USDT's fee-charging dispute: Tether's Plasma conspiracy

Author: Kevin, Movemaker Researcher; Source: X, @MovemakerCN

TL;DR

• Core Positioning: Plasma is a Tether-backed Bitcoin sidechain designed to become the ultimate settlement layer for USDT and Bitcoin.

• Business Motivation: Plasma's core goal is to help Tether recapture the billions of dollars in USDT transaction fees that are lost annually to public chains like Ethereum and Tron, achieving a strategic upgrade from "stablecoin issuer" to "global payment infrastructure."

• Technical Strategy: Robust Portfolio: Plasma doesn't pursue new, high-risk technologies, but instead integrates proven, industry-proven solutions:

         a. USDT Optimization: Utilizes "account abstraction" technology (Paymaster) to enable zero-fee transfers of USDT.

          b. BTC Support: Utilizes the validator network's cross-chain bridge architecture to introduce pBTC, and combines it with LayerZero to address the issue of fragmented BTC liquidity after cross-chain transactions.

• Grand application scenarios:

         a. Native BTC DeFi: Provides a safer and easier-to-use channel for institutions and retail investors to invest their Bitcoin in DeFi protocols and earn returns.

         b. Real-world payments: With zero-fee USDT, we target the two trillion-dollar markets of cross-border remittances and on-chain payroll. c. Challenging Traditional Finance: Launching Plasma One Neobank, offering high-interest savings and generous cashback on purchases, directly competing with payment giants like PayPal and Visa. Prospects and Challenges: a. Strengths: Top-tier resources and background, with a clear and ambitious narrative, and a focus on the two core assets of the crypto industry (USDT and BTC). b. Challenges: It will face fierce competition from existing ecosystems like Ethereum and Tron. User migration will take time and cost, and its financial products also face significant regulatory uncertainty. TGE Frenzy Review: Plasma's mid-year subscription event provides an important window into its initial market appeal. The "deposit first, apply later" admission mechanism objectively screened users with sufficient financial resources and a high willingness to participate. The event attracted approximately $1 billion in inflows within 30 minutes, demonstrating the market's high expectations for value and strong participation consensus before the project's mainnet launch. Subsequently, Plasma's partnership with Binance Earn, Binance's wealth management platform, marked another key market expansion. By launching a customized "Plasma USDT Lockup Product," Plasma not only secured the endorsement of a top centralized exchange but also directly reached its vast user base. The initial 250 million USDT allocation was quickly sold out within an hour, with subsequent issuance increasing to a cap of 1 billion USDT. This data demonstrates the successful transmission of market demand from high-net-worth early adopters to the broader retail market. The product's dual-income structure—daily settled USDT income and post-TGE XPL token rewards—effectively balances users' short-term profit expectations with long-term holding incentives. Plasma's performance during last week's TGE itself was phenomenal. The project has set an attractive threshold for inclusive participation: each participant is guaranteed to receive at least 9,300 XPL tokens. Based on the recent high price of $1.69, this translates to a minimum airdrop asset value of $15,700. This high-value, broad-based airdrop model has established a solid foundation for the XPL token's value and fostered positive market sentiment. Analyzing capital flows before and after the TGE, we observe two distinct phases. Before the TGE, stablecoin deposits within the network primarily consisted of cross-chain wrapped assets such as AETHUSDC (approximately 60%) and AETHUSDT (approximately 39%). Following the TGE, this week's data shows a decline in total stablecoin deposits by nearly $950 million. This large-scale capital outflow should be considered normal and expected market behavior, primarily due to short-term funds initially invested for arbitrage purposes taking profits after achieving their targets. However, what's more noteworthy is the subsequent strategic adjustments and capital structure optimization. The exit of short-term speculative capital has made room for the entry of long-term strategic capital. As Tether's primary gateway for on-chain USDT