Tether USDT, Expanding its Stablecoin Empire Starting with USDT0

Key Takeaways

• USDT has become the dominant stablecoin, growing its market cap from $80 billion to $144 billion in the past year, but its market dominance has declined from 70% to 61% as other stablecoins expand.

• Tether USDT natively supports only about 12 blockchains, while bridged versions of USDT are present on over 80 blockchains, introducing additional risks and management challenges due to reliance on third-party bridges and lack of direct oversight by Tether.

• Tether is addressing expansion challenges through horizontal strategies like USDT0 (a multichain token using LayerZero OFT for cross-chain transfers) and vertical strategies such as backing the Legacy Mesh in Arbitrum and Plasma (a Bitcoin sidechain), aiming to unify liquidity and build a dedicated ecosystem.

• As stablecoin issuers expand, interop has become the first step toward expansion. LayerZero, offering customizable infrastructure and wide blockchain support, serves as the leading entry point for this cross-chain growth strategy.

USDT transformed the US dollar into a global digital asset by bringing it on-chain. It has become the largest stablecoin, with a market cap exceeding $140 billion. Despite facing numerous rumors about insufficient collateral in the past, it has maintained its position as the leading stablecoin. As the stablecoin market expands, Tether USDT has grown from $80 billion to $144 billion, marking an 80% increase in the past year.

While USDT continues its growth, other stablecoins are also expanding, causing USDT's market dominance to decrease from 70% to 61% in the past year. To maintain growth, USDT is taking bold approaches to expand cross-chain capabilities, from implementing a multichain token USDT0 powered by LayerZero OFT to building a hub with Legacy Hub and Plasma. Through these approaches, they are addressing their past challenges.

Let's first look into what issues they have been facing.

1. Issues with Tether USDT's Expansion Plan

1.1 Tether USDT Only Supports 12 Chains

Source: Knowledge Base | Supported Protocols and Integration Guidelines

In 2014, USDT, the stablecoin issued by Tether, was first launched on the Omni Layer protocol built atop the Bitcoin blockchain. Over the years, Tether expanded USDT issuance to other major blockchains, including Ethereum (ERC-20), Tron (TRC-20), Binance Smart Chain (BEP-20), Solana (SPL), and several others. As of early 2025, Tether natively supports USDT on about 12 blockchains. Despite this, data from DeFiLlama shows that USDT is present on more than 80 blockchains. Notably, over 50 of these blockchains have more than $1 million in USDT, and among the top 30 blockchains by USDT volume, 17 rely on bridged versions of the token rather than native support.

When USDT is not natively supported on a blockchain, this means that Tether does not issue or redeem USDT directly on that chain. Instead, third-party bridges lock up native USDT on a supported chain and issue a corresponding “wrapped” or “bridged” version on the new blockchain. For users, this introduces an issue of incompatibility between bridged version and an extra layer of risk. The security and reliability of bridged USDT depend entirely on the third-party bridge operator, not on Tether itself. If a bridge is hacked or compromised, users could lose their bridged USDT, and Tether would not be responsible for these losses. Only USDT on natively supported blockchains is directly backed and redeemable by Tether, so holding bridged USDT means relying on the bridge’s solvency and security.

Additionally, Tether has discontinued USDT minting on several blockchains due to low usage or security concerns. These include the Omni Layer on Bitcoin, Kusama’s AssetHub, Bitcoin Cash’s Simple Ledger Protocol (SLP), EOSIO.TOKEN on EOS, and Algorand. While redemptions may be available for a limited time, new USDT tokens are no longer being issued on these networks.

Although USDT appears to be available on a wide range of blockchains, only a select group is natively supported by Tether. On all other chains, users are interacting with bridged versions of USDT, which come with additional risks that do not apply to the native tokens.

1.2 Bridged USDT is Increasing

Source: Tether: Circulating and stats - DefiLlama

The circulating supply of USDT on Ethereum currently stands at approximately $64.94 billion, and among the supply, about $8 billion worth of USDT has been bridged to other blockchains. For example, on the BNB Smart Chain (BSC), around $5.2 billion in USDT is minted through the BSC Bridge. In addition, 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 the movement of USDT between chains.

From Tether’s perspective, this growing use of bridged USDT presents significant management challenges. Tether can only directly monitor and control the USDT issued on networks they natively support. Once USDT is bridged to other chains, particularly through third-party bridges, Tether loses direct oversight of those tokens. This fragmentation makes it increasingly difficult for Tether to track the total supply, ensure compliance, and manage risks across the expanding number of blockchains and bridging protocols.

Ultimately, while the rise of bridged USDT is enhancing liquidity and interoperability across the crypto ecosystem, it also introduces new complexities for Tether as the issuer.

1.3 Tether is Leaking Value to Tron

Source: Tron Gas used | Token Terminal

Stablecoins are the backbone of on-chain finance, acting as the primary medium for settlements, trading, and lending. Nowhere is this more pronounced than on Tron, where stablecoin-related transactions account for an overwhelming majority of all on-chain activity-USDT alone represents over 98% of the stablecoin supply and nearly all transaction volume on the network.

Currently, the total stablecoin market cap on Tron is $71.5 Billion, with USDT dominating at more than $70.9 billion in circulation, far outpacing other stablecoins like USDD, TUSD, and USDC, which collectively make up only a small fraction of the market. This dominance is so complete that Tron can be described as a "USDT chain," with 98% of transaction fees and 99% of transactions driven by USDT transfers. As a result, Tron captures over $2.5 Billion in annual fee revenue from this activity.

