Currently, USDT0 is only obtained by moving from Ethereum to Kraken’s Ink, L2.
USDT0 is pegged 1:1 to the value of USDT.
Tether, the company that issues USDT, announced the launch of a stablecoin derived from the original, called USDT0, designed to operate on various cryptocurrency networks. To achieve this, it uses OFT (Omnichain Fungible Token), a standard of the network created by LayerZero.
This new version of USDT was developed by Tether in collaboration with LayerZero, a team of developers that creates interchain (cross-swap) solutions and who are building the so-called Omnichain u “Omnichain”. This is a network that seeks to interconnect various networks (ideally, all possible networks) of cryptocurrencies into a single ecosystem.
This solution, which was initially launched on Ink (the second layer created by the Kraken exchange) “spreads USDT across new blockchains, enables a seamless experience for users and developers, and always maintains a 1:1 backup with USDT on Ethereum,” according to the announcement press release.
In practice, the existence of USDT0 will involve in the future the diffusion of a 1:1 standard token pegged to USDTstablecoin that in turn is 1:1 anchored to the price of the dollar.
Also will give greater presence to USDT on trading platforms decentralized finance (DeFi) and other protocols spread across different ecosystems, according to Paolo Ardoino, CEO of Tether.
“I believe USDT0 will help scale USDT support on many more blockchains, pushing the boundaries of interoperability.”
Paolo Ardoino, CEO of Tether.
Simply put, the goal of USDT design, using the omnichain framework, is to make it as easy as possible for users to move the value of a stablecoin from one network to another, without relying on technically cumbersome bridges or of wrapped tokens.
Of course, as the name implies, LayerZero is a different layer to the main networks that host its native currencies. Therefore, the tokens sent to this chain are “representations” of said tokens that are synchronized with the value and monetary supply of those.
For now, USDT0 is only available on Ink from the Ethereum network, so the swap window works as a simplified bridge that allows funds to be brought from Ethereum to LayerZero.
Presumably, this expansion of USDT through USDT0 will reach Berachain and MegaETH soon.
How does LayerZero work?
USDT0 uses the OFT standard (Omnichain Fungible Token), of LayerZero. This standard allows USDT0 to be transferred between multiple networks without the need to wrap assets, use intermediaries or liquidity pools.
The OFT Standard works by burning tokens on the source chain when an omnichain transfer is initiated, sending a message through the protocol and delivering a function call to the destination contract to mint the same number of burned tokens. This creates a unified provision across all networks that support OFT.
LayerZero, technical documents.
As the token is “issued” on the “omnicachain”, it can move to any side of it, since said chain is not limited by divisions such as those that exist between traditional networks (Bitcoin and Ethereum, for example), but that encompasses them.
However, USDT0 is only usable for now in Ink. The optimal utility of USDT0 will depend on LayerZero’s Omnichain allowing entry and exit to and from other cryptocurrency networks with the new Tether stablecoin.
