Bitfinex-backed Plasma raises $3.5 million to expand access to USDT stablecoins on Bitcoin

Plasma network raised $3.5 million in a funding round from Bitfinex and others to expand access to USDT stablecoins on Bitcoin. Tether's stablecoin hasn't been readily accessible on Bitcoin since it closed access to USDT on the Bitcoin-based Omni Layer in 2023.

Bitfinex led the round, which saw support from serial investor Christian Angermayer as well as venture firms Split Capital, Anthos Capital, Karatage and Manifold Trading. Paolo Ardoino, chief technology office of Bitfinex and chief executive office of Tether, is also backing the project.

The chain will be fully compatible with the Ethereum Virtual Machine, meaning that it can conceivably run any Ethereum-compatible smart contract, to provide a solution to expand functionality on Bitcoin.

“The conviction we have, on one hand, is Bitcoin isn't going to change,” Plasma founder Paul Faecks told The Block in an interview. He went on to say the team is not very enthused by current and planned experiments to bring native smart contract functionality to Bitcoin like OP_CAT and covenants.

“We've built on the assumption that there will not be changes to Bitcoin Core while trying to find a solution that enables really powerful USD-denominated payment flows, but have them settle back on to Bitcoin,” Faecks said. 

Tether's USDT is the world’s largest stablecoin with a market capitalization of around $120 billion.

What is Plasma?

Faecks said that Plasma — despite its ability to run any Ethereum-compatible dapp like DeFi protocols Aave or Uniswap — is targeting the “extractive” payments industry through a zero-fee payments rail for USDT.

He added that the network doesn’t fit into the traditional understanding of a Layer 2 network or childchain, though could most accurately be described as “a really advanced, really, sophisticated sidechain” with its own consensus mechanism.

Plasma is attempting to integrate the native UTXO foundation, allowing network gas fees to be paid in bitcoin, while incorporating Ethereum’s account-based model. This could conceivably unlock features like staking BTC to earn yield.

In other words, it's an account-based blockchain model that bridges to Bitcoin, offering “flexibility for Bitcoin’s execution environment,” Faecks said. The chain will launch in a permissioned model, using what Faecks said is a federated multi-sig which will include a name-brand crypto custodian.

“Our consensus architecture, which has been peer-reviewed and published, increases throughput by three times and reduces latency by six times when compared to other leading Nakamoto protocols,” CTO Hans Behrens said in a message. “With real-time difficulty adjustments, Plasma processes over 2,000 transfers per second, inheriting Nakamoto security while vastly improving speed and efficiency for Bitcoin.”

Faecks, a former poker player, noted that the team is looking into expanding functionality to the Cosmos ecosystem as a “strategic option” though is focused on the “EVM side” now.

“We just happen to have strong conviction on the one hand that USDT is an attractive asset to be used for payments and want to increase access to it. So it makes sense to focus on that initially,” Faecks said. “But in the end, you can build DeFi and RWA and any other use cases on Plasma.”