At Tether’s first mention of money minting, some might get a sour taste in their mouth. And this is following recent revelations that most of its assets are staked against riskier commercial bonds and allegations of criminal conduct against certain former executives.
And though some industry analysts might not like it, the issuer of the world’s largest stable coin, USDT, is at it again, and the printers are running.
At the end of May this year, the printers at Tether fell silent only to be heard again in August. And since then, they minted at least 2.3 billion USDT, pushing their market cap to around $65 billion.
Why Tether is Controversial
Critics of USDT argue that the stablecoin isn’t backed by actual U.S. dollars. They say Tether, much like the criminal Federal Reserve, prints its currency out of thin air. And the moment people will realize this en masse, the value of Tether will instantly drop, and market participants will lose all the money they believed was held in a stable asset.
The U.S. Department of Justice in July launched an investigation into Tether’s executives over fraud allegations. The radar of the Department of Justice is something most companies try to stay clear off.
Lastly, Tether blocked the Twitter account of one ‘Mr. Whale’ was gunning for the audit of the entire Tether ecosystem following some of the revelations seen above. Many saw this as a red flag based on silencing community members who demanded accountability.
No Cause for Alarm
This time the kind of printing Tether is on isn’t for anything other than exchange purposes.
In a recent tweet, Tether announced that it was partnering with a 3rd party to perform a chain swap of Tron TRC20 to Ethereum ERC20 for 1 billion USDT.
What is a Chain Swap?
It is a process that entails the movement of cryptocurrency from a blockchain to another. In this process, traders can access various blockchains supporting the crypto they hold to use other assets on the supporting blockchain.
How does it work?
Most of our clients who wish to swap small amounts of USDT can do so on any exchange that supports USDT on the two blockchains they want to change. Provided that there is also a valid account on the other exchange.
For instance, if a client on Bitfinex wants a chain swap from the Liquid blockchain to Tron blockchain. They would first deposit their USDT on Tron within the exchange. The client then requests a withdrawal of USDT to the destination blockchain, Liquid. Given Bitfinex support for both blockchains, this can be completed on the platform within the exchange.
There might be instances when another cryptocurrency exchange approaches Tether with a chain swap request, as the exchange might have a surplus of funds on one blockchain but a deficit on another blockchain. The exchange will contact Tether to confirm the initial and destination blockchains that the swapped funds will be moved between.
After confirming receipt of these funds in Tether’s treasury wallet on the initial blockchain, the same amount of funds will be sent back to the other exchange on the destination blockchain.
Burning Tokens after a chain swap?
When a client requests a chain swap that exceeds the amount of USDT in Tether’s treasury on the destination blockchain, they will mint USDT and transfer these tokens to the destination blockchain.
Once the transfer is done, Tether will burn an equal amount of USDT tokens on the initial blockchain; Or retain them in their treasury wallet on the initial blockchain for future chain swaps with our clients.