settlement, Plasma, in partnership with institutional liquidity providers such as Bitfinex, Flow Traders, and DRW, aims to build a stable, efficient, deep, and resilient financial infrastructure for the network. However, Plasma is collaborating with Tether to introduce native USDT and is collaborating with liquidity partners such as Bitfinex, Flow Traders, and DRW. USDT on Plasma increased from 4M to 37M in a week. Plasma's Mission: Solving the Core Pain Points of Web2 and Web3 Plasma boasts a strong strategic backing and precise market positioning. Plasma boasts a top-tier investor base, including Bitfinex (Tether's parent company), which has the strongest synergies with its ecosystem, as well as Peter Thiel's Founders Fund, a major player in mainstream tech investment, and Framework, a leading crypto-native venture capital firm. This unique investment portfolio provides Plasma with strong support in terms of capital, strategic alliances, and technical credibility, forming a significant competitive barrier to entry in its early stages. Leveraging these resources, the project team launched its flagship application-layer product, Plasma One, in September of this year. Positioned as a "native digital bank" for stablecoins, Plasma One's core mission is to build a seamless bridge between traditional finance and the crypto world. By partnering with Signify Holdings to issue Visa-approved physical bank cards, Plasma One expands USDT's use cases from on-chain to tens of millions of offline and online payment terminals worldwide. Furthermore, by offering zero-fee USDT transfers, an innovative "earn as you spend" account system, and up to 4% cashback on purchases, Plasma One precisely addresses the core pain points of existing crypto payment solutions and provides user incentives that rival those of leading fintech companies. When assessing Plasma's long-term potential, it's important to recognize that its tremendous initial success wasn't accidental, but rather stemmed from its deep insight into and precise response to dual market pain points. We can deconstruct its core narrative from two perspectives: Web2 (external market pull) and Web3 (endogenous strategic drive). 1. Web2 Perspective: Filling the Post-Legalization Payment Infrastructure Vacuum From an external market perspective, a decisive macro catalyst was the passage of the US Genius Act in July 2025. This legislation historically recognized stablecoins as a legal payment tool alongside debit card networks and the ACH system. However, the passage of this top-level regulation has only highlighted the significant lag in underlying infrastructure. USDT currently operates primarily on general-purpose public blockchains such as Ethereum and Tron. These networks aren't designed for high-frequency payments and suffer from three core flaws: Transaction friction: Users transferring USDT must hold and pay gas fees denominated in volatile assets like ETH or TRX, increasing the barrier to entry and cost uncertainty for non-crypto native users. Performance bottlenecks: The architecture of general-purpose chains cannot meet the scalability required for future large-scale payments. Compliance deficiencies: There's a lack of a protocol-level compliance and identity verification framework designed for institutional users. Against this backdrop, Plasma's strategic positioning is clear: to become a dedicated settlement layer built specifically for USDT, securely anchored by Bitcoin consensus, and designed to address all of these infrastructure bottlenecks. 2. A Web3 Perspective: Tether's Business Model Evolution and Value Return From an internal strategic perspective, Plasma is a key component in achieving a fundamental shift in the business model of its parent company, Tether. As the issuer of USDT, Tether has long enjoyed hundreds of billions in asset reserves and profited from them. However, the enormous network effect and transaction value it created were largely captured by underlying public chains like Ethereum and Tron in the form of transaction fees. This "market dividend," which Tether "gives away," represents a significant gap in its business model. Therefore, Tether's core motivation for promoting Plasma is to achieve vertical integration across the value chain and reclaim these long-lost economic benefits within its own ecosystem. This is not just about regaining fee revenue; it represents a complete strategic transformation: evolving from a passive "stablecoin liability