The Rise of Stablecoins: A Game Changer in Crypto
Stablecoins have emerged as the primary method for transaction settlement on public blockchains, surpassing native cryptoassets like Bitcoin and Ether. This trend was not anticipated by the creators of these blockchains or their communities.
Data from various sources indicates that stablecoins make up around 10% of the total crypto market cap but account for 70%-80% of transactional value settled on blockchains. Their usage has remained steady, even during the bear market, with continued growth in monthly active users.
Major stablecoins like USDT and USDC are seeing increased usage on blockchains like Tron and BSC, with Ethereum L2s also gaining traction as stablecoin settlement venues. Tether on Tron has emerged as the most widely used digital asset globally, especially in emerging markets.
On the other hand, native cryptoassets like Bitcoin and ETH are experiencing a decline in usage, despite price recoveries. The rise of stablecoins challenges the long-held belief that native tokens would become a major medium of exchange.
Stablecoins offer stability in transactions and are preferred for cross-border transactions due to minimal volatility. However, there is a debate about whether they are parasitic free riders on blockchains.
Potential Changes and Challenges
There is potential for stablecoins to re-enter Bitcoin through protocols like Taproot Assets, but they must build liquidity, tooling, and network effects from scratch. Bitcoin’s resistance to stablecoins has caused it to lag behind other blockchains.
Ethereum’s leadership recognized that non-native assets would dominate transactional demand in the long term and created a system to ensure that transactions result in burning Ether directly. This has aligned interests between Ether and non-native asset usage.
However, there is a risk of a ‘race to the bottom’ in terms of where stablecoins circulate. Blockchains like Tron and Solana have seen significant growth in stablecoin usage, posing challenges in aligning stablecoin usage with their native token values.
The Future of Stablecoins and Blockchains
While stablecoins are beneficial for financial inclusion and protection from inflation, their impact on blockchains remains uncertain. It is crucial for blockchains to find ways to issue stables against their native tokens to address fee sensitivity among stablecoin users.
Hot Take: The Evolution of Stablecoins and Their Impact on Blockchains
The rise of stablecoins has transformed transaction settlement within the crypto space, overshadowing native cryptoassets like Bitcoin and Ether. While offering stability and convenience, there are concerns about their impact on blockchain ecosystems. As more blockchains adapt to accommodate stablecoin usage, it remains to be seen how this will affect their native token values and overall security. The future may involve finding innovative ways to align non-native asset usage with value accrual for native tokens while addressing fee sensitivity among stablecoin users.
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