Overview

On January 16, 2025, Tether introduced USDT0 on Kraken’s Ethereum extension network, Ink, using the LayerZero Omnichain Fungible Token (OFT) standard.

USDT0 is built to create a more efficient cross-chain liquidity layer, making it easier to transfer USDT between different blockchains, offering a smoother experience for both users and developers.

While USDT is the largest stablecoin globally, it still suffers from liquidity fragmentation across different blockchains and high cross-chain transfer costs. USDT0 aims to solve these issues by providing more secure cross-chain transactions via LayerZero, enabling frictionless transfers and significantly improving USDT’s usability across different blockchains.

Source: https://mirror.xyz/tetherzero.eth/4z1kh9wE6h07zGjrKImx4Cr-VIzCpRle0VElalG0Rss

Background Information

Since its launch in 2014, Tether (USDT) has become the world’s most influential stablecoin. As of February 11, 2025, its market cap had reached $143.57 billion, with its reserves primarily consisting of cash and cash equivalents to maintain its 1:1 peg to the U.S. dollar. Additionally, Tether’s U.S. Treasury bond holdings are managed by Cantor Fitzgerald, a financial services company whose CEO, Howard Lutnick, was nominated by Trump as the Secretary of Commerce.

With the growth of blockchain technology, stablecoins have become a crucial component of the crypto ecosystem. However, traditional USDT faces several challenges, such as limited cross-chain liquidity, difficulties with contract upgrades, and fragmented user experiences. The lack of consistency in how USDT is implemented across various blockchains affects the efficiency of asset transfers between different networks.

Tether has introduced USDT0—a stablecoin designed specifically for multi-chain environments to tackle these issues. USDT0 aims to enhance USDT’s cross-chain liquidity, offering a more efficient and flexible way to transfer assets and providing users with a seamless stablecoin experience.

Source: https://coinmarketcap.com/currencies/tether

How USDT0 Works

USDT0 addresses the problem of liquidity fragmentation by locking USDT on the Ethereum blockchain and minting an equal amount of USDT0 on target chains such as Ink, MegaETH, Arbitrum, and Berachain. This process allows for a seamless cross-chain experience. Users can transfer USDT0 across different chains without having to manage liquidity or rely on cross-chain bridges, and they can always redeem it back for USDT on Ethereum at a 1:1 ratio.

The integration with Ink further enhances liquidity, as users can access USDT0 directly through their Kraken accounts. Andrew Koller, the founder of Ink, described USDT0’s launch as setting a “new standard” for stablecoin liquidity.

USDT0 is supported by LayerZero’s Omnichain Fungible Token (OFT) standard, ensuring it directly correlates with Tether on Ethereum. Here’s how it works:

1. Asset Locking: USDT is locked in a smart contract on the Ethereum network.
2. Issuance on Target Chains: An equivalent amount of USDT0 is minted on the target chain to mirror the locked USDT.
3. Seamless Cross-Chain Transfers: With LayerZero technology, users can smoothly transfer USDT0 across supported chains without needing liquidity pools or bridges.
4. Redemption: Users can redeem USDT0 back into the same value of USDT on Ethereum, maintaining a 1:1 peg.

USDT0 uses a locking and minting system to ensure secure and efficient cross-chain transfers while always keeping the assets fully backed.

Source: https://docs.usdt0.to/overview/how-usdt0-works

Technical Solution

OFT Standard

USDT0 uses the OFT (Omnichain Fungible Token) standard from LayerZero, facilitating seamless deployment and asset transfer across new blockchains while maintaining its 1:1 peg to USDT on Ethereum. USDT0 is live on Kraken’s Ink network and will soon be launched on Berachain, Arbitrum, and MegaETH.

OFT Standard: Enabling USDT0’s Cross-Chain Compatibility

The OFT standard, developed by LayerZero, offers a more efficient and secure solution for USDT0’s cross-chain transfers. Key benefits include:

Unified Liquidity Management: Ensures that liquidity for USDT0 is shared across all chains, reducing fragmentation and increasing capital efficiency.

Enhanced Security: Uses decentralized oracles and relayer networks to verify transactions, minimizing cross-chain risks.

Scalability: Allows rapid deployment on new chains, adapting to the fast-changing crypto landscape.

Efficiency and Cost-Effectiveness: Removes the need for bridges or wrapped assets, simplifying processes and lowering operational costs.