issuer" to an active "global payment infrastructure operator" with control over network rules and business models. Through Plasma, Tether aims to build a closed-loop ecosystem, bringing USDT's issuance, circulation, settlement, and application scenarios under its control, thereby consolidating its business empire in the long term. How much has Tether actually "lost"? To understand the strategic necessity of Plasma, we must first examine the significant "value capture asymmetry" in Tether's current business model. USDT's network scale has reached unprecedented heights, with a circulating market capitalization of $170 billion and annual transaction settlement volume reportedly exceeding that of PayPal and Visa combined. However, there is a fundamental disconnect between the operations of this massive on-chain economy and the core revenue model of Tether, its issuer. Tether's current annual profit of approximately $13 billion comes largely from the 3-4% annualized return it earns from managing its reserve assets (primarily US Treasury bonds). While the absolute profits are substantial, this revenue model appears extremely passive and indirect compared to the network USDT supports, which generates enormous economic activity daily. Essentially, Tether has created the most liquid core asset in the crypto world, yet fails to directly benefit from its circulation. This is the fundamental pain point of its business model. This imbalance in value capture is manifested in the enormous externalities USDT generates for its host public chain. Tether's "Losses" on Ethereum: In the Ethereum ecosystem, USDT is a cornerstone source of liquidity for DeFi. USDT-related transfers and smart contract interactions contribute nearly $100,000 in gas fees to the Ethereum network daily, consistently accounting for over 6% of Ethereum's total transaction fees. This substantial and consistent revenue is captured by Ethereum's validator nodes, forming part of the economic incentive to maintain network security. However, as the source of value creation, Tether receives no share of the profits. Tether's "Losses" on the Tron Network: This phenomenon of value spillover is even more extreme on the Tron network. By optimizing transfer costs and speeds, Tron has successfully positioned itself as the primary retail payment and transfer network for USDT. USDT-related activities account for over 98% of the total transfer volume and gas consumption on the Tron network. It can almost be said that the Tron network's trading activity and economic model are entirely based on providing "settlement outsourcing services" for USDT. Leveraging this highly integrated relationship, Tron generated nearly $2 billion in annual revenue in 2024 alone. This enormous profit stems entirely from the massive demand for USDT, but again, it cannot be directly transferred to Tether's balance sheet. Strategic Conclusion: Plasma as the Inevitable Choice for Value Return In summary, Tether's direct motivation for launching Plasma was to correct this long-standing imbalance in value distribution. Third-party public chains like Ethereum and Tron effectively restrict Tether's full control over and rights to the profits of the massive stablecoin economy it has single-handedly created. Therefore, the establishment of Plasma is the core of Tether's strategy to achieve "vertical integration of the value chain." Its fundamental purpose is to: Reclaim the right to profits: Reclaim the USDT transaction fees, payment service fees, and related DeFi ecosystem revenue currently captured by networks like Ethereum and Tron and return them to its own system. Establishing Economic Sovereignty: Eliminating dependence on third-party public chains and building a self-sovereign, controllable financial infrastructure with USDT as its native asset. Upgrading the Business Model: Expanding from a single profit model focused on reserve management to a platform-based business model capable of capturing value across multiple dimensions, including transactions, payments, and application development. As the Plasma infrastructure matures, Tether aims to recapture the substantial market dividends it has ceded to external public chains over the years. This is not only a tactical move to address immediate pain points, but also a long-term strategic plan to ensure its core competitiveness in the future digital economy. Plasma's Two Fundamentals and Two Innovations Having clarified Plasma's strategic intent, we now