Tether’s growth is reaching new all-time highs across multiple Blockchains. However, the first protocol there was to support Tether is lagging behind. According to Coin Metrics, Tether’s supply on Omni Layer, built on top of Bitcoin, has fallen more than 50% for the past 12 consecutive months.
Omni Layer Tether supply peaked in mid-2018 at just over $ 3 billion. Tether tokens were first released on Omni Layer in October 2014. At the time, this was the only protocol supported by stablecoin.
While fluctuations in the supply of stablecoins and transaction counts occur regularly, it is unusual for there to be a contraction in supply for months, especially for Tether.
What happened to the Tether supply? Why was it not kept in Omni Layer?
It should be noted that Omni Layer was the only one to support Tether for more than three years, until the stablecoin was launched as an ERC-20 token on Ethereum in November 2017. Thus, in less than two years, Ethereum’s participation in Tether’s total circulating supply overshadowed Omni Layer.
It can also be said that demand influences, since in each Blockchain it is different. In such a way that this could explain the uneven growth in the different protocols.
Likewise, performance concerns in Tether-compatible protocols appear to be driving demand on platforms like Ethereum, while moving away from Omni Layer.
In the words of Paolo Ardoino, CTO of Tether, transaction fees and confirmation times were the main reasons why Tether decided to evolve its stablecoin into a cross-chain asset compatible with multiple protocols.
What was the problem with Omni Layer?
According to Ardoino, traders were routinely concerned about the sudden spikes in Bitcoin’s transaction fees causing arbitrage transactions to become “insanely expensive.”
The other concern was confirmation times. Many times the time it took for some exchanges to credit Omni Layer transactions was too much, enough to make traders miss out on an opportunity in the market. The latter is due to the fact that they waited up to three Bitcoin blocks to be able to credit the transaction.
Omni Layer works for those who want robustness in their transactions, but it does not work as well for those who are looking for low rates and speed of transactions using faster blocks.
Ethereum currently owns the bulk of Tether’s supply, with almost 3.5 billion tokens issued on Ethereum since February. Tron, a similarly optimized protocol for token issuance, has recently held almost as many tokens as Omni Layer.
Being a stablecoin, Tether’s USDT appeals to those who already trust the provenance of the tokens the most, so the speed of the transaction and the low fees are two of the characteristics that investors are most looking for.
To date, Tether has been established as a stablecoin for different Blockchains. Specifically, it works with eight different protocols, among which are Omni Layer, Ethereum, Litecoin, Tron, among others.
All this has been part of a strategy to make your stablecoin more competitive, through simple growth. The more compatible Blockchains there are, the more possible interested there may be in Tether, since there is more access to it.
Thus, the perspectives suggest that USDT will continue to be a multi-Blockchain asset. Additionally, the presence of this stablecoin on Ethereum is so extensive, that it is difficult for it to disappear from its Blockchain in a long time.
All of the above does not prevent Omni Layer from remaining important to the creators of Tether, since it was the first platform they had to mobilize stablecoin. However, times have changed and hence the importance of the company’s strategy of expanding to other Blockchains.