Tether-Backed Chains Are Off to a Rocky Start
Olivia Capozzalo & Camila Russo
November 06, 2025
gm, Defiers
Today’s big story:
- After a controversial first deposit campaign, Stable’s second one saw many would-be investors struggle to participate amid UI and other technical issues.
In other news:
- New Hyperliquid proposal meets backlash
- Ripple reveals stablecoin partnerships
- Ethereum protocols launch alliance
- Stream Finance fallout continues
- What’s the value of a domain name in a digital world? [SPONSORED]
Read more below! But first, please give our sponsors some love; they make this newsletter possible.
High Gain is a professionally managed vault that's designed to bring you up to 20% rewards on ETH, delivering blue-chip strategies through a one-click deposit.
We’re back! Here’s what you need to know in web3 today
📈 Markets in the Past 24 Hours
| TICKER | VALUE | 24H | |
|---|---|---|---|
 | Bitcoin | $101,735 | -2.03 % |
 | Ethereum | $3,327.61 | -3.10 % |
 | XRP | $2.24 | -1.71 % |
 | BNB | $944.22 | -1.78 % |
 | Solana | $157.27 | -2.85 % |
Today’s Big Story
Tether-Backed Chains Are Off to a Rocky Start
Stable, the Bitfinex-backed “stablechain,” has hit pause on deposits for its highly anticipated Phase 2 pre-deposit campaign, after a chaotic launch that saw website crashes, failed sign-ins, and rejected onchain deposits. It’s the second major stumble in as many weeks, and it’s raising eyebrows about whether the blockchain backed by the world’s most traded stablecoin can deliver on its ambitions.
Phase 2 of Stable’s rollout was supposed to open Tuesday at 9 a.m. EST, in partnership with yield protocol Hourglass. But within minutes, users were posting screenshots of repeated terms-of-service prompts, failed transactions, and an Hourglass website that buckled under “exceptionally high traffic,” which of course was to be expected.
As a side note, the ToS are not for the faint of heart:
“Any Accepted Tokens you send to the Hourglass Smart Contract may be loaned to [“Vault Operators"] who may deposit such Vaulted Tokens to third-party decentralized finance protocols (“DeFi Protocols”) or loan (them) to institutional counterparties (“Lending Counterparties”) and may earn yield during the Acceptance Period. The Vault Operators will control this process in their sole discretion. (...) the Company is not obligated to make any rewards available during the Vault Term or otherwise.”
So essentially, Stable can deposit the funds sent to Hourglass in DeFi, or lend them out at their own discretion, and they don’t have to share that yield with TGE participants.
Deposits Paused
When the front end went down, many DeFi veterans did what DeFi veterans do, they went straight to the contract. But that backfired too. Hourglass later confirmed that any direct smart contract deposits would not be accepted, and that users would have to redeem those funds.
Three hours later, Stable announced it was pausing deposits altogether, citing “ongoing technical issues” and promising to “share the updated path forward tomorrow.”
Phase 1 didn’t go much smoother.
Less than two weeks ago, Stable’s first pre-deposit vault drew widespread backlash after it was discovered that insiders had pre-filled the vault roughly 20 minutes before the public announcement. Onchain sleuths found that nearly $500 million of the $800 million raised in Phase 1 came from wallets directly linked to the vault owner.
“Stable phase 1 & 2 were executed so poorly it genuinely makes me wonder if these guys can even deploy a blockchain,” wrote DeFi whale CBB, who said he deposited over $15 million in Phase 1 by tracking onchain activity.
The Bigger Picture: Two Chains, One Problem
The stumble comes as Plasma, another Tether-linked blockchain project, faces its own growing pains. Plasma, pitched as a “Bitcoin L2 with USDT-native payments,” launched last month with much fanfare, but has struggled to attract real usage or developer interest since.
Plasma Chain Metrics. Source: DeFiLlama
Both chains share a similar pitch: a stablecoin-centric network promising scalability, composability, and yield, built atop Tether’s massive liquidity base.
But so far, both have been defined more by controversy than competence, raising questions on whether the world’s largest stablecoin issuer should be backing (and implicitly controlling) the rails it circulates on.
Together, the two projects hint at a new chapter in the Tether empire: from being the plumbing of crypto markets to trying to own the pipes outright. Yet early execution suggests that the company’s expertise in liquidity management may not translate so smoothly to blockchain development.
With love,
Cami, founder of The Defiant
Forwarded this newsletter? Subscribe for daily insights and curated news from The Defiant team, Monday-Saturday. It’s free.
🎬WATCH
Institutions Want Bitcoin Yield — Threshold Is Building the Bridge [SPONSORED]
Institutional Bitcoin treasuries are coming but they won’t touch DeFi unless the liquidity, custody, and risk models meet their standards.
Threshold (TBTC) is building that bridge. In this interview, we break down how TBTC is competing with WBTC, why full decentralization alone isn’t enough, and why Threshold is now designing hybrid custody solutions to connect DeFi with the emerging wave of Bitcoin treasury companies (DATs). We also discuss adoption signals on Aave, real BTC collateral usage, governance structure, and the roadmap toward sustainably scaling Bitcoin finance beyond token incentives.
Top News in the Past 24 Hours
- Controversial Hyperliquid HIP-5 Proposal Leaves Community Split The Hyperliquid community is considering a new proposal, dubbed HIP-5, that would establish a secondary assistance fund to support Hyperliquid ecosystem projects using a portion of the decentralized exchange’s revenue. Why it matters: Many in the community are coming out against the idea of altering Hyperliquid’s fee buyback mechanism.
- Ripple Partners with Mastercard, WebBank, and Gemini to Test Stablecoin Card Settlements The collaboration will explore using Ripple’s RLUSD stablecoin on the XRP Ledger to process Gemini Credit Card transactions. Why it matters: The move marks a major integration of traditional payments rails and blockchain.
- Seven Ethereum Protocol Teams Form Alliance to Engage on Crypto Policy Seven major Ethereum protocol teams – Aave Labs, Aragon, Curve, Lido Labs Foundation, Spark Foundation, The Graph Foundation, and the Uniswap Foundation – have launched a new group called the Ethereum Protocol Advocacy Alliance (EPAA). Why it matters: The group says protocol devs need more representation in policy discussions, especially as governments continue to draft new crypto rules.
- FEATURE: How Stream Finance’s Collapse Exposed DeFi’s Looping Yield Bubble As the dust settles, reports continue to surface that indicate the scale of the fallout across the DeFi sector. Why it matters: The collapse left roughly $285 million in debts intertwined across risk curators, vaults, as well as lending markets, and is shaking trust in DeFi.
Trending on The Defiant
- Controversial Hyperliquid HIP-5 Proposal Leaves Community Split
- Seven Ethereum Protocol Teams Form Alliance to Engage on Crypto Policy
- Ripple Partners with Mastercard, WebBank, and Gemini to Test Stablecoin Card Settlements
- DWF Labs ‘Likely’ Exploited for $44M in 2022 Hack Linked to North Korea: Report
- BTC Tests Key Support at $99K as Long-Term Holder Selling Continues
- Privacy Coin Rally Continues as DASH Surges 150%
That’s it for today — if you enjoyed this newsletter, tell your friends! https://thedefiant.io/subscribe
Free newsletters
Good reporting. Delivered.
Choose your coverage: crypto and DeFi, the future of finance, or both.
Free. Unsubscribe anytime.