Source: https://docs.layerzero.network/v2/home/token-standards/oft-standard

Legacy Mesh

Legacy Mesh: USDT Cross-Chain Interoperability Solution

Legacy Mesh connects various blockchains—Tron, Ton, Ethereum, Arbitrum, Ink, and Berachain—enabling smoother transfers of USDT and USDT0 between them.

Launch Date: February 12, 2025

Key Features

Simplified Cross-Chain Transfers for USDT: Supports four key USDT ecosystems—Ethereum, Tron, TON, and Arbitrum—using liquidity pools and LayerZero messaging technology to ensure efficient and secure transfers.

Seamless Tether Interoperability: Integrates USDT from Ton, Tron, and Ethereum with USDT0 on Arbitrum, covering nearly 98% of the global USDT supply.

Improved DeFi Liquidity: Reduces liquidity fragmentation, enhancing market liquidity for both USDT holders and DeFi protocols.

How to Use

Go to usdt0.to/transfer.

Choose the source and destination chains to transfer USDT or USDT0 easily.

Supports single-hop transfers (e.g., Tron → TON) as well as multi-hop transfers (e.g., Tron → Arbitrum → Ink).

Source: https://mirror.xyz/tetherzero.eth/NUSP9nxicfUulDFjEyXRC3LHUtL2c23fxRdE_3M79Es

Why Was Ink Chosen for the Initial Deployment?

USDT0 will launch on Kraken’s Layer 2 network, Ink, to provide seamless liquidity support for institutional users. Ink’s founder, Andrew Koller, stated:

“USDT0, combined with Ink, empowers users and developers, ensuring full control of assets and establishing a new standard for stablecoin liquidity.”

USDT0 has already been integrated with Kraken, supporting easy deposits and withdrawals on Ink, with plans to expand interoperability. In the future, USDT0 will also collaborate with Berachain, MegaETH, and Arbitrum.

Source: https://mirror.xyz/tetherzero.eth/4z1kh9wE6h07zGjrKImx4Cr-VIzCpRle0VElalG0Rss

Key Reasons for Choosing Ink for Initial Deployment:

1. Kraken’s Support and Exchange Resources

Kraken is a leading global crypto exchange, and its new Layer 2 network, Ink, has a large user base and significant trading liquidity.

By deploying USDT0 on Ink, Kraken can offer liquidity support, driving wider adoption of stablecoins.

2. Ink’s Innovative L2 Design to Reduce Transaction Costs

Ink uses Rollup technology as a Layer 2 solution, greatly reducing gas fees for transactions involving USDT0, improving overall efficiency.

Compared to traditional Layer 1 transactions, USDT0 transfers on Ink are cheaper, making it ideal for large-scale DeFi and payment applications.

3. Ink as a Pilot Network to Ensure Security and Scalability

With Kraken’s backing and regulatory compliance, Ink provides a secure platform for issuing USDT0.

As the first Layer 2 network to support USDT0, Ink will act as a testbed, optimizing the cross-chain issuance model and testing the feasibility of the Omnichain Fungible Token (OFT) standard.

4. Ink’s L2-Level Interoperability for USDT0

Once USDT0 is deployed on Ink, users will be able to easily deposit and withdraw via Kraken, ensuring smooth and seamless transactions.

In the future, Ink will be able to connect with other Layer 2 networks, providing a foundation for USDT0’s expansion to more blockchains.

By launching on Ink, USDT0 takes advantage of Kraken’s resources, efficient Layer 2 technology, and cutting-edge interoperability, ensuring low transaction costs, strong security, ample liquidity, and setting the stage for future expansion across multiple chains.

Source: https://blog.kraken.com/news/announcing-ink

How to Lower Cross-Chain Costs?

1.Eliminate the High Costs of Traditional Bridges

Traditional cross-chain bridges often rely on intermediary liquidity pools, introducing extra costs like bridge fees, liquidity provider fees, and Gas fees.

USDT0, by using the OFT standard, directly mints and burns USDT0 on the target chain, removing the need for bridge liquidity pools, significantly reducing these costs.

2.Reduce Gas Fees

Traditional cross-chain bridges involve several on-chain transactions (such as locking, verifying, and minting), which can drive up gas costs. USDT0, using LayerZero’s ultra-light client, reduces the need for complex on-chain computations, helping to cut down on gas fees.

