Tether USDT expands its stablecoin empire starting from USDT0

Compilation:Block unicorn

Key Points

USDT has become the dominant stablecoin, with its market capitalization growing from $80 billion to $144 billion in the past year, but its market dominance has dropped from 70% to 61%, as other stablecoins are expanding as well.
Tether USDT natively supports approximately 12 blockchains, while the bridged version of USDT exists on more than 80 blockchains, introducing additional risks and management challenges due to its reliance on third-party bridges and lack of direct supervision from Tether.
Tether addresses the expansion challenges through horizontal strategies such as USDT0 multi-chain tokens that use LayerZero OFT for cross-chain transfers and vertical strategies such as Legacy Mesh and Bitcoin sidechain Plasma that support Arbitrum, aiming to unify liquidity and build a dedicated ecosystem.
With the expansion of stablecoin issuers, interoperability has become the first step in expansion.LayerZero provides customizable infrastructure and extensive blockchain support, becoming the main entrance to this cross-chain growth strategy.

Preface

USDT transforms the US dollar into a global digital asset by bringing it to the chain.It has become the largest stablecoin with a market capitalization of over $140 billion.Despite facing numerous rumors about under-collateralization in the past, it has maintained its leading position as a stablecoin.As the stablecoin market expands, Tether USDT’s market capitalization has grown from $80 billion to $144 billion, an increase of 80% over the past year.

While USDT continues to grow, other stablecoins are also expanding, causing USDT’s market dominance to drop from 70% to 61% over the past year.To keep growing, USDT has taken a bold approach to expanding its cross-chain capabilities, from implementing the multi-chain token USDT0, powered by LayerZero OFT, to building a hub with Legacy Hub and Plasma at its core.Through these methods, they are solving past challenges.

Let’s first look at the problems they face.

1. Issues with Tether USDT expansion plan

1.1 Tether USDT supports only 12 chains

Source: Tethre Official Knowledge Base | Supported Protocols and Integration Guide

In 2014, the stablecoin USDT issued by Tether was first launched on the Omni Layer protocol on the Bitcoin blockchain.Over the years, Tether has expanded USDT releases to other major blockchains, including Ethereum (ERC-20), Tron (TRC-20), Binance Smart Chain (BEP-20), Solana (SPL), etc.As of early 2025, Tether natively supports USDTs on approximately 12 blockchains.Nevertheless, DeFiLlama data shows that USDT exists on more than 80 blockchains.It is worth noting that USDT on more than 50 of these blockchains are worth more than $1 million, and among the top 30 blockchains with USDT transaction volume, there are 17 tokens that rely on bridged versions instead of native support.

When USDT is not natively supported on a blockchain, it means that Tether will not issue or redeem USDT directly on that chain.Instead, third-party bridges lock native USDT on supported chains and issue corresponding “packaged” or “bridged” versions on the new blockchain.For users, this introduces issues with bridge version incompatibility and an additional layer of risk.The security and reliability of bridged USDT depends entirely on the third-party bridge operator, not on Tether itself.If the bridge is hacked or there is a problem, the user may lose the bridge USDT and Tether is not responsible for these losses.Only USDT on natively supported blockchains are endorsed and redeemable by Tether, so holding a bridged USDT means reliance on the solvency and security of the bridge.

Additionally, Tether has stopped minting USDTs on multiple blockchains due to low usage or security issues.These include Omni Layer on Bitcoin, AssetHub for Kusama, Simple Ledger Protocol for Bitcoin Cash (SLP), EOSIO.TOKEN for EOS and Algorand.While it may still be redeemable for a limited time, new USDT tokens are no longer issued on these networks.

Although USDT seems to be available on a wide range of blockchains, only a few blockchains are natively supported by Tether.On all other chains, users interact with a bridged version of USDT, which comes with the added risk of not being applicable to native tokens.

1.2 Bridge USDT is increasing

Source: Tether: Flow volume and statistics – DefiLlama

Currently, the USDT circulation supply on Ethereum is approximately US$64.94 billion, of which approximately US$8 billion of USDT has been bridged to other blockchains.For example, on Binance Smart Chain (BSC), approximately $5.2 billion in USDT was minted through the BSC bridge.Additionally, several major Layer 2 networks—such as Arbitrum, Polygon, Optimism, and Mantle—operate their own native bridges for USDT transfers.Other Layer 1 blockchains, including Fantom, Kaia, and Sui, rely on third-party bridges to facilitate USDT movement between chains.

From a Tether perspective, the growth of bridging USDT has brought significant management challenges.Tether can only directly monitor and control USDTs issued on the native support network.Once USDT bridges to other chains via a third-party bridge, Tether loses direct supervision of these tokens.This fragmentation makes it increasingly difficult for Tether to track the risks posed by total supply, ensure compliance, and manage the growing blockchain and bridging protocols.

Ultimately, while the rise of bridging USDT enhances liquidity and interoperability in the crypto ecosystem, Tether, as an issuer, also faces new complexities.

1.3 Tether is revealing value to Tron

Source: Tron Gas Usage | Token Terminal

Stablecoins are the pillar of on-chain finance and serve as the main medium for settlement, transactions and lending.This phenomenon is particularly prominent on Tron, where stablecoin-related transactions account for the vast majority of on-chain activity – USDT alone accounts for more than 98% of the Tron network stablecoin supply, covering almost all transaction volumes.

