Stablecoins: The #1 Web3 Usecase?

More than a decade since the creation of Bitcoin, it's not yet widely used as a payment network. Similarly, other crypto assets have yet to find their product market fit. Yet, among them, stablecoins stand out as the one asset that has come closest to broad adoption. This post covers why stablecoins have quietly grown to be one of the widest used crypto assets, and what they are used for beyond speculation. 

What are stablecoins? 

Stablecoins are, as their name suggests, a digital asset that doesn't have the typical volatility associated with cryptocurrencies. Instead, their value is pegged to a stable reserve asset, most commonly the US dollar and other fiat currencies. They are designed to reduce volatility and offer a store of value and a way to transfer money quickly. 

In short, they combine the stability of fiat currencies with the benefits of on-chain assets, such as offering permissionless access and transparent transfers. Stablecoins also frequently serve as a bridge between the traditional financial system and the digital asset world and form part of the growing trend of tokenizing real-world assets (RWAs). Popular stables include USDT, USDC, and DAI. 

Stablecoin adoption 

Into The Block: https://app.intotheblock.com/perspectives/stablecoins 

Stablecoins have a market cap of 129 billion dollars, making up nearly 10% of the cryptocurrency market cap. USDT, also known as Tether, is dominating the stablecoin market with a market cap of $89.6 billion spread across more than 50 different chains, including Ethereum, Tron, BNB Chain, Solana, and many Ethereum Layer-2s. The second-most popular stablecoin is USDC, issued by Circle with $23 billion in circulating supply. 

Far behind with a $5 billion market cap comes DAI, the decentralized stablecoin backed by Ether and other crypto assets. 

DefiLama: https://defillama.com/stablecoins/chains 

Ethereum, as the home for most DeFi applications, is popular for stablecoins. Currently, over 50% of stablecoins are sitting on Ethereum. Yet, since this is a volume/wealth-based analysis, it says little about actual retail users, considering that big holders of stablecoins include protocols and exchanges. The picture changes drastically when looking for wallet addresses instead. 

USDT reports that while USDT has nearly 4 million unique holders on Ethereum, the number is 4x that when looking at USDT holders on Tron, with 16 million wallets holding USDT on Tron. Going beyond just wallets, USDT on Tron has also surpassed Ethereum in regard to weekly transactions in the first half of this year. The report also mentions BNB Chain and Polygon as other popular chains for stablecoin transactions. What all of these have in common is the speed of execution in combination with relatively cheap fees. 

The popularity of Tron and other low-fee chains is only logical when looking at the big use cases for stablecoins and where they're popular. 

Use Cases 

Stablecoins for crypto natives are just a tool to move in and out of trades and sideline capital for the next bull run. However, stablecoins serve a much more fundamental purpose in some parts of the world as a store of value. 

Store of value 

In high-inflation countries like Turkey and big parts of Latin America, cryptocurrencies, generally, and stablecoins, particularly, have found wider adoption. When the fiat currency is inflating at rates beyond 100%, and people are limited in the amount of dollars they can access, stablecoins offer a way to protect one's money and hedge against ever-falling purchasing power. Because of their popularity, one of the largest payment companies, Mercado Pago, has also integrated stablecoins into its infrastructure, further increasing access.

Money Movement 

In addition to being a store of value, stablecoins are also popular to transfer thanks to being stable, cheap, and efficient. They're popular with retail to transact, as Chainanalysis found in its report looking at transactions below $1k, with Venezuelans making up to 34% of their transactions using stables. 

And it's not just individuals who benefit from using payments for transactions. Merchants often end up waiting up to one month to receive the money from a consumer transaction. Stablecoins drastically reduce this time to minutes, increasing capital efficiency and saving costs by removing expensive intermediaries such as credit card companies. 

Unsurprisingly, big payment networks like SWIFT or Worldpay have been actively investigating blockchain for some time. 

Overall, stablecoins are a giant driving crypto adoption thanks to strong product market fit across use cases. Chains like Tron are especially popular for stablecoin transfers because, as Tether CTO Paolo puts it, “It’s simple to use; it’s fast and cheap."

And for anyone who doesn't want to just take our word for it and tap into the data themselves, Subsquid recently added Tron support to its decentralized data lake.

Get in touch to learn how you can leverage this data for your analytics project or dApp. 

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Article by @Naomi_fromhh