Article reproduced from: Foresight News
Author: Robbie Petersen, Delphi Digital Researcher
Compiled by: Luffy, Foresight News
The total supply of stablecoins continues to rise steadily, masking a more concerning detail. Despite cryptocurrency trading volumes remaining below historical highs, the number of active addresses trading with stablecoins each month continues to climb. This disparity indicates that stablecoins are not just serving as lubricants for the cryptocurrency speculation casino but are finally delivering on their core promise: to become the foundation of a new digital financial system.
Source: Artemis, The Tie
Perhaps more importantly, some clear signs indicate that mass adoption may not necessarily come from emerging startups, but rather from companies that already have established distribution channels. In just the past three months, four large fintech companies have officially announced their entry into the stablecoin space: Robinhood and Revolut are launching their own stablecoins; Stripe recently acquired Bridge to facilitate faster and cheaper global payments; and despite harming their own interests, Visa is helping banks launch stablecoins.
This marks a new paradigm shift: the adoption of stablecoins is no longer contingent on purely ideological assumptions. Rather, by providing fintech companies with a straightforward proposition of lower costs, higher profits, and new revenue sources, stablecoins find intrinsic common ground with the most reliable forces in capitalism: the relentless pursuit of profit. As market-leading fintech companies leverage stablecoins to enhance profit margins and/or expand their payment stack, we will inevitably see their competitors emulate and join the stablecoin battleground. As I emphasized in the 'Stablecoin Manifesto', game theory indicates that the adoption of stablecoins is not optional but a necessary bet for fintech companies to maintain their market position.
Stablecoin 2.0: Revenue-Sharing Stablecoins
Intuitively, the most apparent beneficiaries of these structural advantages are the issuers of stablecoins. The reason is simple: considering the monetary network effect, stablecoins are essentially a winner-takes-all game. Today, these network effects are primarily manifested in three aspects:
Liquidity: USDT and USDC are the most liquid stablecoins in the cryptocurrency market, using some emerging stablecoins means traders will have to bear more slippage.
Payments: USDT has become an increasingly common means of payment in emerging economies, and its network effect as a medium of digital exchange is arguably the strongest.
The 'denomination effect': Almost all major trading pairs on CEX and DEX are quoted in USDT or USDC.
Simply put, the more people use USDT (Tether), the more convenient it becomes to use USDT, leading to even more people using USDT. The result is that Tether simultaneously increases its market share and enhances profitability.
While Tether's network effect is nearly impossible to fundamentally break, there is an emerging stablecoin model that seems best suited to challenge Tether's existing model: revenue-sharing stablecoins. Importantly, this model is well-positioned within the stablecoin paradigm increasingly adopted by fintech companies. To understand why, some prerequisites need to be acknowledged.
Today, the stablecoin ecosystem stack typically consists of two main participants: (1) stablecoin issuers (e.g., Tether and Circle) and (2) stablecoin distributors (i.e., applications).
Currently, stablecoin issuers create value exceeding $10 billion annually, surpassing the total revenue of all blockchains. However, this represents significant structural inefficiency: the value generated within the stablecoin stack fundamentally lies with downstream distributors. In other words, without exchanges, DeFi applications, payment applications, and wallets integrating USDT, USDT would have no utility and thus generate no value. Nonetheless, currently, 'distributors' are not receiving corresponding economic benefits.
This has led to the rise of a new batch of stablecoins: revenue-sharing stablecoins. By redistributing the economic benefits traditionally captured by stablecoin issuers to the applications that bring users to the collective network, this model disrupts the existing system (the USDT model). In other words, revenue-sharing stablecoins enable applications to effectively share in the revenue generated from their own distribution channels.
In terms of scale, this could be a significant source of revenue, potentially becoming the primary revenue source for large applications. Therefore, as profit margins continue to compress, we may enter a world where the primary business model for crypto applications evolves into effectively selling 'stablecoin issuance as a service' (SDaaS). Intuitively, this makes sense, as today stablecoin issuers derive more value than the sum of the blockchain and applications, and the share of value that applications derive could be significantly larger than from other sources.
Despite countless attempts to break Tether's monopoly so far, I believe the revenue-sharing stablecoin model is the right direction for two reasons:
Distribution is everything: While previous attempts to issue revenue-generating stablecoins primarily sought support from end users, revenue-sharing stablecoins target participants with existing users: distributors. This indicates that the revenue-sharing model is the first to intrinsically combine the incentive mechanisms of distributors and issuers.
