USDT Wrapped Arrives on Lightning Network to Challenge Tron and Ethereum
August 8, 2024
Speed Wallet, a company within the stablecoin market valued at $165 billion, has entered the scene by introducing a wrapped version of USDT on Bitcoin’s Lightning Network, a Layer 2 solution. This move was made possible through the utilization of Taproot Assets, a developer suite by Lightning Labs that facilitates stablecoin transactions on the Bitcoin network.
Jesse Shrader, co-founder of Lightning Network explorer Amboss, highlighted the significance of this development, emphasizing the potential for rapid currency competition and the emergence of a new era of Free Banking tailored for the digital age. Shrader commended the Speed Wallet team for their focused efforts in becoming the first to enable stablecoin assets over the Lightning Network, noting the subsequent influx of builders offering varied solutions at an accelerated pace.
One of Speed Wallet’s primary objectives is to redirect stablecoin usage and capital currently tied up in networks like Tron, Ethereum, and Solana by leveraging the efficient and cost-effective Lightning Network. Ryan Gentry, responsible for business development at Lightning Labs, explained that the Taproot Asset USDT is collateralized by Ethereum USDT, which in turn is backed by Tether’s funds held by Cantor Fitzgerald. Speed Wallet employs a trusted custodial bridge to utilize USDT on the Lightning Network, a move that Gentry described as significant.
Despite its initial promise as a solution to Bitcoin’s scaling challenges, the Lightning Network has faced sluggish adoption rates. Users have cited usability issues such as transaction failures, alongside the prevailing perception of Bitcoin primarily as a store of value rather than a medium for transactions. Data from mempool.space indicates that Bitcoin locked in Lightning channels has maintained a stable average deposit of 5,000 BTC since September 2022, with a decline in the number of channels from 81,000 to 48,000 during the same period, signaling reduced usage and signs of centralization among top liquidity providers.
The addition of USDT-L on Lightning represents a potentially transformative development. Shrader noted the evolving divergence between Bitcoin as an asset and as a monetary technology, facilitating seamless global movement of various monetary assets. Stablecoins, pegged 1:1 to fiat currencies, are widely regarded as a pivotal use case for cryptocurrencies, with a combined market capitalization of $165 billion, predominantly concentrated in leading assets like USDT and USDC.
USDT stands out as the most traded cryptocurrency in terms of 24-hour volume, surpassing Bitcoin. The introduction of USDT-L on Lightning Network has the potential to invigorate the network by capturing a portion of the substantial trading volume associated with USDT on other platforms, offering Bitcoin enthusiasts the payments-centric Layer 2 solution they have long championed.
