Carbon chain value
By Greg Cipolaro, Global Head of Research at NYDIG
Compilation: WEEX Exchange
Read the summary:
The payment implications of Visa's stablecoin strategic expansion
Stablecoins have become one of the blockchain killer apps, with transaction volume approaching that of mastercard
The industry focuses on infrastructure and the provision of transaction supply, but it is also necessary to increase transaction demand
Last week, Visa made waves when it announced a partnership with merchant acquisition agencies Worldpay and Nuvei to use USD Coin (USDC) stablecoins to settle merchant payments on the Solana chain. This exciting development builds on Visa's ongoing efforts in the digital currency space, enabling them to use USDC stablecoins for payment settlement with issuer and receiver partners, although it is still in the pilot phase. Visa, which previously relied on USdcs issued on the Ethereum network, has expanded to include USdcs issued on Solana.
The size and variety of stablecoins
There is no doubt that stablecoins, a digital asset closely linked to the value of the US dollar (USD), have become one of the most important applications of blockchain technology. The total market capitalization of stablecoins now stands at a staggering $124.4 billion, most of which are off-chain reserve assets such as Tether (USDT) and USDC. In addition, there are a small number of over-collateralized on-chain reserve stablecoins, such as DAI, and a small number of under-collateralized algorithm-based stablecoins, such as FRAX. Despite its controversial history, Tether still dominates the stablecoin market, accounting for about two-thirds of the industry's total market capitalization.
At first glance, a centrally issued alternative to the US dollar would seem to run counter to the ethos behind the creation of the first digital asset, Bitcoin, a fixed supply asset created to eliminate reliance on financial intermediaries. Most stablecoins (off-chain forms of reserve) rely on a central issuer because they mimic the US dollar and inherit the same economic, social, and governance characteristics as the US dollar.
Initially, many stablecoins operated as a single asset on a single network (Omni/ Bitcoin USDT, Ethereum USDC), and today most 'stablecoins' are collections of unique digital assets that span multiple networks, for example, 13 in USDC and 15 in USDT. (Editor's note: In fact, according to WEEX statistics, Tether has currently minted USDT on 18 blockchains or protocols, including: Bitcoin, Ethereum, OKT Chain, BNB Chain, Polygon, TRON, Cosmos Hub, Klaytn, Arbitrum One, OP Mainnet, Linea, Polygon zkEVM, zkSync Era, StarkNet, Ethereum PoW, Avalanche C, Ethereum Fair, Ethereum Classic; USDC has been cast on 19 chains or protocols, which is one Ronin more than USDT.)
Stablecoins surpass mastercard in transaction volume
Despite the criticism of centralization, it has not hindered the popularity of stablecoins. This clearly demonstrates the growing demand for 'on-chain dollars', whether as a reliable store of value, a convenient medium of exchange, or as a quote currency in various asset transactions (e.g. BTCUSDT). In fact, stablecoins have become so popular that their total transaction volume now exceeds that of Bitcoin and is even on the verge of surpassing the second largest credit card network, Mastercard (editor's note: $8.175 trillion in Mastercard transactions in 2022, $7.928 trillion in stablecoins). We acknowledge that such a one-to-one comparison may not be appropriate, but it provides us with valuable insights.
It is worth noting that the transaction volume of credit card networks is mainly payments, while stablecoins and Bitcoin can be used for a range of financial applications, including payments, but the exact proportion is difficult to determine.
The supply and demand of transactions should be equal
Taking a step back and looking at the big picture of technological advances in the crypto industry, it is clear that the focus is on expanding the availability of user transactions. Various layer 2 technologies, such as rollup, application chain, sharding and sidechain, as well as faster Layer 1 blockchains, such as Solana and the Lightning Network, are pioneering innovations that make cryptocurrencies faster and more cost-effective.
Visa's support for USDC on Solana is particularly noteworthy because, despite the occasional blockchain outage, Solana was created to provide high-speed and low-cost transactions on a single chain. However, this begs the question: Should the industry pay as much attention to demand as it does to supply? For startups in the sector, a fruitful strategy may involve focusing on some features that are not adequately provided by existing technology. The Bitcoin protocol essentially provides many of the features that users want because it aims to eliminate intermediaries. This essentially makes it a challenge to build long-lasting companies in the industry.
Cryptocurrencies have the potential to follow in the footsteps of the Internet, with faster speeds and widespread accessibility opening up new and previously unimaginable possibilities. In the days of dial-up Internet access, we could imagine watching TV over the Internet, but never services like Uber or Twitch, or the widespread reach of social media. It is these unexpected opportunities that make the future truly exciting.
Editor: Zhang Jingdi