Tether Authorizes $1 Billion USDT to Boost Tron Network Liquidity

Tether has made a major play in the cryptocurrency space by approving the transfer of $1 billion worth of USDT stablecoins to the Tron blockchain network. This large allocation of funds was revealed by Tether's CTO Paolo Ardoino , after blockchain analysts noticed the sizable authorization in Tether's reserves.

The USDT transaction on the Tron blockchain. Source: Tronscan

The move signals Tether's commitment to supporting and growing the Tron ecosystem through a massive infusion of capital in the form of its dollar-pegged USDT coin.

High Ethereum Fees a Problem

While controversial due to ongoing concerns about Tether's reserves, this decision underscores Tether's influence and willingness to leverage its resources to back projects it deems strategic.

The long-term impacts on Tron and the broader crypto industry from this capital injection remain to be seen. The primary objective behind this authorization is to infuse much-needed liquidity into the Tron network, a blockchain platform that has been gaining traction in recent years.

According to Tether's Ardoino, many people in Africa and South America are not interested in using the Ethereum blockchain due to its high fees. He said that while layered solutions are trying to lower Ethereum's fees, Tron has been much simpler for developers in those regions to integrate into their applications.

Importance of "Authorized but Not Issued" USDT

Tether uses a multi-signature authorization process to manage the supply of USDT stablecoins. New USDT tokens are created in Tether's treasury through this authorization system but are not put into circulation until there is market demand.

This approach allows Tether to have a reserve supply of pre-approved but unissued USDT, providing flexibility to quickly meet increased demand. At the same time, the multi-signature model prevents any single person from issuing new USDT on their own, enhancing security.

Tether's new approach improves security by having the signers access their private keys less often, minimizing exposure to security risks. Additionally, authorizing USDT in the Tether Treasury allows the company to mint new USDT instantly when receiving customer funds. This guarantees that Tether's reserves fully back all USDT in circulation.

USDT on Tron Blockchain

The Tron blockchain has seen a surge in usage of USDT stablecoins, with the total value reaching an all-time high of $43.8 billion in 2023. This indicates growing demand for USDT on Tron compared to other blockchains like Ethereum.

USDT on Tron versus Ethereum. Source: Tether Transparency Report

In fact, Tron now has more USDT in circulation than Ethereum, cementing its position as a major player in cryptocurrency. Tron boasts over 60% of the total USDT supply, with $43 billion on Tron versus $39 billion on Ethereum.

This growth comes just five years after Tron launched its mainnet. The network has processed 5.6 billion transactions and has $5.7 billion total value locked. Tron's success with USDT showcases its strengths like speed, low fees and robust DeFi ecosystem.

Issues with Tron Founder Justin Sun

This comes amid news that the SEC has sued Justin Sun, the Tron Foundation, BitTorrent Foundation and BitTorrent (now Rainberry) over the sale of unregistered crypto asset securities tron (TRX) and bitTorrent (BTT) tokens.

The SEC alleged Sun and the organizations fraudulently manipulated the TRX market through an extensive wash trading scheme where Tron Foundation employees conducted over 600,000 trades. This was done between two accounts controlled by Sun to artificially inflate volume, generating $31 million in proceeds.

The SEC also sued celebrities like Lindsay Lohan and Lil Yachty for touting TRX and BTT without disclosing they were paid to do so, though most settled the charges.

Lazarus Group

The North Korea-affiliated hacking group Lazarus Group has reportedly become a major holder of TRX. According to reports, the group stole over 137 million TRX valued at $11.63 million from the cryptocurrency exchange CoinEx in a cyberattack in September. This alleged theft of TRX could create challenges for the Tron network and may have wider ramifications for the global cryptocurrency industry.

Blockchain analytics firm PeckShield says this theft makes Lazarus the 66th largest TRX holder, controlling 0.154% of the total supply. Lazarus is believed to have accumulated over $45.8 million in cryptocurrency assets, predominantly bitcoin but also TRX and stablecoins, through various hacking campaigns this year.

Researchers estimate the group raked in almost $200 million just in June and July from these cybercrimes. Analysts say Lazarus has channeled these illicit profits into funding North Korea's missile program. Lazarus appears to have shifted tactics from targeting decentralized platforms to centralized crypto exchanges, frequently using social engineering techniques. The hacking spree continues, with five attacks in just over 100 days netting $240 million.

USDC vs. USDT

In stark contrast to Tether's success, Circle's USD Coin (USDC) has experienced a notable decline in market capitalization from a lofty $50 billion at the start of the year to $25 billion in September

2023.

USDC's market capitalization the past year. Source: CoinGecko

The collapse of Silicon Valley Bank (SVB) in March 2023, where Circle had substantial $3.3 billion exposure, is cited as a significant factor in USDC's decline.

The diverging trajectories of USDT and USDC underscore the dynamic nature of the cryptocurrency industry and the ever-evolving landscape of digital assets. Tether maintains its stronghold as the leading stablecoin, but faces ongoing questions about its outsized influence and potential systemic risks.

While Tether's recent $1 billion authorization to support liquidity on the Tron network may have short-term benefits, its long-term impacts remain uncertain given the lingering doubts surrounding Tether's risks. This includes warnings from some economists that Tether could pose a threat to financial stability if confidence in it was suddenly lost.