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Cryptocurrency : Exchange processes 4 times more USDT transactions on Tron than on Ethereum

Key facts:

Bitfinex supports Ethereum rollups, but sending USDT on Tron is the most widely used option.

The largest supply of USDT is currently on the Tron network.

Cryptocurrency exchange Bitfinex processed 4 times more stablecoin Tether (USDT) deposits and withdrawals on Tron than on Ethereum last May.

This was reported days ago by the company’s chief technology officer, Paolo Ardoino. “The data is probably similar for most exchanges that support both blockchains,” he added.

This is so even when Bitfinex supports second layer solutions on Ethereum, specifically rollups, for deposits and withdrawals. With them, tokens of the Ethereum network can be moved, but without paying the high commissions of the main layer.

The fact is not surprising considering that at the beginning of 2021 they were already reported three times more USDT transactions on the Tron network than on Ethereum, although the metric only takes into account the movements in layer 1.

The development of new scalability solutions in Ethereum, apparently, is not as attractive for the generality of users as the low commissions natively offered by the Tron network.

Perhaps ease of use has to do with this, as the Tron ecosystem can be accessed with several popular wallets (Trust Wallet or Atomic Wallet, for example). Instead, special settings are required to use rollups.

Currently there 21 exchanges that support Tether deposits and withdrawals on the Tron network. Among them are Poloniex, Binance, Huobi, OKCoin, Kukoin, and OKex.

USDT on Tron: less commissions, more centralization

From the point of view of decentralization, The use of Tether in Tron is a disadvantage, as this blockchain is more centralized than Ethereum. At the time of writing, as can be seen in the TronScan scanner, there are 1,332 Tron nodes. On Ethereum, the number is 4,015, according to the EtherNodes report.

The arrival of Tether to Tron, under the TRC-20 protocol, occurred in March 2019, as reported by CriptoNoticias at that time. Previously, the currency that replicates the value of the US dollar it was available on Omni (a Bitcoin side network) and on Ethereum. By the middle of the current year, USDT is expected to be launched on the Avalanche blockchain as well.

Finance specialist Lyn Alden, founder of Lyn Alden Investment Strategy, has drawn attention to “the ongoing migration from stablecoins to increasingly less expensive and increasingly centralized blockchains.”

The executive accompanies her comment with a graph from the blockchain analysis firm, Coin Metrics, which shows the supremacy that the three aforementioned networks (Omni, Ethereum and Blockchain) were having in the supply of USDT, in chronological order .

The supply of Tether (USDT) tends to migrate to networks with lower commissions and greater centralization. Source: coinmetrics.com

“If the escrow service is centralized anyway, users don’t seem to particularly care about the blockchain it’s running on either, as long as it works and the fees are low.”

Lyn Alden, founder of Lyn Alden Investment Strategy.

The Argentine bitcoiner and developer Nicolás Bourbon agrees with Alden’s explanation and adds an argument why, according to him, This migration to cheaper and more centralized networks is mainly observed in stablecoins. “With stablecoins, every penny you lose in fees is a permanent loss, and those stablecoins typically need to be moved many times rather than just buying and hodlting,” he explains.

Something similar maintains the researcher Vijay Boyapati. The former Google engineer says that “for many people, subjecting their savings to the risks associated with centralization is tolerable when it is temporary.”

Still, the Coin Metrics report Alden refers to, which was released on June 1, indicates that although the supply of USDT on Tron is higher than Ethereum, ‘the Ethereum version of Tether has been worth more than transfer in recent weeks. According to the analytics firm, this “suggests different use cases for the Ethereum and Tron versions of Tether.”

Although Coin Metrics does not give clues to these different use cases, one possibility is the use of USDT for the realm of decentralized finance (DeFi). There, Ethereum, with Uniswap as its flagship platform, maintains primacy over other blockchains.

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