The Fee Gate Controversy of USDT: Tether's Plasma Conspiracy

Original author: @BlazingKevin_, the Researcher at Movemaker

TL;DR

• Core Positioning: Plasma is a Bitcoin sidechain supported by Tether, aimed at becoming the ultimate settlement layer for USDT and Bitcoin.
• Business Motivation: The core goal of Plasma is to help Tether reclaim billions of dollars in USDT transaction fees lost annually to public chains like Ethereum and Tron, achieving a strategic upgrade from "stablecoin issuer" to "global payment infrastructure."
• Technical Strategy: Robust Combination: Plasma does not pursue high-risk new technologies but integrates mature solutions that have been validated in the industry:
• USDT Optimization: Utilizing "account abstraction" technology (Paymaster) to achieve zero-fee transfers of USDT.
• BTC Support: Introducing pBTC through a cross-chain bridge architecture based on a validator network, combined with LayerZero to address the issue of BTC liquidity fragmentation after cross-chain transactions.
• Grand Application Scenarios:
• Native BTC DeFi: Providing a safer and more user-friendly channel for institutions and retail investors to earn returns by putting their Bitcoin into DeFi protocols.
• Real-World Payments: With zero-fee USDT, targeting the massive trillion-dollar markets of cross-border remittances and on-chain payroll disbursement.
• Challenging Traditional Finance: Launching Plasma One Neobank, offering high-interest savings and substantial cashback on spending, directly competing with payment giants like PayPal and Visa.
• Prospects and Challenges:
• Advantages: Possessing top-tier resources and background, with a clear and grand narrative, based on the two most core assets in the crypto industry (USDT and BTC).
• Challenges: Facing fierce competition from existing ecosystems like Ethereum and Tron, user migration will require time and costs, and its financial products also face significant regulatory uncertainties.

TGE Hype Review

The subscription activity conducted by Plasma mid-year serves as an important window to observe its initial market appeal. The "first deposit, then apply" access mechanism objectively filtered a user group with certain financial strength and high willingness to participate. The event recorded approximately $1 billion in inflows within 30 minutes, proving that the market had formed extremely high value expectations and strong participation consensus before the project's mainnet launch.

Subsequently, Plasma's collaboration with Binance's wealth management platform Binance Earn marked another key market expansion. By launching a customized "Plasma USDT Lockup Product," Plasma not only gained endorsement from a top centralized exchange but also directly reached its vast user base.

The initial quota of 250 million USDT was quickly subscribed within an hour, with subsequent batches increasing to a limit of 1 billion USDT. This series of data validated the successful transmission of market demand from high-net-worth early users to a broader retail market. The product's dual yield structure—daily settled USDT returns and XPL token rewards post-TGE—effectively balanced users' short-term return expectations with long-term holding incentives.

Last week's TGE event itself saw Plasma's performance as phenomenal. From the airdrop distribution strategy, the project team set an attractive inclusive threshold: each participant was guaranteed to receive at least 9,300 XPL tokens. If estimated at the recent high price of $1.69, this means the minimum airdrop asset value reached $15,700. This high-value, wide-coverage airdrop model established a solid value foundation and positive market sentiment for the XPL token.

When analyzing the capital flow before and after the TGE, we observed two distinctly different phases. Before the TGE, the stablecoin deposits within the network were primarily composed of cross-chain wrapped assets like AETHUSDC (approximately 60%) and AETHUSDT (approximately 39%). After the TGE ended, data from this week showed that the total stablecoin deposit amount shrank by nearly $950 million. This large-scale capital outflow should be viewed as a normal, predictable market behavior, mainly attributed to early short-term funds exiting after achieving their arbitrage goals.

However, what is more noteworthy is the subsequent strategic adjustments and capital structure optimization. The exit of short-term speculative capital has created space for the entry of long-term strategic capital.

As the main entry point for Tether's on-chain USDT settlement, Plasma's collaboration with institutional liquidity service providers like Bitfinex, Flow Traders, and DRW aims to build a stable, efficient, deep, and resilient financial infrastructure for the network.

