Add USDT0 market to Moonwell on OP Mainnet

Summary

I am pleased to present a proposal for the addition of USDT0, a multichain variant of Tether (USDT), to the Moonwell protocol’s Core lending markets. USDT0 brings the stability and familiarity of Tether into an advanced cross-chain infrastructure, powered by LayerZero’s Omnichain Fungible Token (OFT) standard. With high trading volume, a circulating market cap of $900M, and rapidly expanding adoption across chains like Ink and Unichain, listing USDT0 will further strengthen Moonwell's position as a leader in onchain lending. This proposal details the technical, economic, and governance aspects of USDT0 and argues for its inclusion as a Core Market on OP Mainnet for Moonwell.

General Information

Token: USDT0

USDT0 is an omnichain version of Tether’s stablecoin built to unify fragmented USDT liquidity across chains. It is backed 1:1 by locked USDT on Ethereum, enabling seamless minting and redemption across ecosystems via LayerZero. Unlike wrapped assets or bridge tokens, USDT0 achieves direct interoperability through native mint/burn logic and a dual-DVN (Decentralized Verification Network) security configuration. It is designed for high throughput, regulatory compliance, and rapid settlement.

Benefits to the Moonwell Community

1. Enhanced Liquidity and Volume Listing USDT0 will inject a stable, high-volume asset into the protocol. With a 30D trading volume of $2.9B and 24H volume of $215M (as of April 22, 2025), USDT0 can anchor borrowing activity and reduce slippage across all Core Markets.
2. Stable Collateral Type USDT0 offers price stability backed by redeemable assets on Ethereum. It serves as an ideal stable collateral option for borrowers and liquidity providers seeking predictability.
3. Interoperable and Cross-Chain Compatible Because it conforms to the OFT standard, USDT0 is natively bridgeable across ecosystems without relying on fragmented liquidity pools. This improves UX and opens up Moonwell to cross-chain integrations.
4. DeFi Access and Integration USDT0 is already integrated with major DeFi protocols and CEX/DEXs. Listing on Moonwell aligns with its usage as a stablecoin rail across Inkchain, Optimism, Arbitrum, and more.

Resources and Socials

• USDT0 Website
• Token Documentation
• Twitter

USDT0 Social Channels Metrics

• Twitter: 11.4k followers

Market Risk Assessment

Market Metrics

• Market Cap: $900M
• Minimum/Maximum Market Cap (Last 6 months): $0 (October 21st 2024) / $900M (April 22nd 2025)
• Circulating Supply: $899M USDT0
• Maximum Supply: ∞ USDT0
• 30D Total Volume (CEX/DEX): $2.9B
• 24 Hour Trading Volume: Varies heavily, as of April 22nd, 2025 it is $215M

Liquidity on Centralized Exchanges

This does not apply to this token as it stands to be a multichain deploy of USDT.

Liquidity on Decentralized Exchanges:

• Uniswap (Unichain) -2% Depth: $272,972
• Aerodrome SlipStream (Optimism) -2%: $45,277

Herfindahl Index: 0.80 (on Inkchain), .80 (on Unichain)

The Herfindahl Index quantifies token concentration among holders. A value of 0.80 reflects significant concentration among wallets for the USDT0 token, indicating that governance risks stemming from concentrated holdings are high. It should be noted however that Tether is a reputable company, and that the OFT borrows from Tether’s supply on ETH Mainnet, and so this may not be a completely accurate representation.

Decentralization

• Top 10 Holders (Majority is concentrated in a Kraken-Inkchain wallet)
• Token Contract: 0x0200C29006150606B650577BBE7B6248F58470c1

Ownership and Administration: USDT0 operates as an Omnichain Fungible Token (OFT), leveraging LayerZero’s infrastructure. The token contracts across supported chains are controlled by Tether and its designated administrative roles, depending on the deployment context. Ownership and upgrade privileges for the token are modular and vary by deployment, enabling independent upgrades of the messaging layer and token logic.

Multichain Governance Structure:

• Each deployment uses an upgradeable framework via LayerZero adapters and TetherTokenOFTExtension contracts
• On Ethereum, the USDT adapter is responsible for locking native USDT and authorizing cross-chain messages.
• On other chains, minting and burning of USDT0 are handled by OFT-compatible contracts controlled via administrative safes.
• The system allows efficient contract upgrades and emergency control without affecting interoperability.

Security and Controls:

• All cross-chain transfers must be verified by two independent Decentralized Verification Networks (DVNs): LayerZero DVN and a USDT0-specific DVN, providing robust guarantees against message tampering or spoofing.

Blacklist Functionality: USDT0 supports blacklist and freezing functionality in line with regulatory compliance tools, enabling enforcement actions if needed.

Economic Risks

USDT0 is a fiat-backed stablecoin and does not participate in governance voting like native protocol tokens. Therefore, it carries no governance risk (e.g., malicious voting attacks). However, standard risk controls such as supply caps, borrow limits, and oracle safeguards should be considered to minimize systemic protocol risk in extreme market scenarios. There is also some concentration risk in the current supply of USDT0 that is deployed to the Superchain; however, it is held by a reputable actor.

Smart Contract Risks

Codebase and Onchain Activity

• The USDT0 system is built on audited smart contracts maintained by Tether and the LayerZero team. Here are the available audits and bounties: OpenZeppelin, ChainSecurity, ImmuneFi Bug Bounty
• The OFT logic is live across multiple networks including Ethereum, Optimism, Ink, Arbitrum, Berachain, and others.
• Source code is publicly available via GitHub repositories.

