Tron’s Bitcoin Layer 2 plan could see USDT flows ‘wrapped’ into Bitcoin.
Layer-1 blockchain Tron is envisioning a Bitcoin Layer-2 solution that supports a “wrapped” version of Tether (USDT) that will allow billions of dollars of liquidity to flow into the Bitcoin ecosystem.
In February, Tron founder Justin Sun announced Tron's Bitcoin Layer 2 solution in an X post, which will allow stablecoins and tokens to move between Tron and Bitcoin.
“This merger will not only connect TRON directly to Bitcoin, but will also facilitate access to the Bitcoin network, which is worth more than $55 billion, thereby bringing financial flows into Bitcoin,” Sun said at the time.
A Tron spokesperson told Cointelegraph that the plans “will involve” the creation of a tokenized version of USDT. The Tron network is currently home to more than half of the USDT $104 billion in circulation across multiple blockchains.
“As the home of leading coins like USDT, we bring significant liquidity and stability to the table,” Tron told Cointelegraph on February 22.
They added that the merger will attract new users to the Bitcoin ecosystem and expand the network's use cases, especially decentralized finance.
Sun said Bitcoin's Layer 2 solution would allow TRON-based tokens to interact “seamlessly” with Bitcoin.
“[It will aim to] In cooperation with BTC L2, ensure the security of POW and UTXO, keep the speed of POS systems and low fees!
For now, the organization will use existing chain protocols to link USDT and other tokens between Bitcoin and Tron. Part of Tron's plan includes cooperation with several Bitcoin layer 2 protocols.
It could be a different story, as Tether's rival USD Coin (USDC), the issuer, stopped creating USDC on Tron last month.
According to a Tron spokesperson, the recent increase in community interest is one of the main reasons they are considering building a Layer 2 solution to expand Bitcoin's functionality and scalability.
Developing decentralized applications on Bitcoin can improve Bitcoin (BTC) price volatility, as payments are made in Bitcoin, he added.
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Meanwhile, TRON's decentralized autonomous organization, TRON DAO, also wants to build a user-friendly wallet and toolkit to support Bitcoin-based Ordinals and BRC-20 tokens.
Cryptocurrency investment firm CoinShares predicted in January that a Bitcoin-based stablecoin could be launched by 2024, comparable to the speed and value of other statscoins in the industry.
Liquid-based Tether (L-USDT) is one of the few United States dollar-denominated stablecoins currently circulating on the Bitcoin Layer-2 network.
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