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Ethereum is losing ground to its rivals in terms of USDT consumption, and Hermez may be able to help reverse this trend.
Tether’s USDT stablecoin is now available on Hermez Network, an Ethereum scalability approach built on the zk-rollup concept. Rollups allow the batching or “rolling up” of transactions in order to reduce the load on the Ethereum network.
The idea of data transparency is central to rollups, which ensures that the rollup’s state data is still completely accessible on-chain. In fact, this ensures that the Ethereum network knows the token balances of all user accounts on the Hermez rollup for each sale, and that this information can be used to quickly remove funds and transfer them to their new owners in the event of a failure.
Zk-rollups can be thought of as independent “blockchains” that depend solely on the layer-one network for support. The Hermez rollup publishes daily proofs to the Ethereum network that validate its correctness using zk-SNARKs. The underlying evidence will be almost arbitrarily large due to the succinctness property of SNARKs, while the proof will remain constant in scale. This makes it ideal for scalability purposes, since the Ethereum network will demonstrate conclusively that the network is functioning properly with just a fraction of the data that the rollup itself processed.
Tether hopes that by launching USDT on Hermez, it will relieve pressure on Ethereum gas fees, where the Tether contract is regularly among the top gas consumers. As fees for token transactions on Ethereum regularly exceed $10, and exchanges raise withdrawal fees in response, the market’s Tether use has diversified considerably.
Tether on Tron has achieved equilibrium with Ethereum in terms of value exchanged, which is a major milestone for Tron and a point of concern for Ethereum supporters. The funding of a number of exchanges, including Binance, Huobi, OKEx, and many others that are traditionally synonymous with Asia and Asian traders, is arguably the most important contributing factor to Tron’s growth. Whatever users think of Tron, few can deny its low fees and widespread adoption.
Hermez is an Ethereum-native alternative to Tron, but it adds to OMG Network’s Plasma, which has yet to achieve major momentum. Hermez is currently accessible via MetaMask, which is linked to the user’s Ethereum wallet. To transact on the network, a deposit transaction from the Ethereum main chain is needed, after which the funds become available on the rollup. Hermez, on the other hand, avoids becoming suffocated by interference from other sidechains and layer-one networks if there aren’t a significant amount of potential destinations for the assets.
The Hermez team is well aware of the situation and is working hard to integrate with as many exchanges as possible; however, it remains to be seen if its actions can be fruitful. Meanwhile, Bitfinex has said that it will add native support for Hermez as a withdrawal option on its exchange.