Plasma, a financial layer built on Bitcoin and backed by Tether, has launched with native privacy features that enable it to achieve goals that are difficult for other cryptocurrency projects to reach.

With Circle's successful IPO and its impressive market performance, the focus on stablecoins has gradually increased. Plasma, a stablecoin chain supported by Tether, completed its ICO last night, with the $500 million quota being "snapped up" within minutes. While Plasma is primarily labeled as a stablecoin, the market knows little about its technical architecture and functional characteristics. This article aims to fill this "knowledge gap."

Previously, PANews published an article titled "Creating a Stablecoin-Specific Blockchain: What Makes Plasma Different with Over $24 Million in Funding?" which readers can refer to for a more comprehensive understanding.

Main Content:

First Look

Plasma is more than 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, enabling low-slippage Bitcoin exchanges and minimum-trust Bitcoin-collateralized stablecoin lending. This will be the key to unlocking new demand for BTCFi.

Similar to Circle's payment network, Plasma serves as a payment network for bank partners and custodians, providing support for the fiat off-ramp channels for USDT.

A Deeper Understanding

Plasma is often simplistically understood as a "stablecoin chain." While this understanding is not wrong, it misses the point. What Plasma is truly building is a financial infrastructure layer specifically designed for Bitcoin. It supports stablecoins but treats them as the underlying foundation. It is a Bitcoin sidechain that offers 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; it aims to build a settlement layer that is natively supportive of Bitcoin and denominated in US dollars.

The project is backed by Peter Thiel and Paolo Ardoino's Tether and Bitfinex, integrating three emerging technological trends: Bitcoin Rollup technology, stablecoin infrastructure, and on-chain privacy protection. Each of these concepts has investment value on its own, but their combination is more likely to create the most valuable financial infrastructure layer in the Bitcoin ecosystem.

Plasma as a Bitcoin Sidechain, Beyond Stablecoin Applications

Plasma's architecture uses Bitcoin as its final settlement layer. The chain functions as an L2 and sidechain, regularly anchoring state commitments to the Bitcoin blockchain to reduce trust assumptions and inherit Bitcoin's security model.

Plasma chain technology is highly likely to lead a new wave of BTCFi because it unlocks the features that users truly desire: low-slippage exchanges of large amounts of Bitcoin and the ability to borrow stablecoins by directly collateralizing native Bitcoin. These seemingly basic needs actually require two core supports: deep liquidity (provided by Tether) and trust-minimization mechanisms (supported by BitVM2).

With Tether's direct endorsement, Plasma has access to one of the deepest liquidity pools in the crypto world. The platform is likely to natively support USDT, giving it an advantage over 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 Bitcoin mainnet itself currently lacks.

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

Built-in Privacy Features

Privacy protection is directly integrated into Plasma's transaction model. Users can choose to join the shielded transfer feature, which hides the information of both parties and the transaction amount without sacrificing interoperability or user experience. Unlike ZK privacy solutions (such as ZCash and Aztec) that require dedicated tools or browser extensions, Plasma's privacy model achieves application-layer compatibility. By introducing basic account abstraction elements, it makes the user experience more similar to banking services rather than another EVM chain.

This design supports selective disclosure, 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's technology allows users to conduct transactions without holding or using highly volatile native tokens. Gas fees can be paid directly in USDT or BTC, with the payments automatically exchanged through an oracle mechanism or internal pricing system. This design not only simplifies the user experience but also eliminates the transaction tracing risks associated with purchasing and consuming native tokens. Plasma thus becomes an ideal choice for users seeking low-friction, discreet financial operations, achieving privacy protection while maintaining excellent usability.

From a Stablecoin Perspective

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

This brings two potential value-added aspects. The first is market-driven. As the demand for stablecoins grows (especially among global users seeking US dollar exposure), products based on USDT may experience strong fundamental demand. Coupled with Circle's IPO, which has refocused the market on stablecoins, assets tied to the Tether infrastructure are likely to benefit from the increasing market heat.

The second is a structural advantage. Plasma can connect financial institutions with a compliant global payment system. Similar to Circle's payment network but serving the Tether ecosystem, this system will have full anti-money laundering capabilities to support corporate onboarding. It will integrate with bank partners and custodians to provide fiat exchange channels while still supporting permissionless DeFi applications. With its 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 based on the valuation of Circle's payment network, I believe that the institutional demand for just the payment network function alone is sufficient to support a $500 million fully diluted valuation (FDV).

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