Plasma is currently working with Tether to introduce native USDT and collaborating with liquidity partners like Bitfinex, Flow Traders, and DRW. USDT on Plasma increased from 4 million to 37 million within a week.

Plasma's Mission: Addressing Core Pain Points Between Web 2 and Web 3

Plasma possesses a strong strategic resource background and precise market positioning. The lineup of Plasma's investors is top-tier, including Bitfinex (the parent company of Tether), which has the strongest synergy with its ecosystem, as well as Peter Thiel's Founders Fund from mainstream tech investment and top venture capital Framework from the crypto-native field. This unique investment portfolio provides Plasma with strong support in terms of capital, strategic alliances, and technical credibility, forming an important competitive barrier for its early development.

Leveraging these resources, the project team launched its flagship application layer product—Plasma One—in September this year. This product is positioned as a "native digital bank" for stablecoins, with the core aim of building a seamless bridge connecting traditional finance and the crypto world. By partnering with Signify Holdings to issue Visa-licensed physical debit cards, Plasma One expands the use cases of USDT from on-chain to tens of millions of offline and online payment terminals globally. At the same time, it addresses the core pain points in existing crypto payment solutions by offering zero-fee USDT transfers, an innovative "earn while you spend" account system, and up to 4% cashback on spending, providing user incentives competitive with leading fintech companies.

When assessing Plasma's long-term potential, we must recognize that its significant initial success is not accidental but stems from its profound insights into the dual pain points of the market and precise responses. We can deconstruct its core narrative from two dimensions: Web 2 (external market pull) and Web 3 (internal strategic drive).

1. Web 2 Perspective: Filling the Payment Infrastructure Vacuum Post-Legalization

From the external market environment, a decisive macro catalyst is the passage of the U.S. "Genius Act" in July 2025. This act historically recognizes stablecoins as legitimate payment tools alongside debit card networks and ACH systems. However, this top-level regulatory clearance highlights the severe lag in underlying infrastructure. USDT currently operates primarily on general-purpose public chains like Ethereum and Tron. These networks are not designed for high-frequency payment scenarios and have three core deficiencies:

• Transaction Cost Friction: Users must hold and pay gas fees denominated in volatile assets like ETH or TRX for USDT transfers, increasing the usage barrier 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.
• Insufficient Compliance: There is a lack of compliance and identity verification frameworks designed for institutional users embedded at the protocol layer.

In this context, Plasma's strategic positioning is clear: to become a dedicated settlement layer built specifically for USDT, with Bitcoin network consensus as its security foundation, aiming to address all the aforementioned infrastructure bottlenecks.

2. Web 3 Perspective: Tether's Business Model Evolution and Value Return

From an internal strategic perspective, Plasma is a key piece for its parent company Tether to achieve a fundamental leap in its business model. For a long time, Tether, as the issuer of USDT, has enjoyed a massive asset reserve of hundreds of billions while profiting from it, but the enormous network effects and transaction value it creates have mostly been captured in the form of transaction fees by underlying public chains like Ethereum and Tron. This portion of "market dividends" given away by Tether represents a significant gap in its business model.

Thus, the core motivation for Tether to promote Plasma lies in achieving vertical integration of the value chain, reclaiming the economic benefits that have been lost for years. This is not just about reclaiming transaction fee income but represents a complete strategic transformation: evolving from a passive "stablecoin liability issuer" to an active "global payment infrastructure operator" that controls network rules and business models. Through Plasma, Tether aims to build a closed-loop ecosystem, bringing the issuance, circulation, settlement, and application scenarios of USDT under its control, thereby ensuring the long-term consolidation of its business empire.

How Much Has Tether "Lost"?

To understand the strategic necessity of Plasma, we must first examine the significant "value capture asymmetry" present in Tether's current business model. The network scale of USDT has reached unprecedented heights, with a circulating market value of $170 billion, and the annual transaction settlement volume reportedly surpassing the combined total of PayPal and Visa. However, the operation of this massive on-chain economy is fundamentally disconnected from the core revenue model of its issuer, Tether.

