Crypto Trading Privacy Gets a Boost as $15M of Tether Moves to Liquid Sidechain

At 11:27 UTC on Jan. 7, stablecoin issuer Tether conducted a cross-chain swap of some 15 million USDT reserves from ethereum to Blockstream's Liquid, a federated sidechain running parallel to the bitcoin blockchain.

The technical possibility of USDT's Liquid debut was first announced in July 2019.Innocuous at first glance, the transfer has implications for both digital asset trading and the larger tether market, which saw a mass migration from Omni, a bitcoin-based protocol, to ethereum and even Tron over the course of 2019.But what Liquid offers is privacy.

Through confidential assets - a privacy tool which blinds asset values on public ledgers via a protocol called "Confidential transactions" - these tether may never see public light again.

By hiding tether transfers between off-exchange accounts on Liquid and exchanges themselves, traders can move assets around "Without worrying about frontrunning," pseudonymous Blockstream community manager Grubles told CoinDesk via Telegram.

Tether maintains a healthy competitive advantage against other stablecoins with nearly 75 times the daily trading volume of the next leading stablecoin, the Paxos Standard, according to Messari's Stablecoin Index.

Tether on Liquid may be the first instance of a semi-private stablecoin, according to Blockstream CSO Samson Mow."Services like Whale Alert, that track movements of assets, would not work for confidential assets in Liquid," Mow told CoinDesk.

The number of tether tokens issued on Liquid remains public via the Blockstream block explorer, said Grubles, potentially assuaging some of the concerns of Tether skeptics.

Customer demand drove the decision to convert $15 million worth of tether from ethereum to the Liquid version, Tether CTO Paolo Ardoino told CoinDesk.

"We may be witnessing the beginning of another Tether migration from ERC20 to Liquid," said Tales from the Crypt podcast host Marty Bent in a blog post Tuesday.

As of press time, some $2.3 billion tether is issued on ethereum compared to $1.5 billion on Omni.While $15 million may be a far cry from $60 million, let alone $1.5 billion or $2.3 billion, Tether's last year with ethereum demonstrates how fast the tide can shift.