The news of USDT (Tether) coming to Bitcoin and Lightning via Taproot Assets has been met with various reactions.
Some believe it’s good for Bitcoin (most, actually, based on a small survey I conducted on X; yes, I know the sample size isn’t large enough for the results to be significant. I’M SHARING IT ANYWAY), while others aren’t so enthused about it.
Tether (USDT) on Bitcoin and Lightning is:
(Please share why in the comments and please RT after you vote.)— Frank Corva (@frankcorva) February 13, 2025
“Others” includes me — I’m not so enthused about it.
That said, I’ve tried to be open-minded.
I even recently profiled Jesse Shrader, the co-founder and CEO of Amboss, a company that provides intelligent payment infrastructure for payments made over Lightning, who’s a proponent of USDT on Bitcoin and Lightning, in efforts to see what I might be missing about the benefits of being able to transact with digital U.S. dollars over Lightning.
In my interview with Shrader, he made the following points:
- The proliferation of USDT has proven that there’s a demand for U.S. dollars globally
- USDT is a massive payment mechanism; it processed over $10 trillion in payments in 2024, more than MasterCard, and some percentage of those payments will now be made over Lightning
- USDT will bring more liquidity to the Lightning Network, which will help the network grow and handle bigger payments
From a business perspective, it’s hard to argue that the above aren’t good reasons to bring USDT to Lightning. And, as someone who believes that people should be free to use whatever money they want, I can’t argue with them when looking at them through a practical lens.
However, I do believe that bringing USDT to Bitcoin and Lightning comes at a price.
One dimension of that price is technical, while the other is philosophical.
On the technical level, running USDT over Bitcoin and Lightning potentially puts Bitcoin’s security at risk.
If we see another Bitcoin hard fork comparable to the one we saw during the Blocksize War, larger economic nodes on the Bitcoin network, like the one operated by Coinbase, which manages much of the bitcoin that backs the U.S. spot bitcoin ETFs, may opt to support the “Tether fork” of the network, which could also include other changes to the network that could jeopardize Bitcoin’s security in the long run.
In other words, if the likes of Coinbase, Tether and some other major players in the Bitcoin space support and push for the “Tether fork,” other major economic nodes will likely follow suit.
What is more, everyone using USDT on Bitcoin and Lightning would also likely support that side of the fork, because the USDT that remains on the chain of the non-”Tether fork” will likely be nullified.
Lyn Alden wrote about this in her essay “Proof-Of-Stake And Stablecoins: A Blockchain Centralization Dilemma.”
In the piece she stated “custodians can nullify the value of all stablecoins on whichever side of the fork they don’t view as the correct one.”
Granted, Alden was referring to smart contract blockchains like Ethereum and Solana that rely heavily on DeFi, which stablecoins are a major component of, when she wrote this, but the same would apply to Bitcoin. (Alden was correct in this claim, as we saw when Ethereum shifted from a Proof-of-Work to Proof-of-Stake consensus mechanism during 2022’s “The Merge.”
Post-Merge, stablecoins issuers like Circle and Tether only continued to back the tokenized U.S. dollars on Ethereum, and not EthereumPoW (ETHW), the older chain that continued running the Proof-of-Work consensus algorithm.)
The same type of scenario could play out with Bitcoin in the event of a chain split, giving Tether an inordinate amount of power over Bitcoin.
My other reason for not liking USDT on Bitcoin is a philosophical one.
Bitcoin, which was released into the world in the wake of the Great Financial Crisis of 2007-2009, was created as an alternative to the U.S. dollar.
At the time, the dollar was being printed en masse (i.e., devalued) to bail out the same banks that caused the crisis.
Bitcoin, money that can’t be printed at the whim of a government or central bank, was created to compete with the U.S. dollar, not to help buoy it.
Bringing USDT, a mechanism the U.S. government uses to prop up U.S. dollar hegemony around the world, to Bitcoin feels morally wrong to me — and I’m not here for it.
So, on a practical level, I get why some are in favor of USDT coming to Bitcoin and Lightning. I just think that many are missing the bigger picture in that Bitcoin has potentially both been put in a vulnerable position and has had part of its value proposition overshadowed (albeit maybe just temporarily) as a result.
This article is a Take. Opinions expressed are entirely the author’s and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.