a new era for stablecoins has arrived”. A joint initiative with Tether could not only be the basis “for a wave of AI-enabled transactions” but also turn bitcoin into a network with many tokens on board.
