Tether is back on Bitcoin - Lightning Dominance Is Just Starting

Earlier today at the Plan B Conference in El Salvador, Tether made an announcement that has been years in the making. USDT is back on Bitcoin using Taproot Assets.

The next steps will be for Tether to mint the asset, which will be available initially via Bitfinex.

Tether's return to the Bitcoin ecosystem via Taproot Assets is not just a simple re-entry; it's a strategic pivot that could herald a new era for both Bitcoin's Lightning Network (LN) and the broader stablecoin landscape. 

With USDT now returning to the Bitcoin network in a way that's also interoperable with Lightning (it has no direct impact on bitcoin the asset - except that it’s massively bullish), users can enjoy the benefits of near-instant, low-fee transactions, which are critical for the practical use of stablecoins in everyday commerce or remittances. The integration is particularly beneficial in regions where financial infrastructure is either lacking or prohibitively expensive.

Having said that, the Lightning Network is probably not capable of handling the activity and user flow happening on competing chains like Solana or Tron. There's also the question of how well the Lightning Network will handle the increased load of stablecoin transactions without degrading performance or leading to centralization of node operations due to the need for higher liquidity.

The answer to this lies in one simple variable: Good infrastructure - and this is where Joltz comes in.

Also present at the Plan B conference, Joltz's early bet on Taproot Assets now looks prescient. Joltz introduces some notable advancements in the Bitcoin infrastructure ecosystem with its unique features. It's one of the only self-custodial mobile wallets supporting Taproot Assets, enabling users to manage multi-asset payments and swaps directly on Bitcoin. Beyond the standalone wallet, Joltz offers a software development kit (SDK) that could be integrated by other developers, reducing the time and cost involved in adding support for these assets, as well as Bitcoin on-chain and Lightning transactions. This could be beneficial for existing crypto wallets, asset issuers, stablecoin platforms, fintechs, payment apps, and exchanges, offering them a pathway to enhance their services with less development effort. Developers who want early access to the Joltz SDK can sign up here.

Similar to how Trump promised to free Ross on Day 1, we should demand that USDT be supported everywhere on Day 1, with good UX. Joltz will deliver on that - hopefully leading the way for others to see the scale of the opportunity that lies ahead for Bitcoin.

Now: Why should you even want stablecoins on Bitcoin?

The recent surge in meme coin activity on Solana has led to significant network congestion, pushing transaction fees to record highs. Solana's daily fee revenue hit nearly $78 million in late 2024, a direct result of the meme coin boom, but this came at the cost of higher transaction fees and occasional network congestion, challenging the user experience. Similarly, Tron has faced its own challenges with transaction fees. Tron's daily fee revenue has been reported to surpass $5 million, reflecting its significant role in handling stablecoin transactions but also highlighting the pressure on its heavily centralized network. We want those fees on Bitcoin, for miners and routing operators.

LN offers nearly infinite scalability by allowing transactions to occur off-chain, only settling on Bitcoin when necessary. This approach contrasts starkly with the scalability struggles of single-layer blockchains like Solana and Tron.

Furthermore, with LN, there's potential for new financial products. Locking Bitcoin within Lightning channels can open up yield-generating opportunities like liquidity provision (leasing) or even more complex financial instruments related to routing, providing users with new ways to generate NATIVE Bitcoin Yields not based on questionable practices. (Also see my recent report on Bitcoin Stablecoins.)

The announcement today underscores a broader lesson in the crypto space: while specific chains like Solana and Tron have made strides in speed and cost, true scalability requires time and a lot of investment into infrastructure to guarantee decentralization and trustless exit: otherwise what’s the point? Centralized chains lead on Stablecoins is temporary - Bitcoin is forever.

Tether's return to Bitcoin through Taproot Assets signifies a vote of confidence in Bitcoin's evolving capabilities. It's a testament to the innovation within the Bitcoin space and a reminder of how foundational technologies like Bitcoin can adapt and expand to meet new demands despite the yapping of high-time preference critics of LN focused on chasing distractions instead of true utility (meow).

This move could very well set the stage for further innovations in decentralized finance (DeFi) on Bitcoin (BTCfi), reshaping how we think about Bitcoin as the ultimate Settlement Layer for all types of economic activity.

Welcome back Tether!

This article is a Take. Opinions expressed are entirely the author's and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.

Guillaume's articles in particular may discuss topics or companies that are part of his firm’s investment portfolio (UTXO Management). The views expressed are solely his own and do not represent the opinions of his employer or its affiliates. He’s receiving no financial compensation for these Takes. Readers should not consider this content as financial advice or an endorsement of any particular company or investment. Always do your own research before making financial decisions.