In a tweet today, Tether revealed that it’ll be partnering with Binance to facilitate a chain swap. As indicated, the collaboration will see the conversion of 1.6 billion USDT from Tron to the Ethereum network.
Meanwhile, the firm established that the latest development will not affect the total supply of USDT. According to findings, Tether often carry out a chain swap in an attempt to ensure that the total USDT in circulation is backed with a reserve ratio of 1:1.
Relevance of the chain swap
Accordingly, this chain swap will see Tether balance the spread on its USDT on the two networks. In a blog post attached to the tweet, Tether explained the rationale behind the chain swap. Further, the firm explained that the mechanism will aid trader to access the numerous blockchains that support the amount of USDT in their possession. With that, Tether said it will help them to use their holding of the stablecoin on other supporting blockchains.
Cryptocurrency exchanges and individual holders often request a chain swap to move their holdings between USDT-supported networks. Upon the completion of a chain swap, Tether is mostly left with excess USDT between the two networks. In a bid to maintain the dollar peg of the stablecoin, the firm mostly retain the excess USDT in its treasury wallet or burn them.
However, if Tether decides to retain the surplus tokens, the firm will be compelled to upgrade its treasury to balance the 1:1 reserve ratio. Likewise, burning these tokens implies that they’ll no longer be in circulation, barring the need to upgrade its treasury.
Tether’s effort to maintain its stablecoin market dominance
In the past, Tether has engaged in numerous burning exercises in a bid to maintain the circulation of USDT. In a report last month, Binbits revealed how the firm burned about $2 billion USDT. The report illuminated how chain swap excesses mandated the firm to carry out the burning process. USDT has been able to maintain its market dominance in the stablecoin sphere by ensuring transparency in its business endeavours.
Also, in another report in May 2022, Binbits disclosed how Tether extended USDT support to the Polygon network. Then, the expansion availed the use of USDT to Polygon users. Presently, the stablecoin is supported by Polygon, Bitcoin, Ethereum, EOS, Tron, Algorand, and OMG.