Author: Aquarius https://x.com/0xAquariusCap
Original link: https://mirror.xyz/0xa54017CA3461743Bf0A14d2C46931ECe151d6D2d/MSeodNADNYBe-M9hVj07sri44bZA9ZA-lY_XQk4VbQQ
Background
The stablecoin market is rapidly growing and has become a significant force in the digital economy, even competing with traditional financial networks. According to research from Coinbase, stablecoin trading volume exceeded $10.8 trillion in 2023. After excluding "non-natural" trades (such as bot-driven or automated trading), the actual trading volume is approximately $2.3 trillion. This adjusted data reflects an organic annual growth rate of 17% for stablecoins, highlighting their increasingly important role in retail and institutional finance. The following chart provides a visual insight into the current landscape and growth trajectory of stablecoins across major blockchain ecosystems.
This chart shows the overall market capitalization trends of the top 20 blockchains from 2020 to 2025. Ethereum stands out significantly, with a market cap exceeding $100 billion at its peak, dominating the entire blockchain ecosystem. Such a high market cap is closely related to Ethereum's role as a major platform for DeFi and stablecoin issuance, which allows it to maintain a strong position even amidst market fluctuations. Other blockchains, such as BSC, Tron, and Solana, have relatively lower but stable market capitalizations. Notably, Tron and BSC exhibit a steady growth trend, highlighting their roles as alternative platforms for stablecoins and DeFi, especially in regions and use cases where transaction costs and speed are critical.
This chart provides a more detailed view of the stablecoin market capitalization trends among the top 20 blockchains. Ethereum leads with a stablecoin market cap exceeding $8 billion, reflecting its significant role as a custodian platform for major stablecoins like USDT, USDC, and DAI. Ethereum's massive market cap supports its position as a stablecoin hub, with demand primarily driven by DeFi applications and institutional users seeking compliant stablecoins.
Other chains (like BSC, Terra Classic, and Solana) have relatively smaller stablecoin market capitalizations but play a critical role in a diverse stablecoin ecosystem. For instance, BSC's stablecoin market cap is around $2 billion, attracting DeFi projects and retail users seeking lower fees than Ethereum. Smaller blockchains (like Algorand and Stellar) are positioning themselves as niche platforms for stablecoins, often targeting specific use cases such as cross-border payments and micropayments.
Existing leaders
Ethereum: A solid leader
A mature and interconnected DeFi ecosystem: Ethereum's vast and mature DeFi ecosystem includes well-known protocols such as Uniswap, Compound, and Aave, which heavily rely on stablecoin liquidity in their operations. Stablecoins are essential for liquidity pools, lending, and yield farming, making Ethereum an indispensable platform for users seeking comprehensive DeFi services.
Institutional and regulatory trust: Stablecoins on Ethereum (especially USDC and DAI) have gained regulatory recognition and institutional trust. As more institutions enter the cryptocurrency space, Ethereum's reputation as a secure and decentralized network makes it an ideal choice for compliant, institutional-grade stablecoins. Circle's USDC and MakerDAO's DAI are the primary native stablecoins on Ethereum, serving as trusted pillars within the ecosystem.
Diverse stablecoins and use cases: Ethereum hosts a wide range of stablecoins, including fiat-backed stablecoins like USDT and USDC, as well as algorithmic and decentralized stablecoins like DAI. This diversity allows Ethereum users to choose the stablecoin that best fits their risk tolerance, regulatory needs, and preferences. For example, DAI's unique appeal lies in its not being directly tied to fiat reserves, aligning with the decentralized values cherished by the Ethereum community.
Layer 2 solutions addressing scalability issues: Ethereum faces scalability challenges, and high gas fees limit participation by small users in DeFi. However, Layer 2 solutions like Arbitrum, Optimism, and zk-Rollups are significantly reducing transaction costs and increasing throughput, allowing Ethereum to maintain its leadership in stablecoin use cases without sacrificing decentralization.
As Ethereum continues to develop its Layer 2 ecosystem and fully transitions to Ethereum 2.0, its dominant position in the stablecoin market is expected to persist. With increasing regulatory clarity surrounding stablecoins, institutional adoption is likely to grow, potentially prompting more fiat-backed and compliant stablecoins to be launched on Ethereum. Additionally, Ethereum's DeFi ecosystem may continue to innovate, developing new stablecoin use cases, including synthetic assets, cross-chain stablecoins, and more complex yield-generating products.
Solana: A high-performance alternative to Ethereum
Solana is often seen as a high-performance alternative to Ethereum, known for its fast transaction speeds and low fees. Although Solana's stablecoin market cap is significantly smaller than Ethereum's, it has successfully attracted a loyal user base and is increasingly popular among retail users and developers seeking low-cost solutions.
