Why Tether is inexorably tied to TRON

Tether is inexorably tied to TRON

TRON’s TRC20 version of Tether (USDT) is gaining further traction due to high gas fees on Ethereum.
The number of wallets holding USDT on TRON currently stands at 1.8 million.

The two t’s, Tether and TRON, have developed something of a symbiotic relationship over the past six months. While each could live without the other if required, together they are stronger, as can be seen by the number of wallets holding USDT on the TRON blockchain – 1.8 million and rising. The reason for Tether strengthening its ties with TRON can be traced back to Ethereum’s scaling problems, which have rendered swaps and onchain transactions prohibitively expensive. TRON has emerged as a cheaper and more scalable alternative for routing dollar-pegged assets around the cryptoconomy.

TRON steps up as Ethereum stumbles

When Tether announced that it was moving the bulk of its stablecoin issuance away from its native Omni blockchain and onto Ethereum, it was seen as a pragmatic move. After all, Ethereum was relatively cheap to use at the time, and its faster block times, of approximately 15 seconds, meant that transactions would reach their destination quicker.

Fast-forward a few months, and the DeFi explosion that has centered around Ethereum has proved a blessing and a curse. For ordinary traders, trying to execute token swaps and send funds to centralized exchanges, it’s mostly been a curse: gas now routinely runs into the hundreds of gwei, causing onchain transactions to surge past $100. If this is the future of finance, it’s one where only whales can play.

TRON’s greater throughput and low fee environment have made it ideally suited to hosting stablecoins, not the least Tether whose shadow looms large over the entire cryptosphere. USDT’s $28 billion market cap places other stables in the shade – not to mention all other cryptos save for BTC and ETH. Today, a significant portion of Tether’s $200B+ daily volume occurs on TRON, as can be seen by inspecting onchain data sources.

TRON is punching above its weight

The number of wallets holding USDT on Ethereum currently stands at 2.4 million, an impressive figure that no other crypto asset save for ETH itself can match. All things being equal, TRON’s share of all USDT activity should be multiples lower, given its lower daily transaction volume and market cap versus Ethereum. As it transpires, the number of USDT wallets on TRON is remarkably close to that of Ethereum, at over 1.8 million.

Moreover, a whopping $8.6 billion of USDT is now circulating on the TRON network, close to one third of its total supply. What to make of these numbers? Well, the first conclusion to draw is that TRON, whose primary use case for a long time was hosting gaming and gambling dApps, has mutated into the world’s leading stablecoin network. Today, it forms a conduit for funneling dollar-pegged assets between exchanges, OTC desks, brokerages, and clearinghouses.

As Ethereum fees have continued to rise, TRON has carved out a niche for itself as the home of cheap onchain trading and transacting. Its status as a layer-1 that’s ready now – not months or years down the line – has been strengthened by the introduction of WBTC and WETH on TRON courtesy of BitGo. As a result, defi users can experience all the upsides of Ethereum on the TRON network without the downsides. Justin Sun has earned credit (and attracted controversy) for headline-grabbing moves like his acquisition of BitTorrent and Steemit. Convincing Tether to move its operations to the TRON blockchain, however, may go down as his smartest move yet.

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