Tron loses $1 billion Tether to Ethereum in chain swap

TRON may be in trouble, as excitement around Ethereum crowds out the competition.

Stablecoin provider Tether announced today a "chain swap" for $1 billion USDT dollar-pegged tokens from the TRON TRC20 token standard onto the Ethereum blockchain at the request of an undisclosed cryptocurrency exchange.

While not officially confirmed by Tether, clues on the blockchain point towards Binance as the exchange in question, which sent $600 million back to the Tether Treasury on the TRON blockchain. The swap comes as the booming DeFi market pushes Ethereum and many ERC20 tokens higher, pulling volume away from TRON as crypto traders hunt for moonshots and yield on the world’s second-largest blockchain network.

Tether’s token swap will reduce the supply of TRON-based TRC20 Tether tokens from $4.3 billion to $3.3 billion, while increasing Ethereum’s ERC20-based Tether supply to $8.5 billion. In the announcement, Tether stated that the overall supply of USDT, currently more than $12 billion, will remain unchanged from the swap.

Tether has minted billions of additional USDT tokens during the recent crypto run-up, increasing the supply from $10 billion on June 22 to more than $12.6 billion today, a more than 25% increase in just two months. Tether has been the single largest source of congestion on the Ethereum blockchain during that time, accounting for 14% of all transactions.

The OMG Network (formerly Omise GO) recently launched Tether transactions as an Ethereum Layer 2 scaling solution to move some of that traffic off of the main Ethereum blockchain in an effort to reduce transaction fees, but it’s unclear how the new influx of $1 billion Tethers will affect that plan.

TRON and its founder, Justin Sun, have been at the center of ongoing controversy over the fork of the popular Steemit crypto blogging platform, recently culminating in a lawsuit against centralized exchange Bitfinex seeking approximately $16 million.

Given the evidence pointing to Binance as the initiator of the billion-dollar chain swap, the move may come simply as the result of lower than expected TRON-related Tether trading on the world’s largest exchange my volume. (Representatives for Binance and Tether did not immediately respond to Decrypt's request for comment.)

But the move could also signal the beginning of a widening disconnect between Ethereum and its competitors, as rapid DeFi development drives accelerating adoption.