A very warm welcome back to Mega Crypto Casino dear readers and welcome to our latest article on the subject of Crypto Casinos, Cryptocurrencies Blockchain and everything related. As always, we aim to at least enrich your knowledge base and add something of value to your day; all in a straightforward and straight-talking style, accessible to readers of every level of experience.
Onwards to today’s subject.
…zzzzzzzzzzzz.
So what’s going on? Am I catching a quick nap before starting? Ah no; today we will be covering the subject of USDT.z a ‘bridging’ coin, but perhaps not; perhaps representing a wrapped asset; a stable coin…but perhaps not!
When dealing with USDT.z one had best have one’s eyes wide open and one’s wits out on alert, as there are not only legitimate coins about, but also inferior imitations and straight-up scam coins!
So why bring up this mysterious and obscure coin? Well, mysterious possibly, but obscure no! There is a large trade in and requirement for these coins from buyers such as crypto casinos and financial institutions, who know exactly what they are and exactly why they want them, so we are covering this subject here, in case you ever come into contact with this coin and to provide you with at least a basic store of knowledge when you do so.
At this stage though, having already made a couple of technical errors, I’m going to diverge a bit, quietly chastise myself and therein, you will avail yourselves of a valuable technical definition…and if its ever the 1 million pound answer on ‘Who wants to be a Millionaire’, then you owe me big time!!
You will note that I referred to USDT as a coin; well, it’s actually a token, although the terms are often used interchangeably. A coin is technically a cryptocurrency that runs on its own native blockchain, so for example:
- Bitcoin runs on the Bitcoin blockchain.
- Ethereum runs on the Ethereum blockchain.
- Solana runs on the Solana blockchain.
Coins are usually used for:
- Paying transaction fees
- Transferring value
- Acting as the native asset of a network
Coins might best be thought of as the “base currency” of a blockchain ecosystem.
By contrast, tokens might best be thought of as a crypto asset built on top of an existing blockchain rather than having its own blockchain.
Examples would be;
Chainlink is a token on Ethereum.
Uniswap is a token on Ethereum.
USDT exists as tokens on several blockchains.
And it’s worth mentioning here that tokens can represent;
- Utility/access rights
- Governance voting power
- Stablecoins
- In-game assets
- Real-world assets
- NFTs
Well there we are then; I’m now suitably chastised and you’ve all just received a knowledge base upgrade; normal service can now resume!
But before going further, it is important to note that USDT.z is not one specific token but the generic name for a species of tokens on the BNB Smart chain that performs a specific bridging or wrapped function. It is referred to thus, so that all buyers and sellers know what type of function is implied with the species.
The other reason is that these tokens are minted NOT mined like BTC coins; so token producers can duplicate the functionality in the token’s underlying smart contract, but it cannot duplicate another token’s name, smart contract address and other specifically unique designations and individual blockchain markers. Essentially, the first token produced may have actually been called USDT.z but subsequent tokens coming from other producers, and fulfilling the same function exactly, cannot be designated with the same name, as that name is ‘already taken’.
So What Is It?
The first thing to clear up about USDT.z is that it is not official Tether USDT in the same manner as USDT (ERC20) or USDT (TRC20) although there is an actual USDT deployment on the BNB Smart Chain which is supported by exchanges and wallets and maintains the 1:1 peg like other USDT versions. It is officially known as USDT BEP-20 or Tether USD (BEP-20).
Note that the BEP-20 appellation simply signifies the token standard on BNB Smart Chain and note that whilst an official Tether deployment, USDT BEP-20 or Tether USD (BEP-20) is not interchangeable at the blockchain level with ERC20 or TRC20 USDT unless bridged or sent through an exchange that supports conversion.
At this point I am impelled to insert a caution which applies to the above but also to any instance of transferring or requesting cryptocurrencies: Token appellations can be confusing. Always match the token type to the correct receiving network. Common mistakes, for instance, can be to send USDT BEP-20 to a USDT ERC-20 wallet address or USDT ERC-20 to a USDT TRC-20 address. Such an error will result in an irretrievable loss of your funds…always match details before sending!
Right…back to business.
It is vital to be able to differentiate between ‘official’ USDT and the numerous other versions, not simply because of their different uses and utility, but importantly, because some have worth and some are literally worthless!
Note that the official contract address for official BNB Tether is:
0x55d398326f99059fF775485246999027B3197955
Which is the contract most wallets, exchanges, and DeFi apps use for Tether USDT deployed on the BNB Smart chain.
Having now covered the official Tether BNB deployment, it makes some sense to switch to the other end of the spectrum and focus on some of the other tokens on the BNB blockchain which proport to be either official USDT or the USDT.z token that is the subject of this article and to which we will be coming back to shortly.