Quantity determines power: Historically, the only way applications could gain economic benefits from stablecoins was by launching their own independent stablecoins. However, this approach comes at a cost. Given that other applications have no incentive to integrate your stablecoin, its utility diminishes to being limited to their respective applications. Therefore, it is unlikely to compete on scale with the network effects of USDT. Instead, by creating a stablecoin that incentivizes numerous distribution-capable applications to integrate simultaneously, revenue-sharing stablecoins can leverage the collective network effects of the entire 'distributor' ecosystem.
In short, revenue-sharing stablecoins have all the advantages of USDT (composability across applications and network effects) and an additional advantage of incentivizing participants with distribution channels to integrate and share revenue with the application layer.
Currently, there are three leaders in the revenue-sharing stablecoin space:
Paxos's USDG: Paxos announced the launch of USDG this November, which will be regulated under the stablecoin framework set to be released by the Monetary Authority of Singapore, and has already secured heavyweight partners including Robinhood, Kraken, Anchorage, Bullish, and Galaxy Digital.
M^0's 'M': The team consists of former senior members from MakerDAO and Circle, and M^0's vision is to serve as a simple, trust-neutral settlement layer that allows any financial institution to mint and redeem M^0's revenue-sharing stablecoin 'M'. However, one of the distinctions of 'M' compared to other revenue-sharing stablecoins is that 'M' can also serve as 'raw material' for other stablecoins, such as USDN (Noble's revenue-sharing stablecoin). Additionally, M^0 employs a unique custodial solution composed of a decentralized network of independent validators and a dual-token management system, offering higher trust neutrality and transparency compared to other models. You can read more about M^0 in my post.
Agora's AUSD: Similar to USDG and 'M', Agora's AUSD also shares revenue with applications and market makers that integrate AUSD. Agora has also received strategic support from numerous market makers and applications, including Wintermute, Galaxy, Consensys, and Kraken Ventures. This is noteworthy as it aligns incentives with these stakeholders from the outset. Today, the total supply of AUSD stands at $50 million.
In 2025, I expect these stablecoin issuers will increasingly attract attention as distributors collaborate and guide users to use stablecoins that are advantageous to them. Furthermore, we should also see market makers (who play a crucial role in ensuring stablecoins maintain sufficient liquidity) showing a preference for these stablecoins, as they can also derive certain economic benefits from holding inventories of such stablecoins.
While 'M' and AUSD currently rank 33rd and 36th respectively in stablecoin supply, and USDG has yet to launch, I expect that by the end of 2025, at least one of these stablecoins will enter the top 10. Additionally, by the end of the year, I anticipate that the overall market share of revenue-sharing stablecoins will rise from 0.06% to over 5% (approximately 83 times), as large fintech companies with distribution capabilities will bring the next wave of stablecoin adoption.
Stablecoins are poised for takeoff.
While the adoption curve of euro dollars is often used as a historical analogy for stablecoins, this analogy is somewhat simplistic. Stablecoins are not euro dollars; they are essentially digitized, they can be used globally, they can settle cross-border instantly, they can be utilized by AI agents, and they are influenced by massive network effects; most importantly, existing fintech companies and enterprises have clear incentives to adopt them, as stablecoins align with every company's goal: to make more money.
Therefore, to say the adoption of stablecoins will follow the trajectory of euro dollar adoption overlooks a fundamental issue. I believe the only commonality between stablecoins and euro dollars is that they will continue to emerge as a bottom-up phenomenon, and no institution or government that perceives this technology as contrary to their interests will be able to control it. However, unlike euro dollars, the adoption of stablecoins will not occur slowly over 30-60 years. It will start slowly and then, due to network effects, rapidly reach escape velocity and suddenly explode.
A regulatory framework is being established. Fintech companies like Robinhood and Revolut are launching their own stablecoins, and Stripe appears to be exploring stablecoins to enhance its payment stack. Most importantly, despite potentially eroding their own profits, existing companies like PayPal and Visa are still exploring stablecoins due to concerns that if they do not, their competitors will.
While it is currently unclear whether 2025 will be a turning point in the history of stablecoin development, it is evident that we are approaching such a turning point.
