The Reaction to USDT on Bitcoin and Lightning via Taproot Assets

The news of USDT (Tether) coming to Bitcoin and Lightning via Taproot Assets has generated mixed reactions. Many believe it benefits Bitcoin, as indicated by a small survey conducted on X, while others share concerns.

> Tether (USDT) on Bitcoin and Lightning is:
> (Please share why in the comments and please RT after you vote.)
> — Frank Corva (@frankcorva) February 13, 2025

I find myself among those who are skeptical about it. However, I’ve tried to remain open-minded. Recently, I interviewed Jesse Shrader, co-founder and CEO of Amboss, a provider of intelligent payment infrastructure for Lightning payments. Jesse supports USDT’s integration into Bitcoin and Lightning, and he shared several points:

• The proliferation of USDT indicates a global demand for U.S. dollars.
• USDT is a substantial payment method, processing over $10 trillion in payments in 2024, surpassing MasterCard, with some of these payments transitioning to Lightning.
• USDT could enhance liquidity in the Lightning Network, promoting its growth and enabling larger transactions.

From a business standpoint, these points are compelling. I believe individuals should have the freedom to use their preferred currency, and the arguments for USDT on Lightning are valid from a practical perspective.

However, there are costs associated with introducing USDT to Bitcoin and Lightning. These costs manifest in both technical and philosophical dimensions.

On a technical level, running USDT through Bitcoin and Lightning might jeopardize Bitcoin’s security. A potential future hard fork similar to the Blocksize War could lead major economic nodes (like Coinbase) to support the “Tether fork.” This shift could pose long-term risks to Bitcoin’s security. Users of USDT would likely support this fork, potentially nullifying the USDT on the main chain.

Lyn Alden discussed this in her essay “Proof-Of-Stake And Stablecoins: A Blockchain Centralization Dilemma.” She stated that custodians can nullify the value of stablecoins on the side of the fork they don’t recognize as legitimate. While she focused on smart contract chains, the principle could apply to Bitcoin as well. A similar scenario occurred with Ethereum during “The Merge,” when stablecoin issuers only supported tokenized U.S. dollars on the new chain.

The potential for Tether to gain undue power over Bitcoin is concerning.

Philosophically, I oppose USDT’s presence on Bitcoin. Bitcoin was created as a response to the 2007-2009 Great Financial Crisis, intended as an alternative to the U.S. dollar during a time when the dollar was being significantly devalued to rescue failing banks. Bitcoin was designed to be a currency that the government or central banks couldn’t inflate at will. Integrating USDT, which bolsters U.S. dollar dominance globally, seems morally misaligned with Bitcoin’s foundational principles.

In conclusion, while I understand the practical reasons many support USDT’s inclusion on Bitcoin and Lightning, I believe they overlook the significant risk to Bitcoin’s security and its core value proposition.

This article is a Take. Opinions expressed are entirely the author’s and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.