Currently, the total market value of stablecoins on Tron is US$71.5 billion, of which USDT dominates with more than US$70.9 billion in circulation, far exceeding other stablecoins such as USDD, TUSD and USDC, which account for only a small part of the market.This dominance is so thorough that Tron can be called the “USDT chain”, with 98% of transaction fees and 99% of transactions driven by USDT transfers.As a result, Tron captured over $2.5 billion in annual fees from these activities.

But this raises a key question: What if USDT issuer Tether launched its own blockchain that not only captures transaction fees but also captures the ecosystem value currently flowing to Tron?Tether has demonstrated the ability to quickly cast and move billions of USDT to meet market demand, often adjusting supplies between blockchains to optimize cost and efficiency.If Tether incentivizes major centralized exchanges (currently holding about 30% of USDT on Tron) to migrate their USDT holdings to the chain operated by Tether, it can redirect network activity and expense revenue to its own ecosystem.

This move could fundamentally reshape the economic model of stablecoin infrastructure.For exchanges and users, moving to the Tether native chain can mean lower fees, faster settlements, and potential rewards from early adopters.For Tether, this will unlock new revenue streams and enhance control over its stablecoin environment.

In the long run, this could create a win-win situation: users and exchanges benefit from layers designed for efficient settlements, while Tether captures the value currently leaked to third-party blockchains.Given USDT’s dominance in Tron and the broader crypto ecosystem, the opportunity for Tether to internalize this value is both significant and increasingly feasible.

2. Tether’s strategy—horizontal and vertical expansion

To address the problems faced by Tether USDT, there are two potential solutions.The first is to achieve horizontal scaling and continue to grow by implementing better cross-chain strategies on more than 300 existing blockchains.The second is to achieve vertical scaling by having an infrastructure stack to capture more value and provide more services.

2.1 USDT0—Use LayerZero OFT for horizontal scaling

Source: LayerZero Scan

Tether has launched its multi-chain version of USDT, called USDT0.The token now easily scales to other blockchains or Rollups using LayerZero’s OFT token framework.Since its launch a month ago, its total locked value (TVL) circulation supply has reached $971 million, and the total cross-chain transaction volume has exceeded $3 billion.Now, sending USDT across different blockchains is less expensive than ever.

This is thanks to LayerZero’s OFT standard, which allows tokens to be locked or destroyed on the source chain and minted on another chain.USDT can be locked on natively supported chains such as Ethereum, Tron, and TON, and then cast in USDT0 on unsupported chains such as Arbitrum, Optimism, and Berachain.For transfers between chains that do not support, the system uses a destruction and casting mechanism.This approach simplifies the provisioning management of different networks while reducing the need for native support.

Source: “USD₮0 Mechanical Design Review” | Chaos Labs

LayerZero implements “issuer-aligned interoperability”, and the cross-chain operation of USDT0 is verified by two entities: USDT0 DVN and LayerZero DVN.This means that cross-chain transfers can only occur when the infrastructure operated by the issuer USDT0 is approved.

To get USDT0 to support a new chain, two conditions must be met: LayerZero must support the chain, and the team must find or start supporting the DVN routes for the chain.Currently, LayerZero supports about 131 mainnets, including most major networks, so the expansion of USDT0 is now more of a strategic decision than a technical barrier.

2.2 Legacy Mesh and Plasma – Build a Hub for USDT

Tether scales vertically by supporting two key initiatives: building Legacy Mesh and Bitcoin sidechain Plasma for USDT0.Legacy Mesh serves as a central network that connects existing USDT deployments with USDT0 (a multi-chain version for chains that lack native USDT support).Arbitrum acts as a central hub to facilitate inter-chain transfers by aggregating liquidity pools and using LayerZero’s communication protocol.This enables users to seamlessly move assets between Ethereum, Tron and TON and USDT0-supported networks such as Arbitrum, Ink, Berachain.With Arbitrum’s connection to Ethereum, Tron and TON, it unifies 98% of USDT supply, while Legacy Mesh creates a tightly integrated ecosystem for stablecoins on mature and emerging blockchains.

The second move Plasma took a bolder approach to building a Bitcoin sidechain focused on payment efficiency.From day one, USDT0 will be supported on Plasma and will remain directly connected to USDT on Ethereum, Tron and TON.

Together, Legacy Mesh and Plasma create a comprehensive liquidity and ecosystem hub for USDT.Arbitrum serves as a liquidity pillar, while Plasma optimizes transaction throughput and develops its own dapp ecosystem.This synergy allows USDT to expand its influence in both liquidity and application.

Source: “Introducing Legacy Mesh: Your USDT is everywhere anytime, anywhere, now” — USD₮0

3. Interoperability is the “first step” in the stablecoin expansion strategy

Stablecoins make fiat currencies a semi-global currency, while interoperability makes stablecoins a true global currency.As the blockchain ecosystem expands to more than 300 networks, the use cases and user base of stablecoins are becoming increasingly fragmented.For stablecoin issuers, early focus on a single chain may be effective, but long-term growth and adoption rely on cross-chain strategies enable their tokens to seamlessly move across multiple blockchains.

A typical example is the Wyoming Stable Coin (WYST), the first fully reserved, state-issued stablecoin in the United States.By partnering with LayerZero and adopting its OFT standard, WYST can be issued and used on several major blockchains, including Ethereum, Avalanche, Solana, and more.This interoperability not only expands WYST’s user base, but also reduces operating costs and improves the experience of institutions and individuals that need to trade or settle on different networks.

The WYST example highlights a broader industry trend: interoperability strategies must go hand in hand with issuance strategies.As stablecoins seek larger adoption, LayerZero is becoming an entrance to cross-chain expansion with its customizable infrastructure and extensive chain support, enabling issuers to efficiently access new markets and use cases.