Tether (USDT) Takes Over Ethereum (ETH) Network
The USDT stablecoin smart contract renewed fears that the Ethereum network will lack the capacity to carry distributed apps.
When Tether, Inc. announced it would move its coins to the Ethereum (ETH) network, the company promised faster and cheaper transactions. But what it did not promise was clogging up the Ethereum network and diminishing its computational resources for everyone else.
The USDT smart contract is currently taking up 31.55% of all Ethereum gas, on par with some of the biggest games on the network. But the games, such as CryptoKitties, and FOMO3D, were just a fad lasting a few weeks. Tether promises to stay, since USDT is the best-used stablecoin on the network.
The high-level usage of network resources also means that the Ethereum network is no longer wide-open to developers. In fact, projects now have to compete for a thin slice of computational power, as older projects take up as much as 90% of network bandwidth. The increase in usage will lead to severe competition and a spike in the price to use the network.
The Ethereum network holds 1.55 billion USDT coins, as new transfers from the Omni layer stopped in the past weeks. But those coins go through multiple loops, moving between exchanges and wallets, thus overwhelming the network. USDT is transferable internationally to use in arbitraging price differences.
USDT is now highly active on exchanges like Binance and Huobi, fueling renewed interest by Asian traders. And while some distributed apps seek ways to scale, or are waiting for Ethereum’s scaling solution, the Tether usage remains greedy for resources.
Daily USDT usage still takes up more than 33% of all crypto trades, while Bitcoin (BTC) has fallen to around 30%. This is one of the reasons why the coin will likely remain extremely active on the Ethereum network.
ETH also gets some benefits from its relationship with USDT. More than $555 million’s equivalent flow through the ETH/USDT pairs, with additional liquidity coming in through BTC. ETH now takes up more than 12.4% of all trading activity, and its price remains relatively stable.
ETH is currently trading at $186.46, though with some recoveries above $190. The $200 price range is still out of reach, despite the relatively high liquidity.