A lot of people have been asking me.
“What is the deal with USDT and fUSDT on Binance Smart Chain (BSC)?”
“Why is this multichain.xyz bridge such a big deal?”
In this article, I will try to address these two questions.
Disclaimer: The arguments below are based on my personal opinions, understanding, and experiences. They might be wrong!
Let's start by looking at two types of USDT found on BSC.
The most liquid type (popular) is the one that is labeled USDT but is in fact BUSD-T. This token is minted and backed by native USDT that is held in either the Binance Centralized Exchange (B-CEx) or in the Binance Bridge contracts.
(I suspect they are in fact one and the same, to some extent, but this is speculation.)
It’s wasn’t until the introduction of fUSDT into BSC that the BUSD-T token icon was edited from the official Tether icon to the new one you might have seen popping up around in protocols, like in ellipsis.finance and seen above on BscScan.
Conversely, fUSDT is the officially wrapped USDT and more details can be found on the frapped.io website. But basically, these tokens are backed by native USDT tokens that were bridged via the multichain.xyz bridge and are backed by USDT locked in smart contracts. This is a simplification, but the idea is sound. These USDT are safe from corporate vulnerabilities, like asset seizures and bankruptcy; not to imply anything here.
For a better understanding of this, you can read my article on the multichain.xyz bridge here.
As you can see, this fUSDT is kind of a new thing, as even BscScan has yet to decide how to handle this token. They have not provided an icon, or complete descriptions of it.
Corporate politics aside, as a user, why are these two tokens important?
The first consideration, which is a positive for BUSD-T is adoption. At the time of this writing, you can see by the BscScan screenshots above, that the total supplies vary drastically. The more supply of a token, generally, the more use it has.
However, to talk about the second consideration we need to look at the bridges more closely and think about what it means to have fUSDT or BUSD-T through the viewpoint of being multi-blockchain (BC).
As an independent user, if I were to desire to move my BUSD-T tokens from BSC to Ethereum, or any other BC, I would need to do so via one of two methods.
- I could send my BUSD-T to the B-CEx, then withdrawn them from the exchange to the wallet of choice. This has a whole host of considerations. To name a few;
- I would need to open an account on the CEx and, depending on the amount, perform KYC where I need to prove my identity.
- I would need to pay fees to withdraw my funds again from B-CEx
- The “gate” can be closed at any time and has been closed in the past.
2. I could send my funds back to Ethereum via the Binance Bridge, but this too has its own issues, some of which are.
- There is a limit on the amount one can send. Below, you can see that I personally have a limit of around 100,000 USDs worth of funds.
- I have personally had funds locked in these contracts for more than 20 days and it was quite an ordeal to get these funds returned to me. However, they were returned in the end, which might even be considered a positive of the centralized control/ownership of this bridge.
There is another more important consideration that needs to be discussed and that is the ability of smart contracts to take advantage of cross-chain opportunities.
Popsicle Finance, for example, has been very supportive of both fUSDT and Multichain.xyz and they must have motivations for developing these two technologies.
In sum, Popsicle Finance plans to utilize as many BCs as possible and to provide liquidity across them all. For a better understanding of their goals, I invite you to check out my overview video here. They will need bridges to provide automated deployment of funds cross-chain.
Ape.tax, I hear, might also be developing some cross-chain automated strategies. (This is only rumor.)
So Smart contracts need to know that they are not at the will of individual entities to close their bridges. They also need the ability to move large sums of money from A to B, and if B happens to be on another chain, they cant be restricted thus.
As a user, it might not matter about using this bridge or that, doing KYC or not, or having limits or not. But by supporting projects that have these concerns, we are developing the ecosystem and thus possibly sowing seeds for future opportunities for all of our Numbas ta go UP!