Following the latest move of Tether, Inc., nearly half of all USDT supply will exist on the Ethereum network. Out of 4.087 billion coins in circulation, nearly 1.9 billion will move using the Ethereum protocol.
Tether has been relatively conservative with new coin printings, while the switch to the new network is still unfinished. The switch involves Tether’s own wallets and a series of coin burns, but major exchanges are also helping, by being some of the first to switch to the new type of USDT. Binance was the first exchange to move to the ETH-based USDT and offer withdrawals only in the new coin.
The markets are closely watching the decisions of Tether, as the influence of USDT has proven capable of swaying most major coin prices within hours. In the case of BTC, USDT trading has ensured the possibility for thousand-dollar gains within a day.
But switching to a new network may spell trouble for Ethereum. Skeptics see the move of Tether as “breaking” the network, especially on days of accelerated transfers of coins. In addition to USDT, the network will also have to carry CNHt, the yuan-based stablecoin that is just now starting its minting. There are only 20 million CNHt as of September 12, with the potential to grow the supply.
Even with the current ETH-USDT supply, the network is feeling the strain. The USDT smart contract, responsible for moving coins, is taking up more than 36% of all gas on the Ethereum network, raising overall gas prices. Payments for USDT transfers specifically are also increasing. Tether has been the biggest gas burner on the network for the past month, show Ethgasstation data.
Still, Tether and its users have paid around $412,000 equivalent in fees, while USDT trading exceeds $17 billion in a day, making the fees relatively low in perspective.
The inflow of USDT has not helped ETH market prices, which still hover around $178.14. But the network congestion, which also takes into account other distributed apps, may make the usage of the network slower and more expensive. Currently, Ethereum sees more than 90% of its computational resources utilized, while the distributed ledger has grown to levels impossible to keep for regular users.