Security Posture

• Tether maintains a robust operational and compliance infrastructure.
• OFT deployments use verified contracts with multisig safes and formal auditing.
• LayerZero messaging uses a dual-DVN configuration to ensure message validity before minting or burning USDT0 across chains

Upgradability

• USDT0 contracts are upgradeable to support evolving chain integrations and compliance features.
• Upgrades are secured through governance processes managed by Tether and related multisigs.

Oracle Assessment

• Chainlink oracle price feed address: 0xECef79E109e997bCA29c1c0897ec9d7b03647F5E (USDT-USD Oracle OP Mainnet)
• Is the asset a wrapped, staked, or synthetic version of a different underlying asset?* If yes, and the Chainlink price feed provides price data for the underlying asset rather than the wrapped, staked, or synthetic version, please provide the following information:
• How is the asset wrapped, staked, or otherwise created?
  • The asset is wrapped, USDT0 is an OFT that represents USDT. Users/Integrators deposit USDT to the OAdaptorUpgradeable proxy in a lock-and-mint model on Ethereum mainnet. After dual verification by the L0 DVN and the Tether DVN (0x3b0531eB02aB4Ad72E7a531180bEEf9493A00dD2) an equal amount of USDT0 is minted on the destination chain.
• How can you verify that the amount of the asset that is minted is never more than the amount of the underlying asset that is locked, staked, or used as collateral
  • Read the ERC20.balanceOf(OAdapterUpgradeable) for USDT on Ethereum (shows the locked amount of USDT).
  • Sum totalSupply() of USDT0 contracts across all chains (LayerZeroScan has an API)
  • L0 security stack refuses messages that violate collateral > supply; both DVNs must sign mint/burn messages.
• Is there a way to verify proof of reserves (PoR) on the same network as the market?
  • Chaos Labs' "Proof Oracle" keeps track of the proof of reserves for USDT0 (though this is not live yet).
• What specific events might cause the price to “depeg” or no longer be the same as the price of the underlying asset?
  • Underlying risk: USDT itself de-pegs.
  • Bridge logic failure: bug or upgrade mishap in OAdapterUpgradeable emits excess mint.
  • Oracle/DVN compromise: both DVNs fail or are captured, allowing fake messages.
  • Proof-of-Reserve downtime: traders apply a discount until transparency is restored.
  • Regulatory freeze: court order pauses the Ethereum reserve contract, blocking redemptions.
  • Extreme thin-liquidity on a newly added chain: temporary ±1-2 % drift until arbitrage.

Swap Size Requirement

USDT0 meets the new MALF criterion requiring that a $500,000 swap incur no more than a 25% price impact across decentralized exchanges and aggregators with some considerations. The token currently holds meaningful liquidity across platforms such as Uniswap (on Unichain) and Aerodrome (on Optimism). As of April 2025, the -2% depth on Uniswap for USDT0 is approximately $272,972, and $45,277 on Aerodrome. A swap of $500,000 on Uniswap on Unichain incurs a .24% price impact, which shows that it is substantially liquid on prospective chains. However, currently, on OP Mainnet, USDT0 is illiquid and sustains a high price impact upon trade, though this is expected to change rapidly.

Liquidity Threshold

USDT0 satisfies the minimum liquidity threshold of $2 million in total value locked (TVL) across decentralized exchanges. The asset benefits from its native OFT architecture, which allows deployment of USDT from ETH Mainnet and deep integration across a variety of onchain ecosystems. Below is an image of pool TVL just for Unichain, and it far surpasses the benchmark.

Commercial Viability

USDT0 is projected to generate protocol revenue through its high demand as a stablecoin collateral and borrowable asset. Historical utilization data from Moonwell shows that stablecoins like USDC and USDT consistently maintain utilization rates between 65–90%. Using a conservative 85% utilization rate for USDT0, combined with a 10% reserve factor and expected total supplied of $10 million, the protocol could generate approximately $7,000/month in revenue. In case this is not a satisfying answer, here’s some back-of-napkin math:

|Metric|Value|Explanation| | --- | --- | --- | |Total Supplied|$10,000,000|Chose a random middle ground on the supply between EURC (5M) and USDC (57M)| |Utilization Rate|85%|Based on historical rates for stablecoins on Moonwell| |Total Borrowed|$8,500,000|85% of supplied USDT0| |Avg. Borrow Interest Rate (APY)|10%|Higher rate due to proximity to kink point in IR curve| |Annual Interest Paid|$850,000|$8.5M × 10%| |Reserve Factor|10%|Per standard for USDC, USDT, USDS​| |Annual Protocol Revenue|$85,000|$850,000 × 10%| |Monthly Protocol Revenue|$7,083|$850,000 ÷ 12|

Proposal Author Information

• Name: 0xMims
• Telegram): Mims0x
• LinkedIn
• Twitter: 0xMims
• Delegate Address: 0x657D07095b082BB71ebD93F549f407A97f49094F
• Relationship with token: I am a Moonwell community member and delegate.

Conclusion

The listing of USDT0 as a core asset on Moonwell unlocks significant potential for protocol growth, liquidity expansion, and user adoption. As a stable, interoperable, and compliance-ready asset, USDT0 provides users with cross-chain lending functionality while aligning with Moonwell’s mission of simple, secure, and accessible DeFi.

With its established integrations, large trading volume, and widespread adoption, USDT0 is well-positioned to become a foundational stablecoin for Moonwell lending markets. I invite the community to engage in discussion and help shape this listing proposal to best serve the protocol’s long-term vision.