Currently, Tether's annual profit of approximately $13 billion primarily comes from managing its reserve assets (mainly U.S. Treasury bonds) to earn a 3-4% annual yield. Although the absolute profit value is considerable, this income model appears extremely passive and indirect compared to the enormous economic activity generated daily by the network supported by USDT. Essentially, Tether has created the most liquid core asset in the crypto world but has failed to directly benefit from the "circulation" of that asset, which is the fundamental pain point of its business model.

This imbalance in value capture is specifically reflected in the significant externality benefits that USDT creates for its host public chains.

Tether's "Loss" on Ethereum

In the Ethereum ecosystem, USDT is a cornerstone liquidity source for DeFi. Transfers and smart contract interactions related to USDT contribute nearly $100,000 in gas fees to the Ethereum network daily, consistently accounting for over 6% of the total gas consumption on Ethereum.

This substantial and ongoing income is captured by Ethereum's validator nodes, becoming part of the economic incentives to maintain its network security. However, as the source of value creation, Tether has not received any of these earnings.

Tether's "Loss" on the Tron Network

The phenomenon of value spillover is even more pronounced on the Tron network. Tron has successfully positioned itself as the primary retail payment and transfer network for USDT by optimizing transfer costs and speeds. Activities related to USDT account for over 98% of the total transfer volume and gas consumption on the Tron network.

It can almost be said that the trading activity and economic model of the Tron network are entirely built on providing "settlement outsourcing services" for USDT. Through this highly binding relationship, Tron has earned nearly $2 billion in annual revenue in 2024. This massive profit, entirely derived from the huge demand for USDT, similarly fails to directly translate into Tether's balance sheet.

Strategic Conclusion: Plasma as an Inevitable Choice for Value Return

In summary, Tether's launch of Plasma is directly motivated by the need to correct this long-standing imbalance in value distribution. Third-party public chains like Ethereum and Tron effectively limit Tether's complete control and revenue rights over the vast stablecoin economy it has created.

Therefore, the establishment of Plasma is at the strategic core of Tether's aim to achieve "vertical integration of the value chain." Its fundamental objectives are:

1. Reclaim Revenue Rights: To bring back the USDT transaction fees, payment service fees, and related DeFi ecosystem revenues currently captured by networks like Ethereum and Tron into its own system.
2. Establish Economic Sovereignty: To break free from reliance on third-party public chains and build a self-controlled financial infrastructure with USDT as the native asset.
3. Achieve Business Model Upgrade: To expand from a single reserve management profit model to a platform-based business model capable of capturing value from transactions, payments, and application development across multiple dimensions.

As the Plasma infrastructure gradually matures, Tether aims to reclaim the massive market dividends it has "given away" to external public chains over the past years. This is not only a tactical move to address immediate pain points but also a long-term strategic layout to ensure its core competitiveness in the future digital economy.

Plasma's Two Fundamentals and Two Innovations

After clarifying Plasma's strategic intentions, we analyze its fundamentals. The overall architecture of Plasma is built around two core pillars: 1) Absolute Priority of USDT as Asset Support, and 2) Native Integration of BTC.

Therefore, any effective evaluation of Plasma's technical fundamentals must revolve around the following two key questions:

• Regarding USDT: What mechanisms does Plasma provide that offer superior utility compared to other networks? Does its technical implementation constitute a sustainable competitive barrier that is difficult to replicate?
• Regarding BTC: What trade-offs has its "native support" solution made in terms of decentralization and security? Are the trust assumptions it introduces standard industry practices, or do they introduce new, untested risk models?

1. Core Network Architecture: The Foundation of Performance and Compatibility

Before delving into the application layer, let's first look at its underlying network. Plasma employs two key optimizations in its architecture:

• Consensus Layer - PlasmaBFT: This is an original BFT consensus algorithm designed to significantly shorten transaction finality times. For a network positioned for payments and settlements, high-speed finality is the foundation for ensuring user experience and commercial application feasibility.
• Execution Layer - Reth Client: Plasma utilizes the high-performance Ethereum client Reth, written in Rust. The core aim of this move is to maximize the network's transaction processing capacity and execution efficiency while ensuring complete compatibility with EVM.