So why can there be so much confusion between tokens? Well, primarily because absolutely anyone can create a token named “USDT”, the name/logo alone means nothing and the vital thing is to verify the contract address so that you know exactly what you are getting i.e. which smart contract you are interacting with.
Pseudo USDT - The Good, The Bad and the Ugly!
To illustrate just how the subject can be so confusing, we merely have to look at some examples of different variants of “USDT.z” style tokens that have appeared on the BNB Smart Chain:
- “USDTZ”
- “USDT-Z”
- “LayerZero USDT.z”
- “zkBridge USDT”
- “wrapped Tether”
- “synthetic USDT”
- “Tether USD Bridged ZED 2.0”
- “Zedxion Bridged USDT”
- “USDT Bridged ZED20”
Many of these and similar tokens usually purport to:
- Act as a stablecoin pegged to USD.
- Provide “faster” or “private” transfers.
- Offer “banking alternatives”.
- Support arbitrage or OTC trading.
- Bridge stablecoins between blockchains.
- Enable cross-chain liquidity.
- Are a ‘Wrapped Asset’
For thoroughness, let us examine three of the most important, and to a client, utilitarian claims of some “Z” type cryptos and how this would actually work I real life:
Acts as a Stable Coin
So how does a genuine crypto coin/token actually achieve 1:1 parity with the US Dollar i.e. why is it stable?
Well, the most obvious is Fiat asset backing, as in tether or USD tokens. Typically the issuer would hold Cash, Treasury Bills, Bank Deposits or similar liquid assets as issue capital in reserve and then issue an amount of coin/token on the blockchain accordingly. Structurally, $1 held with the issuer as issue capital would then lead to the creation of one coin/token which would then trade on the crypto markets. When the crypto is subsequently redeemed, it is destroyed and the $1 is returned to either the seller or to treasury depending on the liquidity model.
“So that’s all well and good” I hear you say, “but what exactly maintains the value of a coin at 1:1?”
Well, should the price rise above $1, issuers can deposit more dollars, mint new coins and sell for more than $1; sheer arbitrage will push the value back downward.
Similarly, should the price drop below $1, issuers could purchase the discounted coins, sell them for $1 and arbitrage would again push the price upwards.
I will briefly mention here that there are also other mechanisms whereby a crypto can be maintained as a stable coin. Firstly, Crypto-collateralized stable coins, whereby instead of holding dollars in a bank, the system holds crypto assets as collateral. More esoterically, there are Algorithmic stablecoins where there are no direct dollar reserves, nor crypto assets, but stability is maintained through the supply-and-demand mechanics of minting, burning and incentive arbitrage.
Anyway. Although a ‘stable’ coin may claim that it is ‘stable’, the transparency and mechanism of its backing are vital points to understand. A good starting point is by looking at the underlying smart contract address, but note carefully; the contract address will not reveal absolutely everything:
A contract will reveal:
- Minting rules
- Burning rules
- Collateral ratios
- Liquidation logic
- Reserve addresses
- Governance permissions
- Supply changes
- Whether it’s a real deployed token contract
- The blockchain it’s on (Ethereum, Solana, Base, BNB Chain, etc.)
- Token name/symbol
- Total supply and holder distribution
- Whether the contract source code is verified
- Transaction history
- Whether the contract has suspicious permissions (minting, blacklisting, pausing transfers, etc.
Importantly, what it cannot reveal:
- What collateral is accepted
- How much is locked
- Liquidation thresholds
- Stability fees
- Total supply
- Whether the coin is legitimate
- Whether the project has real utility
- Whether it’s a scam
- Whether the tokenomics are good
- Whether the developers can rug-pull users
So although a lot can be gleaned from the smart contract, never forget that ‘stable’ is not synonymous with ‘risk-free’.
Acts as a Bridge / Wrapper
Although possibly self-explanatory, let us take a look at the second role that a ‘Z’ token might fulfill and exactly how it works practically.
A bridge lets value move from one blockchain to another without physically moving the original asset; the core principal is exactly that the tokens do not “travel” between chains, instead, one version is locked or destroyed, and another version is created on the destination chain. Let’s take a closer look.
If for example, you had 100 USDT (ERC20) and wanted to move it onto the BNB Smart chain, the bridge would perform several coordinated actions:
- Firstly, you would connect your wallet to a bridge service (either an existing provider or your own bespoke bridge) and the bridge would provide a deposit address or smart contract on Ethereum. You would send your coins into the bridge and from that point onwards, the bridge would control them.
- The bridge verifies the deposit and scans the Ethereum blockchain to confirm that the transaction is genuine, finalized and not reversable.
- Once confirmed, the bridge creates a corresponding token on the BNB Smart chain.
