The Dollar is Dying; Long Live the Stablecoin?
Over the past 12 months, $19.9 trillion in stablecoin transactions have settled on the blockchain over 3.5 billion total transactions. That’s not according to some crypto enthusiast, that’s according to Visa.
The volume may seem crazy if you haven’t made a blockchain transaction for yourself, but if you have, it seems obvious. The gatekeeper banks and credit card companies are slow and costly compared to the blockchain. They’re outdated in a digital world.
The last time you used your phone to buy groceries, did you ask why a credit card company built on physical cards with magnetic strips took 3% of the entirely digital transaction? Of course, you didn’t because this is how things work.
Is there a better way?
The blockchain provides a better way, and the financial world seems to be catching on quickly.
What Is a Stablecoin?
Let’s start with the basics. A stablecoin is a cryptocurrency token that’s backed by a real-world currency. USDC (Circle) and USDT (Tether) are the two most popular stablecoins, and they are both backed by the U.S. dollar. There’s also EURC, a Euro stablecoin also from Circle, and dozens of others.
USDT is an opaque stablecoin, but it became popular during the boom days for crypto during the pandemic.
USDC was started by $Coinbase Global, Inc.(COIN)$ and Circle and is backed by U.S. dollar reserves that are invested in treasuries, bank accounts, and similar low-risk assets. In 2023, the consortium that operated USDC was taken over by Circle, and in exchange, Coinbase gets a revenue share from the token and has an ownership stake in Circle. I’ll get to that financial impact below.
Stablecoins Explosive Growth
The data I’m going to share below is from Visa, so this isn’t some rosy picture trying to sell crypto or the blockchain to newbies.
You can see below that about $400 billion per month is transacted on the blockchain using stablecoins. That may be trading one token for another, buying/selling an NFT, or paying for a cup of coffee. What we can see here is a surge in stablecoin transactions since 2020, and you can see the industry is growing even after the crypto boom cycle wore off.
While the dollar numbers are impressive, the transaction count is more meaningful. A single transaction of $100 million can skew the chart above, but the one below shows steady growth in stablecoin transactions on a near-monthly basis.
https://asymmetric-investing.beehiiv.com/p/stablecoin-growth
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