These two underlying optimizations are not isolated; they collectively form a high-performance foundation that serves the high-frequency usage scenarios of USDT and maintains the cross-chain security of native BTC.

2. USDT Priority Strategy: Modular Applications, Not Technical Barriers

In enhancing USDT's utility, Plasma's implementation path adopts the "account abstraction" standard widely discussed and accepted by the Ethereum community, specifically the EIP-4337 and EIP-7702 proposals. By integrating the Paymaster functionality within the account abstraction framework, Plasma can achieve key features such as "zero-fee USDT transfers" and "allowing users to pay gas fees using USDT and various other tokens."

From this analysis, we conclude that while these features greatly optimize user experience, their underlying technology is not unique to Plasma. This represents a typical modular design approach—prioritizing the adoption of the most advanced and widely accepted mature protocols in the industry rather than developing a closed system independently. Therefore, from a technical fundamental perspective, Plasma's advantages in stablecoin functionality do not stem from an insurmountable technological moat but from the rapid and effective integration of existing advanced technologies.

3. Native BTC Support: Recombination and Optimization of Mature Solutions

For native BTC support, any public chain's implementation path 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 independently running a full Bitcoin node.
• Asset Control: The fund pool is not controlled by any single party; deposits and withdrawals of BTC must be collectively approved by a threshold signature from a legally required number of validators.

The key distinction between Plasma's solution and other general-purpose cross-chain bridges mediated by validator networks lies in its "specialization." Validators in general-purpose cross-chain networks need to monitor multiple blockchains, while Plasma's validator network only needs to focus on monitoring interactions between the Bitcoin mainnet and the designated vault address of Plasma, theoretically reducing the system's complexity and attack surface.

Similar to the strategy for USDT, Plasma's native cross-chain bridge is also a recombination of existing mature technologies. It achieves industry-leading practices in security but does not introduce disruptive innovations.

4. Liquidity Solutions: Integrating LayerZero OFT Standards

The pBTC generated after successful cross-chain transactions will face the common dilemma of all wrapped BTC assets (such as WBTC)—liquidity fragmentation. To address this issue, Plasma integrates LayerZero's Omnichain Fungible Token (OFT) standard. This standard allows pBTC to be treated as the same asset across all supported EVM chains, thereby aggregating into a unified, non-fragmented liquidity pool.

Conclusion: A "Steady Wins the Race" Technical Philosophy

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

1. Underlying Infrastructure: Performance optimizations at the consensus and execution layers to ensure network efficiency and stability.
2. Application and Product Layer: A comprehensive modular approach, integrating the best existing solutions in the industry, such as the Paymaster for account abstraction, Axelar's validator network model, and LayerZero's OFT standard.

Ultimately, we conclude that the most significant characteristic of Plasma's technical fundamentals is low risk and theoretical security; it does not introduce additional and dangerous trust assumptions. However, its moat does not lie in the technology itself. The core philosophy of its technical development is "steady wins the race, do not hold back"—ensuring the absolute robustness of the technical architecture, making it a solid platform that does not fail, thereby allowing its true moat—an ecosystem led by Tether, substantial native liquidity, and top-tier strategic partnerships—to fully发挥作用.

Market Entry Strategy for pBTC and USDT

After thoroughly assessing 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 yield market for Bitcoin and the high-frequency payment market for stablecoins, respectively.

1. Native BTC (pBTC): Targeting the "Yieldization" Wave of Bitcoin Assets

The core value proposition of pBTC is to provide Bitcoin holders with a safe and efficient channel to participate in a broader DeFi ecosystem, thereby unlocking the yield potential of this massive stock asset.

Stock Market Validation and Retail User Opportunities:

The demand for wrapped Bitcoin (Bridged/Wrapped BTC) has been fully validated in the market. Current data shows that over 242,600 BTC have been migrated to various smart contract platforms, with as much as 86.5% (approximately 209,800 BTC) actively deployed in various DeFi protocols to earn yields. This indicates a strong willingness among Bitcoin holders to seek returns. The foundational market opportunity for pBTC arises from retail users who have previously questioned the security of various wrapping solutions and need a more reliable way to:

• Use BTC as collateral or liquidity assets in DeFi protocols.
• Safely store BTC on EVM-compatible chains with a more user-friendly experience and lower transaction costs.