- You then receive 100 ‘bridged USDT’ on the BNB Smart chain, which although not the original 100 USDT (ERC20), represents the original 100 locked coins…or in other words the new BNB coin is effectively a blockchain wrapper around the original asset that has allowed the value of the original to be moved across different blockchains.
So if you are just getting a ‘representation’ of the original coin on the BNB Smart chain, what backs the bridged coin?
Well, if you recall, the original 100 coins sit locked within the bridge, so essentially, these act as a 1:1 backing for the newly produced BNB coin in exactly the same way as each USDT (ERC20) is backed 1;1 by cash reserves held by Tether.
Intuitively, if you later decided to bridge back to the Ethereum blockchain, you would send the bridged tokens into the bridge, after verification, the bridge would burn or lock them and then the original USDT on Ethereum would be released back to you. As you can see, this mechanism ensures parity of value and parity of its 1:1 supply ratio.
Let’s Get This All Wrapped Up!
During the explanation of how a bridge functions, illustrated above, we also briefly gained an insight into how a crypto can act as a ‘wrapped’ token; for thoroughness and because some ‘Z’ tokens inherently act as such and because some are specifically required to act as both bridgeable coin and wrapper, let us just zoom in and take a more detailed look.
So the best way to conceptualize a crypto “wrapped token” is as a digital receipt or container that represents something else. Imagine you go to the dry-cleaners and deposit your jacket and the dry-cleaners hand you a receipt. The receipt is analogous to the wrapped token; different in form but representing your value claim on the jacket.
As you will soon see, the operational concepts of bridging and of a wrapped token are very similar and in certain aspects are directly analogous.
Wrapped tokens exist in the first place because all blockchains are discrete operating environments and cannot naturally ‘talk’ to each other. This is inconvenient because, for instance, Bitcoin lives on the Bitcoin blockchain, however, many crypto apps and games live on the Ethereum blockchain; therefore, one cannot directly use Bitcoin inside Ethereum apps.
The solution to this is elegant;
- Lock up real Bitcoin somewhere secure.
- Create a new token on Ethereum that represents that Bitcoin.
- Allow people to trade and use that token inside Ethereum.
This is a real-life example and that new token is called Wrapped Bitcoin (WBTC).
Ok, so we’ve got that, but there is another real-world example that works slightly differently. I don’t want to labour the point but will…because one day if you become involved with wrapped tokens, you will be glad that I did. So let us take a look at wrapped Ether (WETH).
“What’s going on?” I hear you say. “Surely, Ether is already on Ethereum, so why wrap it?”
Well yes, but Ethereum, although the native coin of the Ethereum blockchain, behaves slightly differently to other Ethereum tokens, and many apps on the blockchain only understand the ERC20 format; so developers created WETH, the ERC20 compatible version.
Quite simply, each time an WETH is created, firstly an ETH is locked into a smart contract thus maintaining a 1:1 parity. A change of form into a wrapped token but not bridged, as both are already on the same blockchain.
Rather more exotically, let’s look at the example of Pax Gold (PAXG), a wrapped token on the Ethereum blockchain; PAXG is a regulated, gold-backed cryptocurrency issued by Paxos Trust Company. Each ERC-20 token represents legal and beneficial ownership of one fine troy ounce of London Good Delivery gold held in an LBMA-accredited vault.
Historically, wrapped tokens first gained importance as the solution to pressing real-world problems and their subsequent development allowed:
- Moving value across blockchains.
- Using assets in new apps.
- Faster trading.
- Decentralized Finance (DeFi).
- Tokenization of real-world assets.
But of course, these days, things move onward incredibly quickly and using the same principals, the current industry focus is on the tokenization of;
- Stocks
- Bonds
- Real Estate
- Gold
- Art
All well and good, however, some of our more seasoned (ok, I mean older) readers may by now be having a sense of Deja vous;
- Stocks: inferior or unsuitable quality stocks or assets, wrapped in a managed fund ‘wrapper’ and the funds thereby imploding as in the Archegos Capital Management Implosion or the Woodford Equity Income Fund implosion.
- Bonds; the high-yield or "junk" bond craze of the 80s and its subsequent crash.
- Real Estate: the Mortgage-Backed Securities (MBS) and Collateralized Debt Obligations (CDOs) of the early 2000s and its market shattering crash.
- Gold: Yes, several gold funds have collapsed, but due mostly to mismanagement, not to the gold. If you want gold just get gold and hold it yourself and for the right reasons…don’t mess around with anything fancy. Gold has been good since the birth of mankind. (Not financial advice)
- Art; Remember the NFT boom and bust of 2021-2022?
Caveat Emptor – practical steps in staying safe
And these examples from the past, bring us nicely back to lessons for the future. As with all things, there are good and bad examples everywhere, but as they have been saying since Roman times; “Caveat Emptor”…buyer beware.