Once USDT0 is burned on the source chain, it is directly minted on the target chain, avoiding the cost buildup caused by multiple transactions.

3.Improve Capital Efficiency and Reduce Slippage

Traditional bridges depend on AMM liquidity pools, which can lead to slippage if the liquidity depth is too low.

USDT0 addresses this by enabling 1:1 conversions across all supported chains, utilizing full-chain liquidity sharing to reduce fragmentation and improve the efficiency of asset conversions.

4.Reduce Price Arbitrage Costs

With traditional bridges, liquidity differences across chains can cause price discrepancies for USDT, leading to arbitrage trading that raises hidden costs.

USDT0 eliminates this by using a consistent issuance mechanism, ensuring the price of USDT0 remains uniform across chains and improving market stability.

By leveraging the OFT standard, LayerZero transmission, and a 1:1 exchange mechanism, USDT0 reduces bridging fees, Gas costs, slippage, and arbitrage expenses, offering users a more cost-effective, efficient, and secure cross-chain USDT solution.

Technical Advantages

USDT0 adopts the OFT standard, allowing seamless movement between blockchains without relying on traditional cross-chain bridges or wrapped assets. This significantly enhances both liquidity and security.

Burn & Mint Mechanism

When users burn USDT0 on the source chain, the same amount of tokens are minted on the target chain, ensuring the total supply remains consistent and avoiding the risk of double-spending or asset loss that can occur with cross-chain bridges.

LayerZero Cross-Chain Communication Protocol
By utilizing LayerZero technology, USDT0 enables secure and low-cost cross-chain transfers, effectively avoiding the security vulnerabilities of traditional cross-chain bridges and enhancing the cross-chain experience for stablecoins.

Upgradeable Smart Contracts
Unlike traditional USDT, USDT0 is upgradeable. Its smart contracts can be optimized with technological advancements, ensuring consistent contract logic across major blockchains, providing users with a unified and smooth operating experience.

Interoperability

USDT0 is compatible with multiple mainstream blockchains such as ETH, BSC, Polygon, and Solana, allowing assets to flow freely between different ecosystems and significantly improving fund efficiency in DeFi and Web3 fields.

The launch of USDT0 marks the beginning of a new era for cross-chain circulation of stablecoins, providing true seamless liquidity for USDT in a multi-chain environment and offering global users a more efficient and secure cross-chain trading experience.

Functionality

USDT0: Cutting Cross-Chain Costs and Unifying Liquidity

Addressing USDT Fragmentation

For a long time, USDT has existed independently on different blockchains, which required reliance on cross-chain bridges for asset transfers—users had to burn USDT on one chain and mint it on another. This process was cumbersome and came with high fees and security risks.

The launch of USDT0 seeks to change this by making USDT a unified, fluid asset. Users no longer need to deal with different versions of USDT on multiple chains or manage complex liquidity and cross-chain bridge risks.

Zero-Friction Cross-Chain Transfers, Lower Fees

Using LayerZero technology, USDT0 facilitates native cross-chain transfers with a 1:1 exchange rate. Users who transfer USDT0 receive the same amount across any supported chain, without incurring extra wrapping or unwrapping fees. This drastically cuts cross-chain costs, offering higher capital efficiency. USDT0 is especially beneficial for high-frequency traders and enterprise users.

A Safer Cross-Chain Experience

Traditional cross-chain bridges are vulnerable to attacks because they rely on centralized liquidity providers. These bridges are often targets for hackers, leading to significant losses. USDT0 avoids these risks by utilizing LayerZero’s immutable liquidity system, ensuring that assets can only move within authorized environments, greatly enhancing fund security.

Seamless Integration with DeFi and Web3 Ecosystems

USDT0 is designed with upgradeable smart contracts that support DeFi, GameFi, NFTs, and other Web3 applications. Developers no longer need to work with multiple versions of USDT. Instead, they can integrate USDT0 seamlessly across various blockchains, boosting liquidity and improving the user experience.

Ecosystem Partnerships and Future Expansion

The first blockchains to support USDT0 include Ink, Kraken L2, and Arbitrum. In the future, Berachain, MegaETH, and additional blockchains will join the ecosystem. With the power of LayerZero, USDT0 is set to redefine liquidity standards for DeFi and cross-chain finance.