analyze its fundamentals. Plasma's overall architecture is built around two core pillars: 1) USDT as the absolute priority asset backing, and 2) native integration of BTC. Therefore, any effective evaluation of Plasma's technical fundamentals must center around the following two key questions: Regarding USDT: How does Plasma provide superior utility to other networks? Does its technical implementation create a sustainable and difficult-to-replicate competitive advantage? Regarding BTC: What trade-offs does its "native support" solution make between decentralization and security? Are the trust assumptions it introduces industry-standard practices, or do they introduce new, untested risk models? 1. Core Network Architecture: The Cornerstone of Performance and Compatibility Before delving into the application layer, let's first examine the underlying network. Plasma employs two key architectural optimizations: Consensus Layer - PlasmaBFT: This is an original BFT consensus algorithm designed to significantly reduce transaction finality times. For a network focused on payments and settlement, high-speed finality is fundamental to ensuring user experience and commercial feasibility. Execution Layer - Reth Client: Plasma utilizes Reth, a high-performance Ethereum client written in Rust. This is designed to maximize the network's transaction processing capacity and execution efficiency while ensuring full EVM compatibility. These two underlying optimizations don't exist in isolation; together, they form a high-performance foundation that supports high-frequency USDT use cases and maintains native BTC cross-chain security. 2. USDT-First Strategy: Modular Applications, Not Technical Barriers To enhance USDT's utility, Plasma's approach is to adopt the widely discussed and accepted "account abstraction" standard within the Ethereum community, specifically proposals EIP-4337 and EIP-7702. By integrating the Paymaster functionality within the account abstraction framework, Plasma enables key features such as "zero-fee USDT transfers" and "allowing users to pay for gas with various tokens, including USDT." This analysis leads us to the conclusion that while these features significantly enhance the user experience, the underlying technology is not unique to Plasma. This is a typical modular design approach—prioritizing the adoption of cutting-edge, established, and consensus-building protocols rather than developing a closed system in-house. Therefore, from a fundamental technical perspective, Plasma's advantage in stablecoin functionality stems not from an insurmountable technological moat, but rather from the rapid and effective integration of existing advanced technologies. 3. Native BTC Support: Recombination and Optimization of Proven Solutions For any public chain to achieve native BTC support, the path to implementation inevitably involves some form of cross-chain bridge. Plasma emphasizes that its cross-chain bridge solution avoids the drawbacks of a single centralized custodian and small, high-risk multi-signature wallets: Security Model: Security is provided by a decentralized network of validators, each of which independently runs a full Bitcoin node. Asset Control: The treasury is not controlled by any single party, and BTC deposits and withdrawals must be collectively approved by a quorum of validators via threshold signatures. A key difference between Plasma's solution and other general-purpose cross-chain bridges that rely on validator networks is its "specialization." Validators in general-purpose cross-chain networks need to monitor multiple blockchains. Plasma's validator network, however, focuses solely on monitoring interactions between the Bitcoin mainnet and Plasma's designated vault addresses, theoretically reducing the system's complexity and attack surface. Similar to USDT's strategy, Plasma's native cross-chain bridge is a recombination of existing, proven technologies. It achieves industry-leading security practices without introducing disruptive innovation. 4. Liquidity Solution: Integrating the LayerZero OFT Standard pBTC generated after a successful cross-chain transition will face the common challenge of all wrapped BTC assets (such as WBTC) – liquidity fragmentation. To address this, Plasma integrates LayerZero's fully homogenous token (OFT) standard. This standard allows pBTC to be treated as a single asset across all supported EVM chains, creating a unified, chain-independent liquidity pool.