If you are ever looking for a ‘Z’ type bridge coin, to either bridge value across blockchains, or to act as a ‘wrapper’ or both, it is of no use just ‘getting out there’, picking a coin that says that it can oblige and hoping for the best. A wrapped token is only as trustworthy as: the reserves backing it; the smart contracts and the token issuers. So beginners should always ask: “Who holds the real asset, and can I verify it?”
Ok, so how do we do that?
Well, as briefly covered much earlier; to check the veracity of a wrapped crypto token, you must verify its smart contract address against official sources, inspect its underlying liquidity, and confirm that its circulating supply is backed 1:1 by the original asset….because…the most common way to fake a bridge token is by deploying a malicious copycat token, misleading users into buying an unbacked or worthless token.
So let’s get to it;
Verifying the Smart Contract Address
Firstly, never search for a token by its ticker symbol on a decentralized exchange (DEX), as scammers often name malicious tokens after popular issuances, instead;
- Locate the official contract: Find the exact token address from official sources such as the project's whitepaper, official documentation, or trusted community channels.
- Compare addresses: Check the contract address of the token in your wallet against the official address.
- Check the issuer/deployer: Check on block explorers such as Etherscan or Polygonscan for example, locate the "Contract Creator" address. A genuine bridge token should be deployed by a known, verified smart contract address belonging to a recognized bridge protocol such as; LayerZero, Wormhole, or the ecosystem’s native bridge.
Trace the Liquidity and Backing
Remember; genuine bridge tokens / wrapped tokens are meant to represent an original asset locked on a different network, so;
- Track down proof of reserve: Some bridge protocols such as Chainlink, use Chainlink Proof of Reserve, which allows you to independently verify the asset balances backing a wrapped token on the destination chain.
- Check the exchange’s liquidity pools: Genuine bridged tokens will have more than adequate solvency, paired with canonical assets (e.g. USDC, WETH) on major decentralized exchanges. Be extremely wary of a token with high trading value but a zero or low locked liquidity ratio.
Identify Official (Canonical) vs. Third-Party Bridges
- Canonical Bridges: These are the official bridges natively built by the founding blockchain team, for example; the Arbitrum Bridge which connects Arbitrum networks (such as Arbitrum One) directly to the Ethereum blockchain: Or the official Polygon Bridge which is a dedicated channel to transfer assets specifically between the Ethereum Mainnet and the Polygon network (including the Polygon PoS and the Polygon zkEVM chains. Tokens minted by such native bridges are broadly accepted as the official "canonical" asset on that network.
- Third-Party Bridges: These protocols (like Synapse, Hop, or Stargate) lock original tokens and issue their own representative wrapper tokens. But be aware that you will need to ensure that the token you are holding corresponds to the specific third-party bridge you used.
Check Platform Aggregators and Lists
Where available, it makes sense to utilize inherent DeFi safety tools and trusted token lists to confirm the asset. Some examples are;
- L2BEAT: Use this if you are interacting with bridging to Layer-2 networks, L2BEAT offers detailed statistics, canonical representations, and risk analysis for various bridges and their wrapped assets.
- De.Fi Scanner: An inherent Web3 antivirus and threat detector that evaluates any smart contract for known vulnerabilities, backdoors, and red flags.
- Token Sniffer: A tool to automatically track new tokens on networks like Ethereum and Solana, checking for honeypot indicators and poor liquidity locks.
- RugCheck: A highly specialized tool inherent to the Solana ecosystem that provides risk scores for Solana Program Library (SPL) tokens.
- Token Lists: An invaluable resource. Most major DEXs such as Uniswap, PancakeSwap, Jupiter, Orca, SushiSwap etc, pull from default lists such as CoinGecko’s or CoinMarketCap’s token lists. During a swap, a warning will pop up stating that a token is unknown or imported from an untrusted source, if it is analytically deemed likely that the token is a fake.
Make full use of Community & Security Audits
- Simply search for the token and bridge name on block explorers, X, or community forums.
- Look for official smart contract security audits published on the bridging protocol's GitHub or by security firms like CertiK, Open Zeppelin, Cyfrin, Sherlock, Quantstamp and others.
Also note; that if an unknown bridge token appears in your wallet, do not attempt to approve or swap it, as it could be an "airdrop" phishing scam.
…and ultimately, if at all in doubt, seek professional advice before taking any action.
Well, that’s about it for another week. As always, we at Mega Crypto Casino thank you for your valuable time and your invaluable company. We hope that you found this article useful, and we hope that you will be thereby, be fully prepared if, in the future, you do have occasion to encounter bridged or wrapped cryptocurrency tokens, USDT.z or otherwise.
We wish you all every success in your ventures and we hope that you will visit us again at Mega Crypto Casino for our next article.