What is USDT0?

06 March What is USDT0?

USDT0 is a bridged version of Tether’s USDT Stablecoin, designed to extend USDT availability to blockchains that are not natively issued. It works with the “Lock and Mint” mechanism. This means that the USDT is locked to Ethereum and an equivalent amount of USDT0 is cast in the destination chain. The system is equipped with Layerzero’s Omnichain Fungible Token (OFT) standard, which makes it easy to secure and seamless cross-chain transfers. Unlike standard USDT, USDT0 is not directly issued or redeemable by Tether, but is managed by EverDawn Labs, making it a clear asset that users need to exchange USDT0 and USDT conversion tools.

USDT0 aims to address the interoperability challenges of the blockchain ecosystem by making it easy to transfer stubcoins across different networks without relying on fragmented liquidity pools or traditional bridges. It has been introduced in blockchains such as Ink, Bellachine and Megaeth, and plans to expand to additional networks. The OFT standard ensures that USDT0 maintains 1:1 backing with USDT on Ethereum, and that the relocation is validated by a distributed security model that includes oracles and relays. This approach reduces the complexity of cross-chain transactions while enhancing liquidity management.

One important distinction between USDT0 is that it cannot be used for direct transactions. Instead, it acts as a transport mechanism to promote USDT movement through different ecosystems. Users can deposit USDT0 with a supported exchange such as Bitfinex, or exchange it for a standard USDT using withdrawals and currency conversion tools. This design allows for seamless use of USDT on networks where native publishing is not feasible, making it more flexible for users without compromising the underlying backing of Stablecoin.

The introduction of USDT0 will affect both blockchain users and platforms. It provides users with a more efficient and safer way to transfer stable values ​​across chains and reduce the risks associated with third-party bridges. For exchange and distributed finance (DEFI) platforms, simplify integration and liquidity management by integrating Stablecoin supply across multiple networks. While USDT0 reflects its focus on cross-chain interoperability, the distinction between standard USDT, particularly third-party issuer involvement, requires users to keep an eye on the underlying mechanisms and associated risks when interacting with assets.

What is a USDT0 token?

Unlike standard USDTs, which are issued and redeemed directly on supported networks such as Ethereum and Tron, USDT0 works through a “lock and mint” mechanism. When a user transfers the USDT to a non-native blockchain, an equivalent amount of USDT0 is cast in the non-native destination chain, and the original USDT is firmly locked to Ethereum. This ensures that each USDT0 token maintains a strict 1:1 support with USDT on Ethereum, and maintains a stable value peg in US dollars.

USDT0 is built using the OFT standard developed by Layerzero. This allows tokens to move seamlessly across multiple blockchains. This standard often includes liquidity pools, eliminating the need for traditional bridging solutions that can put users at risks such as bridge exploits and price slippage. Instead, USDT0 allows users to efficiently and securely transfer stubcoins between supported blockchains, and transactions are validated via a layer-zero decentralized messaging and verification system. The initial launch of USDT0 began with networks such as ink and Bellachin, with further expansion to additional blockchains expected.

The introduction of USDT0 addresses the growing demand for interoperability within the blockchain ecosystem, allowing USDT to operate more efficiently on different networks. It provides a practical solution for users looking to move stubcoins between ecosystems without managing fragmented bridging systems or liquidity pools. This development reflects the continuous evolution of Stablecoins as the blockchain industry continues to prioritize cross-chain capabilities and interoperability.

Let’s get started with USDT0:

• Create a bitfinex account here.
• Check your account with Basic Plus.
• In the Currency Conversion drop-down menu, select from.
• For the “to” drop-down menu, select USDT0 in either Arbitrum One or Ink.
• Please note that currently you cannot exchange USDT0 between the Arbitrum One and Ink variants.

USDT0 Tokenomics

USDT0’s Tokenomics is centered around a “Lock and Mint” model designed so that each USDT0 token is fully supported by Ethereum’s equivalent amount of USDT. This system maintains a strict 1:1 peg between USDT0 and USDT. When a user moves funds to USDT0, the corresponding USDT is locked to Ethereum and an equivalent amount of USDT0 is minted on the destination blockchain. This ensures that the total supply of USDT0 across all chains will always prevent comparable reserves of USDT and inflation or non-package creation. With this model, USDT0 acts as a stable representation of USDT across multiple networks, supporting interoperability without compromising the fundamental stability of the tethered ecosystem.

The Minting process begins when the user initiates a cross-chain transfer by locking the USDT to Ethereum. This is done through a smart contract that securely holds a locked USDT. Once a transaction is validated, the Layerzero messaging protocol sends a message to the destination chain. Upon receiving this message, the USDT0 contract for the target blockchain will create an equal amount of USDT0 tokens, reflecting Ethereum’s locked funds. This process is designed to be safe and reliable, and utilizes Layerzero’s OFT standard and dual verification network (DVN) to ensure that the correct amount of USDT is locked before USDT0 is issued on a new chain. This ensures that the token is not minted without proper collateral.

Redemption follows the reverse process. When a user attempts to return USDT0 to Ethereum or convert it to USDT, the USDT0 token in the source chain is burned. Once this burn is confirmed, a Layerzero message will be sent to the contract and will tell the user to release an equivalent amount of USDT, as it holds the Ethereum locked USDT. This combustion mechanism ensures that the USDT0 token is created only when backed up by the USDT and is destroyed upon redemption, ensuring that it maintains supply balance throughout the chain. This system prevents excessive issuance of USDT0, supports 1:1 backing, and enhances stability and reliability of tokens moving into various on-chain ecosystems.

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