Summary: A "Steady Win" Technical Philosophy

Overall, Plasma's technical development approach presents a clear two-tier structure:

1. Underlying Infrastructure: Performance optimizations are conducted at the consensus and execution layers to ensure network efficiency and stability.

2. Application and Product Layer: A comprehensive modular approach is adopted, integrating the industry's best existing solutions, such as Paymaster's account abstraction, Axelar's validator network model, and LayerZero's OFT standard.

Ultimately, we conclude that the most significant fundamental characteristics of Plasma technology are its low risk and theoretical security, as it does not introduce additional and dangerous trust assumptions. However, its moat doesn't lie in the technology itself. The core philosophy of its technological development is "win through stability, don't lag behind"—that is, ensuring the absolute robustness of its technical architecture, making it a rock-solid platform that can't fail. This allows its true moat—the Tether-led ecosystem, massive native liquidity, and top-tier strategic partnerships—to fully leverage. pBTC and USDT Market Entry Strategies After thoroughly evaluating Plasma's technical architecture, we need to further examine how its core assets will translate into actual market utility. Plasma's market entry strategy is highly focused on its two pillar assets: pBTC and USDT, targeting the Bitcoin yield market and the stablecoin high-frequency payment market, respectively. 1. Native BTC (pBTC): Targeting the "Yielding" Trend of Bitcoin Assets. pBTC's core value proposition is to provide Bitcoin holders with a secure and efficient channel to participate in the broader DeFi ecosystem, thereby unlocking the yield potential of this vast existing asset. Validation of the Existing Market and Opportunities for Retail Users: Market demand for Bridged/Wrapped Bitcoin has been fully validated. Current data shows that over 242,600 BTC have been migrated to various smart contract platforms, of which a staggering 86.5% (approximately 209,800 BTC) is actively deployed in various DeFi protocols for yield. This demonstrates the strong desire of Bitcoin holders to seek yield. pBTC's fundamental market opportunity stems from retail users who are skeptical of the security of previous packaging solutions. They need a more reliable way to:

• use BTC as collateral or liquidity in DeFi protocols.

• securely store BTC on EVM-compatible chains with a more user-friendly experience and lower transaction costs.

Core Growth Engine: Asset Management for Institutional and Corporate Treasurys

pBTC's more promising growth lies in capturing the accelerating trend of institutional and enterprise Bitcoin adoption. As of now, the total amount of Bitcoin held by public and private companies worldwide has reached approximately 1.38 million, an increase of 833,000 from the beginning of 2025. This incremental figure highlights the strong momentum of institutional adoption. We predict that the asset strategies of these corporate holders will gradually evolve from rudimentary "passive holding" to more mature "active treasury management." During this evolution, how to safely and compliantly generate additional returns on existing Bitcoin will become their core concern. In this context, pBTC is positioned as an ideal institutional solution. Given that institutional users place undisputed priority on security when selecting infrastructure, Plasma's robust security model, based on a decentralized validator network and threshold signatures, as previously analyzed, will constitute its core competitive advantage in attracting this customer base. 2. Zero-Fee USDT: Seizing the High-Frequency Payment Vertical Market Plasma's "zero-fee USDT transfers," enabled by account abstraction technology, precisely targets two highly cost-sensitive payment verticals with substantial market size. Cross-border Payments and Remittances Plasma aims to leverage the inherent low-cost and high-efficiency advantages of blockchain technology to disrupt the traditional cross-border remittance industry. The potential size of this market is enormous: Market Size: According to statistics, there will be 200 million international residents worldwide in 2023, creating a stable demand for remittances. By 2024, total remittances to low- and middle-income countries are projected to reach $700 billion. Industry Pain Point: Traditional intermediaries (banks and foreign exchange institutions) capture excessive value. For example, the average 4% transaction cost of the US-India remittance corridor means over $600 million is lost annually between senders and recipients. On-chain stablecoin payment solutions can theoretically return this value to users. On-chain Payroll: This is another enterprise-level application scenario with enormous potential. For example, in the US market, total payroll is projected to reach $11 trillion in 2023, with associated payment processing fees reaching $1.4 billion. For companies with global, remote teams, using stablecoins for payroll can significantly simplify processes and reduce costs. It should be noted that the aforementioned application scenarios are not entirely new, having been explored by numerous projects during the previous market cycle. The most fundamental difference between the current environment and the past lies in the clear shift in macro-regulatory policies, which has opened a window for compliance-focused applications. However, we must remain aware that a significant "implementation gap" remains between high-level policy approval and the willingness of mid-sized companies to adopt them, supported by clear and detailed regulatory enforcement rules. This requires project developers to invest in compliance, legal affairs, and enterprise solutions, in addition to technology, over the long term. Plasma's Strategic Value, Growth Flywheel, and Future Outlook Plasma's Strategic Empowerment of USDT From the current perspective (September 2025), Plasma's core value to USDT is multi-dimensional. First, in terms of geopolitical competition, it will serve as a key weapon to consolidate USDT's market leadership and counter competitors such as USDC. Plasma is positioned as the Tether ecosystem's commercial and retail access layer (Tether-to-C Terminal) for end users. Its core strategy is to achieve this through a two-wheel drive "killer weapon":

1. Disruption of traditional finance (TradFi): Through the Plasma One product matrix, it directly challenges the market position of traditional payment giants such as PayPal and Visa.

