How does Tether-backed Plasma build the Bitcoin financial settlement layer?

Plasma is not just a stablecoin chain, but also a Bitcoin sidechain and privacy solution.

Tether is likely to launch native USDT on the Plasma chain, enabling low-slippage Bitcoin exchange and minimally trusted Bitcoin-collateralized stablecoin lending, which will be key to opening up new BTCFi demand.

Similar to Circle's payment network, Plasma serves as a payment network with banking partners and custodians, supporting USDT's fiat off-ramp channels.

​​Plasma is often simplified as a "stablecoin chain". This understanding is not wrong, but misses the point. What Plasma is truly building is a financial infrastructure layer specifically designed for Bitcoin, which not only supports stablecoins but views them as a fundamental base. It is a Bitcoin sidechain that provides native USDT support, protocol-level privacy protection, and a Gas model that does not require users to hold highly volatile governance tokens. This is not just about payment functionality, but about constructing a native, dollar-denominated settlement layer that supports Bitcoin.​​

The project is supported by Peter Thiel, Tether, and Bitfinex under Paolo Ardoino, combining three emerging technological trends: Bitcoin Rollup technology, stablecoin infrastructure, and on-chain privacy protection. Each concept is individually investment-worthy, and their combination is likely to build the most valuable financial infrastructure layer in the Bitcoin ecosystem.

Plasma's architecture uses Bitcoin as its final settlement layer. The chain functions like a Layer 2 and sidechain, periodically anchoring state commitments to the Bitcoin blockchain, reducing trust dependency assumptions, and inheriting Bitcoin's security model.

Plasma chain technology is highly likely to lead a new wave of BTCFi, as it unlocks the functions users truly desire: exchanging large amounts of Bitcoin with extremely low slippage and directly pledging native Bitcoin to borrow stablecoins. This seemingly basic demand actually requires two core supports: deep liquidity (supported by Tether) and a trust-minimization mechanism (supported by BitVM2).

With Tether's direct endorsement, Plasma gains access to one of the most liquid asset pools in the crypto world. The platform is highly likely to natively support USDT, an advantage that crushes Bitcoin sidechains relying on cross-chain stablecoins or new native stablecoins. It will essentially become the core settlement layer for BTC/USDT trading, a functionality that the Bitcoin mainnet itself currently lacks.

Unlike other Layer 2 and sidechains that require Bitcoin wrapping or custodial bridges, Plasma has built a dedicated Bitcoin cross-chain bridge, operating through a permissionless validator mechanism and promising to adopt the BitVM2 solution upon its launch. This will enable more seamless user access while effectively reducing counterparty risk.

Privacy protection is directly integrated into Plasma's transaction model. Users can opt into shielded transfer functionality that hides transaction party and amount information without sacrificing interoperability or 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 its user experience closer to banking services than another EVM chain.

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

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

The key point to understand is that Plasma represents the most direct investment in Tether. Traditionally, Tether was just a liquidity layer across platforms, whereas Plasma is positioned as a vertically integrated execution environment where USDT is not just one of many assets, but exists as the chain's native component.

This brings two potential value-adding spaces. First, market-driven: as stablecoin demand grows (especially for global users seeking USD exposure), USDT-based products may receive strong foundational momentum. With Circle's IPO refocusing the market on stablecoins, assets linked to Tether's infrastructure are expected to benefit from the rising market enthusiasm.

The second point is 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 entry, integrate fiat conversion channels through banking partners and custodian institutions, while still supporting permissionless DeFi applications. With near-instant and low-cost international settlement capabilities, Plasma can compete with traditional banking networks. Considering USDT's circulation is nearly 2.5 times that of USDC, and depending on the value assessment of the Circle payment network, I believe the institutional demand from payment network functionality alone is sufficient to support a $500 million fully diluted valuation (FDV).

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