But this raises a critical question: What if Tether, the issuer of USDT, launched its own blockchain, capturing not only the transaction fees but also the ecosystem value currently accruing to Tron? Tether has already demonstrated its ability to rapidly mint and move billions in USDT to meet market demand, often shifting supply between blockchains to optimize for cost and efficiency. If Tether were to incentivize major CEXs, which currently hold about 30% of USDT on Tron, to migrate their USDT holdings to a Tether-operated chain, it could redirect both network activity and fee revenue to its own ecosystem.

Such a move could fundamentally reshape the economics of stablecoin infrastructure. For exchanges and users, migrating to a Tether-native chain could mean lower fees, faster settlements, and potential rewards for early adoption. For Tether, it would unlock a new revenue stream and greater control over its stablecoin’s environment.

In the long run, this could create a win-win: users and exchanges benefit from a purpose-built, efficient settlement layer, while Tether captures the value currently leaking to third-party blockchains. Given the scale of USDT’s dominance on Tron and the broader crypto ecosystem, the opportunity for Tether to internalize this value is both significant and increasingly plausible.

2. Tether’s Strategy - Expand Both Horizontally and Vertically

To address the issues that Tether USDT is facing, there are two potential solutions. The first is to expand horizontally by implementing a better cross-chain strategy across the existing 300+ blockchains and continuing to grow. The second is to expand vertically by owning the infrastructure stack to capture more value, and provide more services.

2.1 USDT0 - Horizontal Expansion with LayerZero OFT

Source: Protocols | USDT0 | LayerZero Message Explorer

Tether launched their multichain version of USDT, called USDT0. This token now leverages LayerZero’s OFT token framework to easily expand to other blockchains or rollups. Since its launch a month ago, its TVL Circulating Supply is $971 Million, and total cross-chain transaction volume has surpassed $3 Billion. Now it is cheaper than ever to send USDT across different blockchains.

This is made possible through LayerZero's OFT standard, which allows tokens to be locked or burned in a source chain and minted in another chain. USDT can be locked in natively supported chains like Ethereum, Tron, and TON, and then minted as USDT0 in unsupported chains like Arbitrum, Optimism, and Berachain. For transfers between unsupported chains, the system uses a burn-and-mint mechanism. This approach simplifies supply management across different networks while reducing the need for native support.

Source: USD₮0 Mechanism Design Review | Chaos Labs

LayerZero enables "Issuer-Aligned Interop," where cross-chain operations of USDT0 are verified by two entities: USDT0 DVN and LayerZero DVN. This means cross-chain transfers can only occur when approved by the infrastructure operated by the issuer, USDT0.

For USDT0 to support a new chain, two conditions must be met: LayerZero must support the chain, and the team must either find or start supporting a DVN route for it. With LayerZero currently supporting around 131 mainnets including most major networks, USDT0's expansion is now more of a strategic decision than a technical hurdle.

2.2 Legacy Mesh and Plasma - Building a Hub for USDT

USDT is expanding vertically by backing two key initiatives: building the Legacy Mesh for USDT0 and Plasma, a sidechain on Bitcoin. The Legacy Mesh functions as a central network connecting existing USDT deployments with USDT0, a multichain version of USDT for chains that lack native support for USDT. Arbitrum acts as the central hub, facilitating transfers between chains by aggregating liquidity pools and using LayerZero's messaging protocol. This enables users to move assets seamlessly between Ethereum, Tron, and TON to USDT0-supported networks (e.g., Artbirum, Ink, Berachain). With Arbitrum's connections to Ethereum, Tron, and TON, it unifies 98% of all USDT supply, while the Legacy Mesh creates a cohesive ecosystem for stablecoins across established and emerging blockchains.

The second initiative, Plasma, takes a bolder approach by building its own blockchain as a Bitcoin sidechain focused on payment efficiency. USDT0 will be supported on Plasma from day one and will maintain direct connections with USDT on Ethereum, Tron, and TON.

Together, the Legacy Mesh and Plasma create a comprehensive liquidity and ecosystem hub for USDT. Arbitrum serves as the liquidity backbone, while Plasma optimizes transaction throughput and develops its own ecosystem of dapps. This synergy enables USDT to expand its reach in terms of both liquidity and applications.

Source: Introducing The Legacy Mesh: Your USDT Anywhere, Now Everywhere — USD₮0

3. Interop is “The First Step” for Stablecoin’s Expansion Strategy

Stablecoin made fiat a semi-global money, and Interop is making Stablecoin a true-global money. As the blockchain ecosystem has expanded to over 300 networks, stablecoin use cases and user bases have become increasingly fragmented. For stablecoin issuers, focusing solely on a single chain may work in the early stages, but long-term growth and adoption hinge on a cross-chain strategy that allows their tokens to move seamlessly across multiple blockchains.

A prime example of this is the Wyoming Stable Token (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 others. This interoperability not only broadens WYST’s user base but also lowers operational costs and improves the experience for both institutions and individuals who need to transact or settle payments across different networks.

The WYST example highlights a broader industry trend: interop strategy must go hand-in-hand with issuance strategy. As stablecoins aim for greater adoption, LayerZero, with its customizable infra and broad chain support, is becoming the entry point for cross-chain expansion, enabling issuers to reach new markets and use cases efficiently.

Source: Accelerate Asia Stablecoins with Interoperability | Four Pillars