More than half of the Tether (USDT) stablecoin is now on the Tron blockchain.
Why USDT is moving towards Tron?
According to recent data from DeFi Llama, more than 50% of the USDT supply is on the Tron network, while less than 40% is on the Ethereum blockchain.
According to Patrick Scott, founder of Dynamo DeFi, the growing demand for USDT on Tron is due to its common use in many countries where USDT is difficult to access.
Another Twitter user pointed out that the practice is especially common in China.
The shift towards using Tron instead of Ethereum may also be associated with Ethereum transaction gas fees. Although gasoline prices has not risen significantly since April, Ethereum transactions are still more expensive than Tron.
Many exchanges offer USDT withdrawals as a TRC-20 token for a considerably lower fee. Until recently, Gate.io offered free USDT withdrawals through the Tron network.
Tron shows signs of growth
The increased use of USDT is not the only metric pointing towards the growth of Tron. According to data from DeFi Llamma, Tron’s total value locked (TVL) showed a significant increase from $4.11 billion to $5.04 billion, indicating a growing interest in the network.
TVL is an important metric in the DeFi space and reflects the amount of value locked in various protocols.
USDT reserve practices are often called into question
Stablecoins, such as Tether’s USDT, have become increasingly popular as they provide stable value to users, allowing them to avoid volatile fluctuations in the price of cryptocurrencies. However, the security of USDT has often been called into question due to suspicions of fractional reserve practices.
Unlike some of the other large stablecoin issuers, Tether has not followed through on its promises to publish third-party reports. As a result, many users have moved towards stablecoin alternatives like USDC.
This apparent lack of transparency has been a recurring theme in the cryptosphere, with many believing that Tether does not have full reserves for the USDT tokens it issues, accusing the company of “printing money” at will.
In fact, in October 2021, the US Commodity Futures Trading Commission (CFTC) imposed a $41 million fine on USDT for insufficient reserves. The CFTC found that during the period between 2016 and 2018, USDT only had enough reserves to back its token 27.6% of the time, leading to the fine.
Many users have started looking for more transparent and secure alternatives to USDT since the events that led to the demise of FTX. This could also be a contributing factor to the recent shift towards Tron’s dominance of USDT market share.
