Why the Monetary Base of the Internet Will Be 80% Stablecoins

A coordinated global crackdown, like the U.S. banning algorithmic or non-bank-issued stablecoins, could instantly vaporize $150B+ in liquidity. This creates a regulatory moat for compliant players like Circle (USDC) but kills permissionless innovation.

• Black Swan Risk: A major stablecoin depeg triggers a cascading liquidation event across DeFi.
• Fragmentation: A balkanized landscape of CBDCs and licensed stablecoins fractures global liquidity.

The entire stack relies on off-chain attestations and banking rails. A single legal seizure of Tether's (USDT) reserves or a Circle banking partner collapse would cause a catastrophic loss of trust.

• Counterparty Risk: The USDC depeg of March 2023 proved systemic fragility.
• Censorship Vector: Central issuers can freeze addresses, undermining the credibly neutral base layer.

The multi-chain future is a liquidity nightmare. Stablecoins fragment across 50+ L1/L2s, creating isolated pools and $B+ in bridge risk. A superior native asset (e.g., a hyper-scaled Bitcoin layer) could outcompete stablecoins as the unit of account.

• Bridge Risk: Exploits on LayerZero, Wormhole, or Axelar can trap billions.
• UX Friction: Users won't tolerate managing 10 different USDC variants.

Major economies launch wholesale CBDCs and mandate their use for large-scale settlement. This crowds out private stablecoins for institutional use, relegating them to niche, retail, and grey-market applications.

• Network Effects: If the Digital Euro or Digital Yuan integrates seamlessly with TradFi, why use USDC?
• Legal Tender Status: CBDCs have a structural advantage private entities cannot match.

Stablecoins are the primary collateral in DeFi (e.g., MakerDAO, Aave). A severe market downturn triggers mass redemptions, forcing liquidations of the underlying collateral (e.g., ETH, LSTs), which crashes their price and further destabilizes the stablecoin's peg.

• Reflexivity Risk: The UST/LUNA collapse is the blueprint.
• Concentration: DAI's backing is now ~60%+ centralized stablecoins, creating a single point of failure.

The foundational premise—that the USD is a stable unit of account—fails. If the U.S. experiences a loss of monetary credibility, all dollar-pegged stablecoins inherit that volatility. This makes them useless as a base layer, shifting demand to Bitcoin or commodity-backed alternatives.

• Base Layer Failure: You cannot build a stable house on a crumbling foundation.
• Paradigm Shift: The internet's money becomes a hard asset, not a fiat derivative.

Traditional finance is slow, expensive, and geographically fragmented. Cross-border payments take 2-5 days and cost 3-7%. This kills global micro-transactions and real-time settlement for dApps.

• Key Benefit 1: Stablecoins enable ~5 second global settlement.
• Key Benefit 2: They reduce transaction costs to <$0.01 for programmable value transfer.

Stablecoins aren't just digital dollars; they are the foundational liquidity layer for DeFi, NFTs, and on-chain economies. Protocols like Aave, Uniswap, and Compound require a stable unit of account.

• Key Benefit 1: Enables $100B+ in DeFi yield markets and lending.
• Key Benefit 2: Creates composable financial legos for novel applications like flash loans and real-world asset (RWA) tokenization.

The approval of spot Bitcoin ETFs and frameworks like MiCA in Europe signal a path for compliant, institutional-grade stablecoins. Entities like BlackRock entering with BUIDL prove the demand.

• Key Benefit 1: Opens the door for trillions in institutional treasury management.
• Key Benefit 2: Drives demand for compliant infrastructure from Circle (USDC) and emerging players, creating a winner-take-most market.

Stablecoins are the primary asset bridged between chains. Over 60% of cross-chain volume is stablecoin transfers via protocols like LayerZero, Wormhole, and Circle's CCTP. They are the universal liquidity carrier.

• Key Benefit 1: Becomes the base pair for every DEX (e.g., USDC/ETH on Uniswap).
• Key Benefit 2: Enables intent-based systems like UniswapX and CowSwap to abstract liquidity sourcing across all chains.

Money's value is in its use, not its storage. Stablecoins have a velocity orders of magnitude higher than base-layer assets like BTC or ETH. They are the working capital of the on-chain economy.

• Key Benefit 1: High velocity supports fee revenue for L1s/L2s (e.g., Ethereum, Solana, Base).
• Key Benefit 2: Creates a sustainable economic flywheel independent of speculative crypto cycles.

As the internet's economy migrates on-chain, the majority of transactional value must be in a stable unit of account. Gold is for saving, dollars are for spending. The internet will mirror this: BTC/ETH as reserve assets, stablecoins as the transactional base.

• Key Benefit 1: Predictable $10T+ addressable market as global trade digitizes.
• Key Benefit 2: Winners will be the issuers and infra providers that capture this utility layer, not just the store-of-value layer.