The operation foundation of stablecoins relies on blockchain.
Authors: Andrew Van Aken & Jon Ma
Compiled by: Shen Chao TechFlow
Summary
Stripe acquired Bridge.XYZ for $1.1 billion, and this company had just raised $50 million from Sequoia, Ribbit Capital, and Haun Ventures less than a year ago. This means that Series A investors achieved nearly 10 times their return in less than a year.
Yellow Card completed a $33 million Series C funding round, planning to transition to B2B payment services for stablecoins, and announced that it has served over 30,000 businesses with revenue reaching eight figures.
Meanwhile, the on-chain data of stablecoins is breaking through or approaching historical highs. In a report in collaboration with Castle Island Ventures and Visa, we present both quantitative and qualitative analyses of this data.
In the past, investors generally believed that the issuers of stablecoins were the biggest beneficiaries of stablecoin adoption.
However, 2024 brings new changes: with the popularity of stablecoins, fintech applications, payment networks, infrastructure development, on/off ramps, and data analysis tools are gradually becoming the main driving forces of value accumulation.
We have identified many businesses that will benefit from the popularization of stablecoins. Today, we share these research findings with other members of the community.
Here is a real-time updated open-source market map: If you want to recommend a company, you can contact Crystal Tai.
Introduction
"Even if we only got stablecoins, that is still a very meaningful achievement." — Nic Carter
Satoshi Nakamoto proposed a completely decentralized peer-to-peer electronic cash system in his white paper, which does not rely on central servers or trusted third parties. We believe that 2024 will bring us closer to this vision, with stablecoins being the killer application of blockchain networks.
The emergence of stablecoins allows global users to easily transfer funds, complete payments, and effectively cope with the challenges of high inflation. On-chain data indicates that the supply, transfer volume, and number of active addresses for stablecoins are all significantly increasing. To verify these trends, we interviewed users in Lebanon, India, and the United States, whose feedback further confirmed the authenticity of this data. Castle Island Ventures recently released a report titled (Stablecoins: Emerging Market Stories), showcasing the practical application scenarios and rapid growth of stablecoins in emerging markets through Artemis's on-chain data.
Stablecoins are gradually moving towards the mainstream market.
Although the cryptocurrency market has experienced alternating bull and bear phases, multiple key indicators of stablecoins continue to break through or approach historical highs:
The total supply of stablecoins has exceeded $160 billion, approaching historical highs.
Stablecoin Supply - Real-Time Dashboard
Between May and July 2024, there were 16 million active addresses per month, with users transferring stablecoins between wallets, demonstrating behavior similar to peer-to-peer payments, setting a historical record.
The volume of peer-to-peer transfers of stablecoins exceeded $700 billion in March 2024, setting a new historical record.
Investors are paying attention to
Traditional views suggest that investing in stablecoins is somewhat challenging: because the value of stablecoins is essentially pegged to fiat currencies. In most discussions with investors, the focus often revolves around how stablecoin issuers (like Circle and Tether) benefit from this.
For example, Circle disclosed that it achieved $779 million in revenue in the first half of 2023, while Tether's net profit reached as high as $4.52 billion in the first quarter of 2024—three times the net profit of Blackrock during the same period ($1.5 billion).
However, this situation is changing. In August 2024, several payment companies related to cryptocurrency announced that they had secured over $100 million in funding. For example, Bridge.xyz stated that its clients include SpaceX and Bitso, indicating that the market demand for stablecoin products is growing.
Through research, we have identified many companies accumulating value in the stablecoin space. Today, we share these research findings with the broader community.
In our market map, we aim to show investors and the community that supporting the global adoption of stablecoins is not limited to a single approach. In addition to investing in private companies, opportunities related to public blockchains or associated tokens can also be explored.
Stablecoin Value Accumulation Chain
Blockchain
The operation foundation of stablecoins relies on blockchain.
Blockchain plays a crucial role in the trading of stablecoins. As a public and transparent ledger, blockchain not only supports the final settlement of stablecoins but also allows anyone to verify transaction information. The blockchain operates around the clock without interruption. Taking the USDC transfer volume in the United States as an example, we observed that its transaction activity peaks during US bank operating hours, yet maintains high activity even when banks are closed.
Source: Internal Artemis Data
Although Ethereum remains the primary platform for stablecoin trading, new blockchains with faster block generation times and lower transaction fees are driving further growth of stablecoins. These blockchains include Solana, Tron, TON, Base, Celo, Stellar, and BNB Chain, among others. Additionally, new blockchains are constantly emerging; for example, Sui recently announced a partnership with Circle.
