Tether Will Reduce Ethereum Congestion with ZK-Rollups

Priyeshu Garg

Sep. 1, 2020

Tether's implementation of Layer-2 scaling will help take pressure off of a congested Ethereum network.

Key Takeaways

Tether announced plans to add support for ZK-Rollups to reduce congestion on the Ethereum network
ZK-Rollups is a zero-knowledge proof technique that bundles transactions
Tether also integrated with Layer-2 solution OMG Network just two weeks ago

Tether, the largest stablecoin issuer in the world, is planning to add support for ZK-Rollups, a Layer-2 solution that would reduce the pressure on the Ethereum network.

ZK-Rollups Coming to USDT

Paolo Ardoino, the company’s CTO, said that ZK-Rollups is the “most comprehensive” and “most preferred” scaling solution for Ethereum currently available on the market. Integrating the solution would allow Tether to have all data on-chain, instead of having to rely on a sidechain.

A type of zero-knowledge proof technique, ZK-Rollups are a Layer-2 construction that runs on top of Ethereum and bundles many transactions into a single transaction. Apart from enabling faster transaction times, this technique helps reduce Ethereum’s notorious congestion. The average transaction fee on the Ethereum network surpassed $6.5 on the last day of August, data from BitInfoCharts showed.

Graph showing the average transaction fee (USD) on Ethereum from June 2020 to September 2020. Source: BitInfoCharts

Tether USD is a large part of why ETH gas fees are so high, accounting for nearly $10.5 million in fees over the last 30 days. Tether is usually the top gas guzzler on the Ethereum network but has recently fallen to second as DeFi exchange Uniswap gains traction.

Gas consumption by smart contract on ETH Gas Station — Top gas guzzlers on the Ethereum Network. Source: ETH Gas Station

Even Vitalik Buterin, one of Ethereum’s founders, acknowledged the high fees the network was experiencing, urging people to utilize Layer-2 solutions to scale the network.

To those replying with "gas fees are too high", my answer to that is "well then more people should be accepting payments directly through zksync/loopring/OMG". Seriously, scaling to 2500+ TPS for simple-payments applications is here, we just need to… use it. https://t.co/J2KMJyLKv6

— vitalik.eth (@VitalikButerin) September 1, 2020

Tether Puts Heavy Focus on Scaling

Ardoino’s announcement about implementing ZK-Rollups comes just two weeks after Tether expanded to its eighth blockchain, the OMG Network. USDT holders will be able to benefit from transacting on the OMG Network, which was built as a Layer-2 solution for Ethereum to reduce congestion and gas fees. Other blockchains that Tether uses for USDT include TRON, EOS, and Algorand.

Vansa Chatikavanij, the CEO of OMG Network, said that the network supports “thousands of transactions per second at a third of the cost of the same transaction on Ethereum,” adding that addressing these fundamental issues would help grow both Tether and Bitfinex. As Tether’s sister company, Biftinex will see its USDT withdrawals and deposits facilitated on the OMG Network.

Last week, Tether made the first major transaction following the integration, moving 3 million USDT coins to the OMG Network from Ethereum.

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