Solana Loses $1B in USDT to Ethereum in Tether Chain Swap
by Arthur · November 18, 2022
Stablecoin issuer Tether today announced a $1 billion chain swap to convert the USDT it held on Solana blockchain to Ethereum blockchain.
The announcement comes as Solana, which just weeks ago ranked among the top 5 cryptocurrencies by market capitalization, faces difficulties following the collapse of crypto exchange FTX. Solana is now ranked 16th by market capitalization and is down 25.4% in the last seven days. It is currently trading hands at $13.33, down 95% from its all-time high of $256.
A chain swap is the process of moving cryptocurrencies from one blockchain to another. Tether have done this in the past when the demand to use stablecoins shifts from one blockchain to another. For example, in mid-2020, Tether twice changed 1 billion dollars in USDT from Tron to Ethereumwithin two months.
In a few minutes, Tether will coordinate with a third party to perform a chain swap, converting from Solana to Ethereum ERC20, for 1B USDt. The #tether total supply will not change during this process.
Learn more about chain replacement ⬇️— Tether (@Tether_to) 18 November 2022
Like Tron and other smart contract blockchains, Solana – traded as SOL – is an Ethereum competitor. All major cryptocurrencies – such as Bitcoin and Ethereum – have experienced sell-offs following the FTX debacle, but Solana has been hit particularly difficult.
FTX, once one of the largest exchanges, has deep ties to Solana: the company has invested heavily in several Solana-related crypto projects and was instrumental in developing Solana’s primary decentralized exchange and DeFi liquidity provider, Serum.
Following an alleged hack to the FTX exchange on November 12, at a time when withdrawals had been disabled, Serum was essentially taken offline. Solana DeFi developers cut off access to Serum, fearing that the project’s private keys, which were also housed in FTX, had been compromised.
The non-profit Solana Foundation, which is helping to grow the Solana blockchain, also admitted it had $1 million in cash or equivalent assets on FTX.
Yesterday, Binance, the world’s largest digital asset exchange, announced it had temporarily suspended deposits of Tether (USDT) and major stablecoin USD Coin (USDC) running on Solana’s blockchain. Last week, Crypto.com the same way announced it will disable support for USDC and USDT on Solana.
Stablecoins are widely used by crypto traders. Unlike major cryptocurrencies such as Bitcoin or Ethereum, they are non-volatile because they are tied to real assets – such as US dollars or euros – and help those who buy and sell digital assets to do so quickly, without the need for access to fiat- currencies. As such, stablecoins are instrumental tools in the DeFi world.
Tether is the world’s largest issuer of stablecoins, and one can use its digital dollar (and euro or yen) tokens on a variety of blockchains, such as Ethereum, Tron or Polygon.
FTX lost billions of dollars of investors’ cash in one of the year’s most publicized crypto stories when the exchange and related entities imploded this month. FTX used money from the exchange to invest through Alameda Research, a trading firm founded by the exchange’s CEO Sam Bankman-Fried.
After a backlash on FTX last week, the company was forced to admit it did not have one-to-one reserves of customer funds, culminating in a withdrawal freeze and subsequent bankruptcy filing.