Stablecoin supply by chain
Another question worth exploring is: how does blockchain accumulate value? When the supply of stablecoins on a particular network grows, does the value of that network increase as well? Taking TRON as an example, its price shows a high correlation with circulating supply under the growth of stablecoin supply, indicating there may be a positive relationship between the two.
Stablecoin Issuers
Stablecoin issuers are the entities responsible for creating, distributing, and managing stablecoins. To ensure the stability of stablecoin values, issuers typically back each stablecoin with reserve assets (such as cash or equivalents). Their main responsibilities include issuing and redeeming stablecoins, managing reserve assets, ensuring transparency, and complying with relevant regulations.
Currently, Tether is one of the major issuers in the stablecoin space, reportedly achieving over $5 billion in net profit in the first half of 2024. Circle is also considering launching an IPO with a valuation of about $5 billion.
In addition, there are some stablecoin issuers that offer yields, such as Mountain Protocol (with a circulating supply of approximately $48 million). These issuers profit from the spread between the assets held and the interest paid to token holders, while providing users with additional returns.
Stablecoin supply by issuer
Source: Artemis
Stablecoin Infrastructure
To enable stablecoin issuers to quickly issue stablecoins in compliance while allowing applications that wish to utilize stablecoins to easily transition between fiat and cryptocurrency, a robust infrastructure support is needed for the stablecoin ecosystem. These enterprises constitute the infrastructure layer within the stablecoin ecosystem.
On the fiat side, companies like Bridge.xyz and Brale.xyz provide developers and enterprise teams with APIs and infrastructure tools to enable smooth flows of funds between fiat and stablecoins. These fiat-stablecoin infrastructure companies help businesses achieve cross-border payments, issue their own stablecoins, and provide convenient fund management tools. At the same time, they also handle complex regulatory, compliance, and technical work that is often costly and time-consuming.
Time-saving: For example, Glo Dollar (a stablecoin focused on funding public projects) successfully issued Glo Dollar within weeks through this infrastructure, while traditional processes could take up to six months.
24/7 service: Users can now make stablecoin transfers at any time, and companies like Bridge.xyz serve as backend infrastructure to ensure services run around the clock.
On the on-chain side, companies like Perena and M^0 are helping stablecoin issuers achieve scalable growth through decentralized protocols while avoiding liquidity fragmentation issues. These protocols position themselves as "fund middleware" for stablecoin issuers, providing efficient on-chain support.
OnRamps
Cryptocurrency fiat on-ramp services (like MoonPay and Transak) allow users to directly purchase cryptocurrencies through traditional payment methods (like credit cards, bank transfers, or mobile payments). These services typically deposit users' cryptocurrencies directly into digital wallets like MetaMask and Coinbase Wallet, without going through traditional cryptocurrency exchanges. Such companies usually charge a small fee to cover the costs of infrastructure operations, KYC (Know Your Customer) processes, and other services. As shown in the graph below, cryptocurrency fiat on-ramp activities on Ethereum have shown a steady growth trend since 2023.
Cryptocurrency fiat on-ramp activities on Ethereum
Source: Internal Artemis Data
Cross-Border Payments/Remittances/P2P Payments
Many companies are streamlining cross-border payments and remittance processes through stablecoin technology. These applications are often designed to be very intuitive, hiding the underlying cryptocurrency technology, allowing users to complete transactions without needing to understand the technical details. The fees charged by these companies are typically much lower than those of traditional remittance companies while also offering more competitive exchange rates. For example, the volume of stablecoin transactions transferring from Coinbase or Kraken to Bitso (a Mexico City exchange) is gradually increasing, indicating that the application of stablecoins in cross-border remittances is expanding.
Source: Internal Artemis Data
Peer-to-peer (P2P) cryptocurrency transactions, often referred to as "global Venmo," provide users with a convenient way to transfer funds globally. Companies like TipLink and Sling offer extremely simple user interfaces that allow anyone to easily receive payments through the cryptocurrency network. More importantly, users of these products often do not realize they are using cryptocurrency, achieving a truly seamless user experience.
Monthly peer-to-peer stablecoin transfer volume categorized by stablecoin
Source: Artemis
Wallet
Cryptocurrency wallets provide users with a self-custodial way to have complete control over their digital assets. These wallets usually support multiple blockchain networks, allowing users to store and manage various types of crypto assets. Moreover, many wallets also come with built-in fiat-to-crypto entry services, making it easier for users to purchase cryptocurrencies. According to Artemis data, transfers between wallets are currently one of the largest application scenarios for blockchain.