2. Aggregation of crypto finance (DeFi): Leveraging its technical compatibility, it plans to integrate more than 100 mainstream DeFi protocols to siphon the native returns of the crypto world into its ecosystem. The Core Engine of the Growth Flywheel: Plasma One Products and Yield Aggregation The Plasma One digital bank is the concrete product that realizes this strategy. Its offering of a 10% annualized yield on passive savings and a 4% cashback debit card represents an extremely aggressive market penetration strategy. Under ideal regulatory conditions, this level of user incentives could significantly disrupt the traditional payment and savings markets, effectively acquiring users and market share from existing systems. The sustainability of these high yields stems from a sophisticated yield aggregation model. With its full EVM compatibility, Plasma seamlessly integrates with the entire crypto infrastructure. Its explicit goal is to bring protocols with strong, sustainable yield generation capabilities, such as Aave and Ethena Labs, into its "yield portfolio." In this way, Plasma abstracts the complex operations of the DeFi world, acting as a revenue aggregation layer to channel the revenue generated by external protocols (far exceeding the 4% Treasury yield generated by Tether's own reserve assets) back to Plasma One, subsidizing its high consumer incentives. To optimize the user experience, Plasma also establishes a transaction fee subsidy channel through the Paymaster mechanism. This design shifts the network costs borne by users when interacting with DeFi protocols to the protocol parties, creating a completely free interaction experience for end users. This is a decisive advantage for attracting and retaining cost-sensitive large-scale retail users. The Grand Narrative and Tether's Endgame From a macro narrative perspective, Plasma's positioning is based on the two most core and enduring themes in the crypto industry: Bitcoin and stablecoins. By making USDT the native gas token, building a seamless, cross-chain liquidity pool for pBTC, and designing it with privacy and compliance in mind, Plasma demonstrates a compelling strategic advantage. This underlies Tether's ultimate strategic vision: elevating USDT from a "guest asset" circulating on multiple chains to a "native settlement currency" on its own sovereign network. Transforming the company's BTC reserves from a passive balance sheet item to a "productive asset" that can be actively managed within its own ecosystem. Ultimately, the USDT supply, currently dispersed across more than a dozen networks and totaling $150 billion, will be consolidated onto a unified settlement layer controlled by Tether. Once this goal is achieved, all USDT transfers, exchanges, issuance, and redemptions will take place on Tether's "home turf." Tether will then not only gain unprecedented pricing power and influence on the network, but will also naturally control the core toll collection process of this new financial infrastructure. Risk Assessment and Conclusions Despite the ambitious business vision, significant challenges remain between strategy and implementation: Competition Risk: Native crypto ecosystems like Ethereum and Tron will not sit idly by and allow their market share to erode. The cost and inertia of user migration present significant obstacles. Furthermore, traditional financial giants like PayPal and Visa will inevitably take countermeasures. Regulatory risk: This is the most critical uncertainty. Plasma One's 10% savings yield is highly likely to be scrutinized by regulators in major jurisdictions. If it is classified as an unregistered security or banking product, its core growth engine will face stagnation. Plasma's fundamentals as an infrastructure are top-tier. Building on the momentum of the highly successful TGE, its next phase of growth will depend entirely on its ability to execute on three key dimensions: enterprise adoption, institutional BTC treasury deployment, and mass user acquisition. Plasma's growth ceiling is inherently tied to the future prospects of Bitcoin and stablecoins. By establishing itself as the intersection hub and optimal settlement infrastructure for these two core assets, Plasma's long-term value ceiling represents, in a sense, the future of crypto finance as a whole.