The announcement regarding USDT (Tether) being introduced to Bitcoin and Lightning through Taproot Assets has elicited a range of responses.
Some assert it’s beneficial for Bitcoin (most actually, according to a small poll I conducted on X; yes, I’m aware the sample size isn’t large enough for conclusive results. I’M SHARING IT ANYWAY), while others are less excited about it.
Tether (USDT) on Bitcoin and Lightning is:
(Please explain your thoughts in the comments and kindly RT after you vote.)
— Frank Corva (@frankcorva) February 13, 2025
“Others” includes myself — I’m not particularly enthusiastic about it.
That said, I have endeavored to keep an open perspective.
I even recently featured Jesse Shrader, co-founder and CEO of Amboss, a firm that delivers sophisticated payment infrastructure for transactions made over Lightning, who supports USDT on Bitcoin and Lightning, in an attempt to discover what I might be overlooking regarding the advantages of transacting with digital U.S. dollars over Lightning.
In my discussion with Shrader, he highlighted the following points:
- The surge of USDT has demonstrated a global demand for U.S. dollars
- USDT is a significant payment instrument; it managed over $10 trillion in transactions in 2024, surpassing MasterCard, and a portion of those payments will now be executed over Lightning
- USDT will inject more liquidity into the Lightning Network, assisting its growth and enabling it to process larger transactions
From a commercial standpoint, it’s challenging to dispute that the aforementioned reasons aren’t valid justifications for integrating USDT into Lightning. Moreover, as someone who advocates for the freedom to use any currency, I can’t contest these viewpoints when viewed through a pragmatic lens.
Nevertheless, I do contend that the introduction of USDT to Bitcoin and Lightning comes with certain costs.
One aspect of that cost is technical, while the other is philosophical.
On a technical front, running USDT over Bitcoin and Lightning may potentially compromise Bitcoin’s security.
If we encounter another Bitcoin hard fork similar to the one witnessed during the Blocksize War, larger economic nodes on the Bitcoin network, like the one managed by Coinbase, which oversees much of the bitcoin that underpins the U.S. spot bitcoin ETFs, may decide to support the “Tether fork” of the network, which could also entail other modifications that might endanger Bitcoin’s security in the long term.
In other terms, if entities like Coinbase, Tether, and some other prominent players in the Bitcoin ecosystem endorse and advocate for the “Tether fork,” it is likely that other significant economic nodes will follow suit.
Furthermore, everyone utilizing USDT on Bitcoin and Lightning would also likely endorse that segment of the fork, as the USDT remaining on the non-”Tether fork” chain will probably be rendered worthless.
Lyn Alden discussed this in her article “Proof-Of-Stake And Stablecoins: A Blockchain Centralization Dilemma.”
In her writing, she noted, “custodians can invalidate the value of all stablecoins on whichever side of the fork they don’t regard as the correct one.”
Admittedly, Alden was referring to smart contract blockchains like Ethereum and Solana that heavily depend on DeFi, which is a significant component of stablecoins, when she made this point, but the same reasoning would apply to Bitcoin. (Alden was accurate in this assertion, as evidenced when Ethereum transitioned from a Proof-of-Work to Proof-of-Stake consensus model during 2022’s “The Merge.”
Following the Merge, stablecoin providers like Circle and Tether exclusively continued to back the tokenized U.S. dollars on Ethereum, not EthereumPoW (ETHW), the older chain that continued operating on the Proof-of-Work consensus algorithm.)
A similar scenario could emerge with Bitcoin in the event of a chain split, granting Tether excessive influence over Bitcoin.
My additional reason for opposing USDT on Bitcoin is rooted in philosophy.
Bitcoin, which was introduced to the world in the aftermath of the Great Financial Crisis of 2007-2009, was designed as an alternative to the U.S. dollar.
At that time, the dollar was being printed en masse (i.e., devalued) to rescue the very banks responsible for the crisis.
Bitcoin, a form of currency that cannot be printed at the pleasure of a government or central bank, was created to compete with the U.S. dollar, not to support it.
Introducing USDT, a tool the U.S. government employs to uphold U.S. dollar dominance globally, to Bitcoin feels ethically inappropriate to me — and I’m not in favor of it.
Therefore, on a practical level, I understand why some advocate for USDT’s incorporation into Bitcoin and Lightning. I just believe that many are overlooking the broader implications that Bitcoin has potentially both been placed in a precarious state and has had part of its value proposition obscured (albeit perhaps only temporarily) as a consequence.
This article represents a Take. The opinions expressed are solely those of the author and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.