Data Source: Artemis
Here is an example of a seamless transfer through Sphere. Users can select the type of transaction (such as fiat to cryptocurrency exchange or exchange between cryptocurrencies), then choose a payment method (like wire transfer, ACH, or SEPA), and the entire transaction process can be settled in just a few minutes, fast and efficient.
Cards and Payment Processors
Cryptocurrency credit cards and payment processors are collaborating to provide users with the convenience of spending using cryptocurrency. The significance of this service is that users can complete payments directly within the cryptocurrency ecosystem without needing to exchange cryptocurrency back to fiat. For example, Visa allows consumers to settle transactions using stablecoins between merchants and acquiring institutions.
Last year, Gnosis Pay launched a Visa card that allows European users to conduct credit card transactions directly through the Gnosis Safe wallet. Although the current user base is still small, various metrics for Gnosis Pay show a continuous growth trend.
Gnosis Pay weekly transaction volume
MicroLending
We visited Nairobi and witnessed the actual operation of blockchain-based micro-lending services, which was impressive.
These companies provide loans to small businesses or individuals through blockchain technology. Companies like Haraka and Goldfinch focus on offering lower interest rate loans to businesses in emerging markets. Due to the characteristics of blockchain technology, funds can arrive almost instantly, while transaction costs are significantly reduced, providing a new solution for markets that traditional banks cannot cover.
Payroll
An increasing number of companies are beginning to support employees receiving salaries in cryptocurrency. With the expansion of the global economy and the prevalence of remote work, establishing a global financial system that can quickly and efficiently pay salaries has become particularly important. Some systems are experimenting with real-time payment features, allowing employees to receive salaries on a weekly, daily, or even per-second basis.
Ravi Kiran (Head of Growth) shares a story of a freelancer choosing stablecoin payment:
"I once collaborated with a freelancer from an emerging country, who recently received a payment in USDC. She kept saying that this payment method is much better than using local currency (saving on taxes, value stability, and worth more than local currency). It was only at that moment that I realized that every payment has a story behind it. Two months later, she completely switched to stablecoin payments. I believe that as commercial payments become more widespread, the influence of Circle and Tether will further expand."
Stablecoin Analytics
Artemis, along with partners such as Allium, RWA.xyz, and Flipside, provides in-depth analytical services regarding stablecoins to the market. Allium has collaborated with Visa to launch the Visa On-Chain Analytics Dashboard, while the RWA platform provides many key data metrics about stablecoins and their issuers.
We believe that as the stablecoin market continues to expand, the demand for understanding the driving factors behind stablecoin usage will also grow.
The Future Development of Stablecoins
As the inflation rate continues to rise in 2024, the application of stablecoins is also rapidly expanding. According to the CIV / Visa / BHD stablecoin report, stablecoins have become the second-largest application scenario, following cryptocurrency trading. We predict that the adoption rate of stablecoins will continue to rise in the future.
This growth may create network effects: when friends, family, or businesses in a region start widely using stablecoins, it will attract more locals to join in, much like a "global Venmo." This increase in user scale will further enhance the liquidity of the entire network. Furthermore, we expect the US to introduce relevant regulations to support the maintenance of global demand for USD through stablecoins.
Although the supply of stablecoins in the market is predominantly denominated in USD, we also see a gradual increase in the adoption of non-USD stablecoins. For instance, euro-based stablecoins are gradually increasing their circulation, and Bitso recently launched a stablecoin based on the Mexican peso, MXNB, marking the potential of regional stablecoins being explored.
Meanwhile, yield-bearing stablecoins are receiving increasing attention. These stablecoins not only provide users with opportunities for asset appreciation but have also become an important source of funding for US Treasury holders. For instance, Ethena has launched an innovative "Delta Neutral Yield Generation Mechanism" to maximize returns through unique strategies, becoming one of the fastest-growing stablecoins.
How Artemis Can Help
Artemis is dedicated to providing in-depth analysis in the field of stablecoins, helping users and businesses better understand trends in the use of stablecoins and market dynamics. We have collaborated with Nic Carter and his Castle Island Venture team, providing on-chain data support to complete the most comprehensive stablecoin analysis report to date.
If you are interested in the stablecoin market or need help analyzing the adoption of stablecoins, feel free to contact us! You can find us at X.com or email us at team@artemis.xyz.
Special thanks to Anna from Perena, Isaiah Washington, Peter Schroeder from Castle Island Ventures, EffortCapital, and other friends for their contributions to this article! Thanks also to all users who provided suggestions on Twitter.