Get a sneak peek

• Plasma is not just a stablecoin chain; it is also a Bitcoin sidechain and a privacy solution.
• Tether is likely to launch native USDT on the Plasma chain, achieving low-slippage exchange of Bitcoin and minimizing trust in Bitcoin collateralized stablecoin lending, which will be key to unlocking new demand for BTCFi.
• Similar to the Circle payment network, Plasma serves as a payment network for banking partners and custodians, providing support for the fiat withdrawal channel of USDT.

Plasma is often simplified as a “stablecoin chain.” This understanding is not incorrect, but it misses the point. What Plasma is truly building is a financial infrastructure layer specifically designed for Bitcoin, which not only supports stablecoins but also sees them as the underlying foundation. It is a Bitcoin sidechain that offers native USDT support, protocol-level privacy protection, and its Gas model does not require users to hold volatile governance tokens. This is not just about payment functionality, but about building a settlement layer that natively supports Bitcoin and is priced in US dollars.

The project is supported by Peter Thiel and Tether and Bitfinex under Paolo Ardoino, integrating three major emerging technological trends: Bitcoin Rollup technology, stablecoin infrastructure, and on-chain privacy protection. Each concept itself has investment value, and the combination of the three is more likely to build the most valuable financial infrastructure layer within the Bitcoin ecosystem.

Plasma is a Bitcoin sidechain, not limited to stablecoin applications.

The architecture of Plasma uses Bitcoin as its ultimate settlement layer. This chain functions similarly to L2 and sidechains by periodically anchoring state commitments to the Bitcoin blockchain, reducing trust dependency assumptions, and inheriting Bitcoin’s security model.

The plasma chain technology is very likely to lead a new wave of BTCFi, as it unlocks the functionalities that users truly desire: exchanging large amounts of Bitcoin with extremely low slippage, and directly staking native Bitcoin to borrow stablecoins. This seemingly basic demand actually requires two core supports: deep liquidity (supported by Tether) and trust-minimized mechanisms (supported by BitVM2).

With the direct endorsement of Tether, Plasma is able to connect to one of the deepest liquidity asset pools in the crypto world. The platform is highly likely to natively support USDT, a competitive advantage that allows it to outperform Bitcoin sidechains that rely on cross-chain stablecoins or new native stablecoins. It will essentially become the core settlement layer for BTC/USDT trading, a function that the current Bitcoin mainnet itself lacks.

Unlike other Layer 2s and sidechains that require wrapping Bitcoin or custodial bridges, Plasma has built a dedicated Bitcoin cross-chain bridge that operates through a permissionless validator mechanism and commits to adopting this solution after the launch of BitVM2. This will achieve a more seamless user access while effectively reducing counterparty risk.

Built-in privacy feature

Privacy protection is directly integrated into the transaction model of Plasma. Users can choose to enable the shielded transfer feature, which hides the information of both parties and the amount involved, without sacrificing interoperability and user experience. Unlike ZK privacy solutions (such as ZCash, Aztec) that require specialized tools or browser extensions, Plasma’s privacy model achieves application layer compatibility by introducing basic account abstraction elements, making the user experience closer to banking services rather than just another EVM chain.

This design supports selective disclosure functionality, allowing users to prove specific transaction details when needed (for example, to exchanges, auditors, or compliance platforms) without exposing all on-chain activities. This privacy system achieves interoperability with regulatory frameworks while ensuring individual control.

The key is that Plasma technology allows users to trade without holding or using volatile native tokens. Gas fees can be paid directly in USDT or BTC, and these payments are automatically converted through an oracle mechanism or internal pricing system. This design not only simplifies the user experience but also eliminates the transaction traceability risks associated with buying and using native tokens, making Plasma an ideal choice for users seeking low-friction, low-key financial operations, achieving privacy protection while maintaining excellent usability.

Stablecoin Perspective

The core point to understand is that Plasma represents the most direct investment in Tether. In the traditional sense, Tether is merely a liquidity layer for various platforms, while Plasma is positioned as a vertically integrated execution environment, where USDT is no longer just one of many assets, but exists as a native component of the chain.

This brings two potential appreciation spaces. The first is market-driven; as the demand for stablecoins grows (especially among global users seeking exposure to the US dollar), USDT-based products may experience strong fundamental support. Additionally, Circle’s IPO has refocused the market on stablecoins, and assets linked to the Tether infrastructure are expected to benefit from the continuously rising market enthusiasm.

The second point is the structural advantage. Plasma can connect financial institutions with compliant global payment systems. This is similar to the Circle payment network, but serves the Tether ecosystem. The system will have complete anti-money laundering capabilities to support enterprise onboarding, achieving fiat exchange channels through integration with banking partners and custodial institutions, while still supporting permissionless DeFi applications. With near real-time and low-cost international settlement capabilities, Plasma can compete with traditional banking networks. Considering that the circulation of USDT is nearly 2.5 times that of USDC, and depending on the valuation of the Circle payment network, I believe that the institutional demand generated solely by the payment network function is sufficient to support a fully diluted valuation (FDV) of $500 million.

The financial layer Plasma built on Bitcoin, launched with liquidity provided by Tether, and enhanced with native privacy features, can achieve goals that are difficult for other cryptocurrency projects to reach.

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