Core Growth Engine: Asset Management for Institutions and Corporate Treasuries

The more imaginative growth point for pBTC lies in capturing the accelerating trend of institutional and corporate Bitcoin adoption. As of now, the total amount of Bitcoin held by publicly listed companies and private enterprises has reached approximately 1.38 million BTC, an increase of 833,000 BTC since early 2025, highlighting the strong momentum of institutional adoption.

We predict that the asset strategies of these corporate holders will gradually evolve from the primary "passive holding" to a more mature "active treasury management."

In this evolution process, how to safely and compliantly generate additional yields from existing Bitcoin will become their core demand. In this context, pBTC is positioned as the ideal institutional solution. Given that institutional users prioritize security when selecting infrastructure, the robust security model based on a decentralized validator network and threshold signatures previously analyzed by Plasma will constitute its core competitiveness in attracting this clientele.

2. Zero-Fee USDT: Capturing the High-Frequency Payment Vertical Market

The "zero-fee USDT transfers" achieved through account abstraction technology by Plasma precisely target two cost-sensitive and massive payment verticals.

Cross-Border Payments and Remittances:

Plasma aims to disrupt the traditional cross-border remittance industry by leveraging the inherent low-cost and high-efficiency advantages of blockchain technology. The potential scale of this market is enormous:

• Market Size: According to statistics, there are 200 million expatriates globally in 2023, creating stable remittance demand. In 2024, the total remittance amount flowing to low- and middle-income countries is expected to reach $700 billion.
• Industry Pain Points: Traditional intermediaries (banks, foreign exchange institutions) capture excessive value. For instance, in the U.S.-India remittance corridor, an average transaction cost of 4% means over $600 million in value is lost from senders to recipients each year. On-chain stablecoin payment solutions theoretically can return this portion of value to users.

On-Chain Payroll:

This is another highly promising enterprise application scenario. In the U.S. market, for example, total payroll in 2023 reached $11 trillion, with accompanying payment processing fees amounting to $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 above application scenarios are not entirely new concepts; many projects attempted them in the previous market cycle. The most essential difference between the current environment and the past is the clear shift in macro regulatory policies, which opens a window for compliant applications.

However, we must recognize that there remains a significant "implementation gap" between high-level policy clearance and the willingness of medium-sized enterprises to adopt it practically, supported by accompanying, clear regulatory execution guidelines. This requires project teams to engage in long-term and in-depth layouts in compliance, legal, and enterprise solutions beyond technology.

Strategic Value, Growth Flywheel, and Future Outlook for Plasma

Strategic Empowerment of USDT by Plasma

From the current perspective (September 2025), the core value that Plasma brings to USDT is multidimensional. First, at the level of geopolitical competition, it will serve as a key weapon to consolidate USDT's market leadership and respond to competitors like USDC. Plasma's positioning is as the commercial and retail access layer (Tether-to-C Terminal) for the Tether ecosystem aimed at end users, with its core strategy being to achieve this through a dual-driven "killer app":

1. Disruption Targeting Traditional Finance (TradFi): Directly challenging the market positions of traditional payment giants like PayPal and Visa through the Plasma One product matrix.
2. Aggregation Targeting Crypto Finance (DeFi): Planning to integrate over 100 mainstream DeFi protocols, siphoning native yields from the crypto world into its ecosystem.

Core Engine of the Growth Flywheel: Plasma One Product and Yield Aggregation

Plasma One digital bank is the tangible product to realize the above strategy. Its offered 10% passive savings annual yield and 4% cashback debit card represent an extremely aggressive market penetration strategy. In an ideal regulatory environment, this level of user incentives is sufficient to significantly impact the traditional payment and savings markets, efficiently acquiring users and market share from the existing system.

