Stablecoins are receiving a lot of attention, but what about stablecoin chains?

Author: Sean C, Source: Capital Control, Translated by: Shaw Jinse Finance

Stablecoins are currently in vogue. Everyone is talking about them, and discussions about stablecoin blockchains are increasing in both traditional finance and the crypto space.

According to the latest reports, Stripe is launching a blockchain. USDC issuer Circle has announced that they will also launch their own blockchain. Tether (USDT) has invested in several teams dedicated to creating chains related to Tether, such as Plasma and Stable. Robinhood is launching a chain (not specific to stablecoins).

JPMorgan ( and Fidelity ) will also be involved.

I believe that the usage and supply of stablecoins will increase significantly. However, I am not quite sure whether a settlement and payment chain specifically for stablecoins is meaningful.

Some (in)stable ideas:

• Most activities related to stablecoins can be classified into one of the following three categories: issuance, payment, or settlement.
• Issuing this currency is very attractive because the issuer can retain the revenue from the underlying dollars while not paying any fees to users. Overall, I really like the "Genius Act" as it makes this easier.
• In terms of issuance, Tether will face very tough competition. Liquidity breeds liquidity, and Tether has a significant lead advantage. Circle is relatively weak, but still ahead of most new entrants.
• It is hard to get excited about payments and settlements. On public chains, the cost of transferring value is already close to zero. Over time, competition will drive payment fees down to zero, whether for domestic or international payments. This is good for users, but not for high-profit businesses.
• If most stablecoins and applications already exist on mainstream public chains like Ethereum and Solana, why would users migrate to smaller networks with lower security, just to access a more limited part of the same functionality?
• For native chains in cryptocurrency, issuing tokens may capture part of the speculation cycle, but the fundamental value proposition of the tokens themselves is not very clear.
• From a technical perspective, some of these chains still have larger issues. Chains based on USDC lack economic incentives for public, honest validation, turning it into a private consortium made up of pre-approved validators. These validators can issue refunds through a "dispute agreement." The chain proposed by Circle resembles more of a multi-vendor database similar to PayPal, merely running EVM code by coincidence, rather than being a true Layer 1.
• In all cases, Circle and Tether remain the final arbiters of USDC and USDT. They can freeze, revoke, or deny transactions at their discretion. Off-chain companies are still the true record keepers. This will not change simply because they have their own chains.
• Stripe's blockchain is likely just an internal backend for its payment business. Whether anyone uses it is not very relevant to them. Circle, on the other hand, will care a lot about how it is adopted.
• There are some reasonable cases for certain stablecoin chains specific to decentralized finance (DeFi) applications, but they are not the payment or settlement chains that people are currently focused on.
• The greater opportunity lies in the fact that blockchain has enabled the dollar to be digitized. Networked currency can be transferred without manual intervention. It can automatically flow to where it can be most effective, thereby unlocking new uses for the dollar. Your funds can actually serve you in the background.
• When the entire industry is fighting tooth and nail for low profits and homogeneous businesses, the real winners will be those companies that can expand the utility of their capital.