How Plasma, backed by Tether, raised $500 million in instant funding to build a Bitcoin financial settlement layer?
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How Plasma, backed by Tether, raised $500 million in instant funding to build a Bitcoin financial settlement layer?
Plasma, a financial layer built on Bitcoin, is bootstrapped with liquidity from Tether and enhanced with native privacy features, enabling it to achieve goals that other cryptocurrency projects struggle to reach.
Navigating Web3 tides with focused insightsAuthor: Sam, Analyst at Messari
Translation: Tim, PANews
PANews Editor's Note: Following Circle's successful IPO and strong market performance post-listing, attention toward stablecoins has been rising. Last night, Plasma—the stablecoin chain backed by Tether—completed its ICO, with the $500 million allocation snapped up within minutes. While Plasma is primarily labeled as a "stablecoin chain," there remains limited public understanding of its technical architecture and functional features. This article aims to bridge that knowledge gap.
Main Content:
Preview Highlights
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Plasma is more than just a stablecoin chain—it is also a Bitcoin sidechain and privacy solution.
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Tether is likely to launch native USDT on the Plasma chain, enabling low-slippage BTC exchange and minimally trusted BTC-collateralized stablecoin lending—potentially unlocking new demand in BTCFi.
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Similar to Circle’s payment network, Plasma will serve as a payments network connecting banking partners and custodians, supporting fiat off-ramp channels for USDT.
Plasma is often oversimplified as merely a “stablecoin chain.” While not inaccurate, this misses the core vision. What Plasma is truly building is a financial infrastructure layer purpose-built for Bitcoin—one that supports stablecoins but treats them as foundational components. It operates as a Bitcoin sidechain offering native USDT integration, protocol-level privacy protection, and a gas model that does not require users to hold volatile governance tokens. This goes beyond simple payments; it aims to establish a dollar-denominated settlement layer natively compatible with Bitcoin.
The project is supported by Tether and Bitfinex under Peter Thiel and Paolo Ardoino, combining three emerging technological trends: Bitcoin rollup technology, stablecoin infrastructure, and on-chain privacy. Each of these concepts holds standalone investment merit, but their convergence could yield the most valuable financial infrastructure layer within the Bitcoin ecosystem.
Plasma is a Bitcoin Sidechain, Not Limited to Stablecoin Use Cases
Plasma's architecture uses Bitcoin as its ultimate settlement layer. Functioning similarly to a Layer 2 or sidechain, it periodically anchors state commitments onto the Bitcoin blockchain, reducing trust assumptions while inheriting Bitcoin’s security model.
Plasma has the potential to lead the next wave of BTCFi by unlocking highly desired user capabilities: swapping large amounts of Bitcoin with minimal slippage and directly pledging native Bitcoin to borrow stablecoins. While seemingly basic, fulfilling these needs requires two critical enablers: deep liquidity (provided by Tether) and trust-minimized mechanisms (enabled by BitVM2).
With direct backing from Tether, Plasma gains access to one of the deepest liquidity pools in crypto. The platform is highly likely to support native USDT, giving it a decisive edge over other Bitcoin sidechains relying on bridged or newly issued stablecoins. It would effectively become the central settlement layer for BTC/USDT trades—a function currently absent on Bitcoin’s mainnet.
Unlike other Layer 2s or sidechains dependent on wrapped Bitcoin or custodial bridges, Plasma builds a dedicated Bitcoin bridge powered by a permissionless validator set, with plans to integrate BitVM2 upon its release. This enables smoother user onboarding while significantly reducing counterparty risk.
Built-in Privacy Features
Privacy is natively integrated into Plasma’s transaction model. Users can opt into shielded transfers, which conceal sender, receiver, and transaction amount without compromising interoperability or user experience. Unlike ZK-based privacy solutions such as Zcash or Aztec that require specialized tools or browser extensions, Plasma’s privacy framework achieves application-layer compatibility. By incorporating basic account abstraction, it delivers a user experience closer to traditional banking services rather than yet another EVM chain.
The design supports selective disclosure, allowing users to prove specific transaction details when required—such as to exchanges, auditors, or compliance platforms—without exposing their full on-chain activity. This system balances individual control with regulatory interoperability.
Critically, Plasma allows users to transact without holding or using a volatile native token. Gas fees can be paid directly in USDT or BTC, automatically converted via oracle mechanisms or internal pricing systems. This eliminates the friction and traceability risks associated with acquiring and spending native governance tokens, making Plasma an ideal choice for users seeking low-friction, discreet financial operations—all while maintaining high usability and strong privacy guarantees.
The Stablecoin Perspective
A key insight: Plasma represents the most direct investment in Tether. Traditionally, Tether functions as a liquidity layer across platforms. Plasma, however, is positioned as a vertically integrated execution environment where USDT isn’t just another asset—it is a native component of the chain itself.
This creates two avenues for value accrual. First, market-driven growth: as demand for stablecoins rises—especially among global users seeking dollar exposure—products built around USDT stand to benefit from strong fundamental tailwinds. With Circle’s recent IPO refocusing market attention on stablecoins, assets tied to Tether’s infrastructure are well-positioned to capture growing investor interest.
The second advantage is structural. Plasma connects financial institutions with compliant global payment systems—similar to Circle’s payment network, but serving the Tether ecosystem. It includes full anti-money laundering (AML) capabilities to support enterprise adoption, integrates with banking partners and custodians for seamless fiat on- and off-ramps, and still accommodates permissionless DeFi applications. With near-instant, low-cost international settlement capabilities, Plasma can compete directly with traditional banking networks. Given that USDT’s circulating supply is nearly 2.5 times larger than USDC’s, and considering valuations placed on Circle’s payment network, I believe institutional demand driven purely by payment functionality could justify a $500 million fully diluted valuation (FDV) for Plasma.
Plasma—a financial layer built on Bitcoin, jumpstarted by Tether’s liquidity, and enhanced with native privacy—achieves what most other cryptocurrency projects cannot.
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