The sustainability of this high yield comes from a sophisticated yield aggregation model. Plasma, with its complete EVM compatibility, can seamlessly integrate the entire infrastructure of the crypto world. Its clear goal is to incorporate protocols like Aave and Ethena Labs, which possess strong and sustainable yield-generating capabilities, into its "yield map." In this way, Plasma abstracts the complex operations of the DeFi world, serving as a yield aggregation layer that channels the yields generated by external protocols (far exceeding the 4% Treasury yield from Tether's own reserve assets) back to Plasma One to subsidize its high incentives for consumers.

To optimize user experience to the utmost, Plasma has also established 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, achieving a completely free interaction experience for end users, which is a decisive advantage in attracting and retaining large-scale retail users who are highly sensitive to costs.

Grand Narrative and Tether's Endgame

From a macro narrative perspective, Plasma's positioning is rooted in the two most core and enduring threads of the crypto industry: Bitcoin and stablecoins. By establishing USDT as the native gas token, building a seamless full-chain liquidity pool for pBTC, and considering privacy and compliance in its design, Plasma constructs a compelling strategic height.

Behind this is Tether's ultimate strategic vision:

• Elevating USDT from a "guest asset" circulating across multiple chains to a "native settlement currency" on its own sovereign network.
• Transforming the BTC reserves held by the company from a passive balance sheet item into "productive assets" that can be actively managed within its ecosystem.
• Ultimately, consolidating the current supply of USDT, scattered across more than a dozen different networks and totaling $150 billion, into a unified settlement layer controlled by Tether.

Once this goal is achieved, all transfers, exchanges, issuances, and redemptions of USDT will occur in Tether's "home ground." At that point, Tether will not only gain unprecedented network pricing power and voice but will also naturally control the core fee gateways of this new financial infrastructure.

Risk Assessment and Conclusion

Despite the grand business vision, significant challenges remain between strategy and implementation:

1. Competitive Risks: Native crypto ecosystems like Ethereum and Tron will not sit idly by as their market shares are eroded; the costs and inertia of user migration present substantial resistance. At the same time, traditional financial giants like PayPal and Visa will undoubtedly take countermeasures.
2. Regulatory Risks: This is the most critical uncertainty factor. The 10% savings yield offered by Plasma One is highly likely to be scrutinized by regulatory authorities in major jurisdictions, and if deemed an unregistered security or banking product, its core growth engine will face stagnation risks.

It can be determined that the fundamentals of Plasma as an infrastructure are top-tier. Building on the momentum of the tremendous success achieved during the TGE, its next phase of growth will entirely depend on its execution capabilities in enterprise adoption, institutional BTC treasury deployment, and large-scale ordinary user acquisition across these three dimensions.

The development ceiling of Plasma is fundamentally tied to the future prospects of the two tracks of Bitcoin and stablecoins. By positioning itself as the intersection and optimal settlement infrastructure for these two core assets, Plasma's long-term value ceiling, in a sense, is the future of the entire crypto finance.

About Movemaker

Movemaker is the first official community organization authorized by the Aptos Foundation, jointly initiated by Ankaa and BlockBooster, focusing on promoting the construction and development of the Aptos ecosystem in the Chinese-speaking region. As the official representative of Aptos in the Chinese-speaking area, Movemaker is committed to building a diverse, open, and prosperous Aptos ecosystem by connecting developers, users, capital, and numerous ecological partners.

Disclaimer:

This article/blog is for reference only, representing the author's personal views and does not reflect the position of Movemaker. This article does not intend to provide: (i) investment advice or investment recommendations; (ii) offers or solicitations to buy, sell, or hold digital assets; or (iii) financial, accounting, legal, or tax advice. Holding digital assets, including stablecoins and NFTs, carries high risks, significant price volatility, and may even become worthless. You should carefully consider whether trading or holding digital assets is suitable for you based on your financial situation. For specific issues, please consult your legal, tax, or investment advisor. The information provided in this article (including market data and statistics, if any) is for general reference only. Reasonable care has been taken in compiling this data and charts, but no responsibility is accepted for any factual errors or omissions expressed therein.