Plasma: Merging Two of Crypto's Strongest PMFs

A host of projects manufacture narratives to gain traction and justify higher multiples.

In reality, if you really think about it, only two products in crypto have demonstrated a clear product–market fit (PMF): Bitcoin and stablecoins.

With Bitcoin holding about 60% of all crypto’s value to date, it’s hard to deny it has become the de facto store-of-value (SoV) for the next era.

Meanwhile, in 2024, stablecoins processed $27 trillion in transaction volume (that’s double Visa’s volume, btw), cementing their role as the dominant medium-of-exchange (MoE) for internet transactions.

Enter Plasma

Tether, issuer of USDT, the leading stablecoin, is now bringing these two narratives together through Plasma, an EVM Layer-1 [L1] with a trust-minimized Bitcoin bridge.

Plasma unifies USDT’s Lindy with built-in payment features on an EVM chain that natively integrates a Bitcoin bridge.

By doing so, it creates functional separation between both assets: Bitcoin consolidates its role as a reserve asset, while USDT takes on the transactional load as the settlement asset of the internet.

This architecture lays the groundwork for global payments at scale while unlocking greater capital efficiency from idle BTC.

Let’s get into the weeds to understand why there’s more than what meets the eye with Plasma.

The stablecoin front (payments and yield)

Plasma has stripped back its blockchain to create a purpose-built platform, capable of processing stablecoin operations right out of the box.

Deep USDT liquidity (via USDT0) combined with features like free  USDT transfers reduces operations costs and improves on/off-ramping funds of all sizes - right from global remittances to micro-transactions, small business invoices, and everything else in between.

Plasma aims to become the default venue to send and spend stables. Compared to Ethereum, Tron, and Solana, sending USDT on Plasma is significantly cheaper.

For organizations that require enterprise-level privacy (including compliance), Plasma will also support confidential (private) payments.

Although still in development, this feature will allow users to send and receive funds with hidden transfer amounts and recipient addresses.

A selective disclosure feature will allow users to reveal specific transactions through verifiable proof, enabling privacy by default while maintaining auditability and regulatory compliance.

Developers deploying on Plasma will be able to configure fee abstraction and custom gas tokens.

Instead of holding a trace amount of XPL to pay for gas fees and submitting multiple transactions, users can hold only the assets they intend to send and interact through “1-click” app experiences.

With $2 billion in USDT liquidity at launch, Plasma is positioned to attract yield-bearing stablecoin issuers, which will help establish Plasma as the hub for idle stablecoins.

USDT is already widely accepted as collateral across DeFi, from Maker’s sUSDS to Maple Finance’s syrupUSDT.

Notably, on Aave v3, USDT is the most borrowed stablecoin with $5.8 billion in active loans.

Plasma recently announced an integration with Aave, alongside plans for an institutional fund.

This partnership will allow users to earn yield natively on the assets they hold, while deep liquidity is expected to drive borrowing demand and create more favorable lending spreads.

The Bitcoin bridge front

Put yourself in the shoes of a Bitcoin maxi. What’s their real endgame?

9/10 times, you’ll find them looking for a convenient way to buy and sell their BTC. Perhaps you’ll also find them looking for ways to secure loans.

They don’t like giving up control to CEXes nor do they like paying massive slippage on clunky cross-chain swaps.

At present, BTC remains fragmented across multiple ecosystems, with few secure ways to store it while also unlocking capital efficiency through DeFi (or CeFi, for that matter - RIP Celsius).    

Plasma addresses this with a Bitcoin bridge that enables transfers from Bitcoin to the Plasma network via pBTC, their trust-minimized Bitcoin (BTC) derivative.

When BTC is transferred to a Plasma wallet, it is locked, and pBTC is minted 1:1 against it. This brings Plasma structurally closer to a Bitcoin L2 with EVM compatibility.

Notably, pBTC is issued through LayerZero’s OFT Standard, a framework for cross-chain messaging, allowing it to move seamlessly across chains.

pBTC liquidity can be seeded across EVM networks – similar to BitGo’s deployment of wBTC on Ethereum – which positions Plasma as a potential home to one of the largest BTC-pegged assets.

By combining deep USDT liquidity with BTC, Plasma functions as a settlement layer for BTC/USDT and enables low-spread BTC swaps, BTC-backed USDT loans, and other DeFi uses.

To secure the bridge, Plasma maintains a network of permissionless verifiers operated by institutions running full Bitcoin nodes and indexers.

These verifiers monitor the Bitcoin blockchain for deposits and burns, using MPC signing to produce attestations onchain for public verification.

The institutional front

With institutions adopting tokenized markets at scale, stablecoins are emerging as the settlement assets of the internet.

Stablecoins are being used for everyday transactions, and offchain traditional assets are increasingly being converted into stablecoins, enabling transferability in the digital economy.

At present, US Treasury bills make up more than half of the collateral backing stablecoins.

The growing reliance on stablecoins for unlocking capital efficiency has drawn the interest of governments.

In particular, Tether’s status as the largest US-denominated stablecoin issuer, i.e., ~2.5x the size of USDC, makes USDT of interest to the US Treasury and Trump administration.

Currently, the US government is looking at Tether to become a major buyer of the US Treasuries (USTs) as part of an emerging fiscal strategy to maintain global dollar dominance.

As of Q2 2025, Tether’s total US Treasury (UST) exposure amounted to $105 billion.

This puts Tether at the 20th spot in US treasury (UST) holdings among countries – right below South Korea, with $126 billion in USTs.

Increased government collaboration could help Tether become a sovereign-scale financial institution.

In line with this vision, Tether recently hired Bo Hines, former head of Trump’s crypto advisory council, as the strategic advisor for digital assets and US strategy.

This leadership will help Tether stay in the conversation during major fiscal mandates.

With regulation setting the backdrop, Tether’s combination of infrastructure (USDT & Plasma) and operational leadership forces traditional banks to acknowledge it as real competition.

Currently, US banks are campaigning to close a “loophole” in the GENIUS Act that would allow protocols and stablecoin issuers to offer yield to holders.

In its current form, the GENIUS Act would allow Tether to issue USDT while administering yield with integrations from protocols like Aave and Pendle.

Compared to holding T-bills in a bank, stablecoins within a permissionless environment unlock a level of capital efficiency for users and businesses that traditional banks aren’t yet equipped to provide.

With the launch of XPL, the market will decide if Circle’s premium stems from genuine preference or because it’s the only biddable asset.

Concluding thoughts

With USDT and Plasma, Tether positions itself as a vertically integrated monetary network.

The closest structural comparisons today remain fragmented solutions: wBTC for Bitcoin wrapping, Circle for fiat-backed stablecoins, and Tron and similar protocols for payments infrastructure.

Plasma combines these functions into a single, high-octane system.

By integrating activity from two of the largest assets by market cap on one chain and stacking up incentives, Plasma could emerge as the de facto BTC/stablecoin trading environment.

While existing ecosystems like Ethereum have cemented themselves as primary liquidity hubs, Plasma has the opportunity to wedge into the market as a tailor-made system - where everyone goes to onramp and offramp their BTC, settle payments, fund projects, take out loans, and pay their bills.

Bitcoin stores value. USDT settles it. Plasma makes it all flow.

Trillions.