Source: ​​https://usdt0.to/

Comparison with Traditional USDT

USDT0 utilizes LayerZero’s OFT standard, providing safer, more efficient, and cost-effective cross-chain liquidity. In contrast, traditional USDT still depends on wrapping and cross-chain bridges, which involve higher costs and increased security risks.

Source: https://tether.to/en/

Value for the Ecosystem

USDT0 simplifies cross-chain operations, enhances liquidity management, and provides a flexible and efficient framework that caters to the needs of developers, users, and exchanges.

1. Benefits for Developers

Unified Liquidity: Efficiently transfers contract ownership while ensuring USDT follows a consistent standard, reducing fragmentation risks.

Compliance Tools: Includes blacklist and freeze features to meet regulatory requirements and respond to law enforcement requests.

Future-Proof: Supports updates to smart contracts, allowing adaptation to evolving blockchain standards.

Cross-Chain Interoperability: Connects with major blockchains to facilitate capital inflows.

Easy Integration: Works like an ERC-20 token, eliminating the need for custom bridges or liquidity pool management.

2. Benefits for Users

Seamless Cross-Chain Transfers: Streamlines the transfer process, removing the need for multiple bridges or liquidity pools.

Expanded DeFi Access: Initially deployed on Ink, providing a superior DeFi experience.

Enhanced Security: Centralized liquidity management minimizes intermediary risks.

3. Benefits for Exchanges

Multi-Chain Support: Seamlessly integrates, easily managing cross-chain deposits and withdrawals.

Efficient Cross-Chain Transactions: Built on the OFT standard, ensuring secure and smooth asset transfers.

Low Integration Costs: Requires minimal development effort, no need for extra liquidity pools or bridging systems.

USDT0 redefines the cross-chain stablecoin landscape, establishing a strong foundation for the future of the DeFi ecosystem.

How to Get USDT0

USDT0 was first launched on Ink, with plans to expand to more blockchains.

USDT0 can be used within DeFi protocols and payment infrastructure, and is available through the following methods:

Exchange Purchase: Trade directly on exchanges that support USDT0, such as Kraken.

Cross-Chain Exchange: Swap USDT0 on DeFi platforms supporting the LayerZero protocol.

Official Bridge: Convert existing USDT through the official bridge and receive USDT0 on the target blockchain.

Source: https://usdt0.to/transfer

Challenges Facing USDT0

As a new type of cross-chain stablecoin, USDT0 holds great potential, but it also faces several challenges, including:

1. Cross-Chain Security Risks
   While USDT0 uses the LayerZero cross-chain communication protocol to ensure liquidity, cross-chain operations still present security risks, such as vulnerabilities in smart contracts and the potential for cross-chain bridge attacks.

2. Regulatory Uncertainty
   The regulatory landscape for cryptocurrency is still evolving, especially in major markets like the U.S., where the framework remains unclear. USDT0’s cross-chain features may raise concerns among regulators regarding its compliance and tax treatment.

3. Market Acceptance
   Although USDT0 offers clear advantages in reducing cross-chain costs, gaining widespread adoption across major blockchain platforms and among users will take time. Key to success will be market education, technical support, and community outreach.

4. Competitive Landscape
   USDT0 faces strong competition from established stablecoins and other cross-chain solutions. Stablecoins like USDC and DAI already hold significant market share, so USDT0 must clearly differentiate itself and prove its unique advantages.

5. Liquidity Concerns
   While USDT0 has established partnerships within certain blockchain ecosystems, its ability to maintain sufficient liquidity across all supported chains remains uncertain. Insufficient liquidity could affect the user experience and limit its broader adoption.

Conclusion

The introduction of USDT0 represents a major advancement in cross-chain stablecoin liquidity, addressing the long-standing issue of liquidity fragmentation. By leveraging the innovative LayerZero cross-chain protocol, USDT0 improves the cross-chain transfer experience, reduces transaction costs, and provides a more efficient and secure solution for fund flow within DeFi and Web3 ecosystems.

With integration into blockchains such as Arbitrum, USDT0 is poised to become the new standard for liquidity in a multi-chain world, driving the crypto market towards greater unity and interconnectedness.

However, as it faces challenges related to cross-chain security, regulatory policies, and market competition, Tether will need to stay attuned to developments in both technology and regulation to ensure USDT0’s stability and long-term success.