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Tether Holdings, the blockchain start-up behind the issuance of the USDT stablecoin, has announced its plans to conduct a major chain swap for the token. Per the announcement, a total of $750 million worth of USDT will move from the Tron (TRX) blockchain to the Ethereum (ETH) protocol.
In few minutes Tether will coordinate with a 3rd party exchange to perform a chain swap, converting from Tron to Ethereum ERC20, for 750M $USDt.
— Tether (@Tether_to) June 12, 2023
The #tether $USDt total supply will not change during this process.
Learn more about chain swapshttps://t.co/abfgnELSvi
Tether was largely silent on why it wanted to conduct this swap, a move that has sparked some assumptions in the community. While Tether has conducted these chain swaps for years, it still reassured its community that the total supply of the USDT stablecoin will not decline.
USDT remains the industry's first and biggest stablecoin, with its market capitalization pegged at $83.37 billion. The usage of the stablecoin has skyrocketed over the past few years, and within that time, Tether has made concerted efforts to shift its reserve portfolios in a bid to drive more trust in its ecosystem.
Of the hypothesis being shared as to why the USDT is being swapped, the most logical remains the move to rebalance the liquidity base of USDT on Ethereum by taking from the region of surplus to the region of scarcity.
Basic ideals of on-chain swapping
In explaining the core ideals of the USDT chain swap, Tether said the majority of the swaps can be completed on trading platforms that have support for the respective chains the user desires. However, for more sophisticated swaps, it may have to step in to help cushion the imbalance in liquidity across the different chains.
Tether has been deemed a very controversial stablecoin issuer, but luckily, the on-chain swaps take place online and can easily be tracked and verified. Tether has made headlines, for a positive reason, as it revealed it recovered about $20 billion in losses earlier this month.
The stablecoin issuer also has a functional partnership with Xapo Bank, which adopted the Tether payment rail in place of SWIFT.
Vladislav Sopov