High-speed low-cost transactions:
Solana's unique Proof of History (PoH) consensus mechanism supports high throughput and low latency, allowing the network to process thousands of transactions per second at extremely low fees. This makes Solana an ideal choice for applications that require frequent transactions, such as micropayments and retail stablecoin transfers. Consequently, stablecoins like USDC and USDT are frequently used for everyday payments and quick transfers within the Solana ecosystem.Integration of payments and gaming applications:
Solana is positioned as an ideal platform for industries such as gaming and payments, which demand fast and inexpensive transactions. Its user-friendly development tools and support for high-performance applications make it the preferred platform for developers to build decentralized applications (dApps), which often integrate with stablecoins. For example, the blockchain game Star Atlas and the music streaming service Audius are leveraging Solana's speed and stability to use stablecoins as in-game currency and tipping tools, respectively.Network stability issues:
Despite Solana's high performance being a significant advantage, it also faces network outages and stability issues. These downtimes have led some users to question its reliability, particularly in high-value transaction or institutional use cases. The resilience of Solana's network is still developing, and it needs to address these technical challenges to gain full trust in the stablecoin and DeFi markets.Collaboration with USDC and cross-chain solutions:
Solana's collaboration with Circle, the issuer of USDC, is a key factor in driving the adoption of stablecoins on the platform. The availability of USDC on Solana provides users with a reliable dollar-backed stablecoin, enhancing Solana's appeal. Moreover, Solana is exploring cross-chain solutions that will allow assets to flow seamlessly between Solana and Ethereum, providing users with more flexibility and expanding its influence in the stablecoin market.
Solana has significant growth potential in the stablecoin space, especially if it can maintain network stability and further solidify its position in gaming and retail payments. By continuing to collaborate with USDC and exploring cross-chain capabilities, Solana is expected to attract more stablecoin transactions and DeFi applications. However, its centralized validator structure and network interruption issues may limit its appeal to institutions unless these issues are resolved.
Key conditions for stablecoin growth
As the appeal of stablecoins continues to grow in the cryptocurrency and financial markets, certain ecosystem features and environments are more conducive to stablecoin adoption and growth. These environments not only possess technological advantages but are also strategically positioned to meet the needs of retail users and institutional investors. Below are specific characteristics of blockchain ecosystems most likely to experience a surge in stablecoin activity, along with the latest data and trends observed in the market.
1. Low transaction fees
Stablecoin transactions are typically frequent and require low latency, especially in scenarios where users rely on stablecoins for everyday transactions, cross-border payments, and remittances. Ecosystems with low transaction fees and high scalability are more appealing because they can achieve cost-effective transactions without network congestion.
In a 2023 survey of stablecoin users, over 60% of respondents stated that transaction costs were the primary factor in their choice of blockchain platform. Ethereum's average transaction fees often exceed $10 during network congestion, while networks like Tron and BSC have average transaction fees below $0.10. This has attracted a significant amount of USDT to migrate from Ethereum to Tron, with Tron capturing about 30% of the USDT supply, primarily due to its low fees, especially in regions with high remittance demand. Additionally, Binance Smart Chain (BSC) continues to attract retail users to participate in its DeFi ecosystem due to transaction fees far lower than those on Ethereum.
Blockchain environments that provide low fees and high scalability (such as Ethereum's Layer 2 solutions like Polygon and Solana) are also well-suited for stablecoin growth. Solana can process up to 65,000 transactions per second, with relatively low average fees, especially in payment and gaming applications, leading to a gradual increase in stablecoin adoption.
2. A strong DeFi ecosystem with diverse use cases
A robust DeFi ecosystem not only attracts stablecoin liquidity but also provides utility beyond simple transactions. In an environment with applications for lending, yield generation, etc., stablecoins become a core component of various DeFi products as stable trading mediums and collateral.
Ethereum globally hosts over 70% of DeFi applications, with stablecoins accounting for nearly 50% of Ethereum's total locked value (TVL) in DeFi protocols. This widespread use of stablecoins is a core reason Ethereum maintains its lead in stablecoin adoption, despite its higher fees. As of the second quarter of 2024, Ethereum's DeFi locked value is approximately $40 billion, with stablecoins (such as USDC, USDT, and DAI) making up a significant portion.
Binance Smart Chain (BSC) also has an active DeFi ecosystem, with platforms like PancakeSwap and Venus widely using stablecoins as the foundation for liquidity pools and lending markets. In 2023, BSC's DeFi locked value exceeded $5 billion, with stablecoins accounting for about 40% of liquidity pools. This utility and the accessibility of the ecosystem further encourage stablecoin adoption.
3. Interoperability
As the cryptocurrency space gradually moves towards a multi-chain ecosystem, interoperability has become an important factor for stablecoin adoption. Stablecoins need to circulate seamlessly across different blockchains to meet users' needs for trading or holding assets across chains. Ecosystems that enable easy cross-chain transfers of stablecoins will benefit from increased adoption.
According to Chainalysis's 2023 report, cross-chain stablecoin transfers account for approximately 25% of all stablecoin transactions. Solutions like Cosmos's Inter-Blockchain Communication Protocol (IBC) support the free flow of stablecoins across different chains within the Cosmos ecosystem, promoting broader liquidity and use cases.
Cosmos and Polkadot are two major ecosystems focused on interoperability. Cosmos's IBC protocol allows blockchains within its network to interact seamlessly, and stablecoins can easily transfer across chains, promoting their adoption in specific ecosystems, such as Terra's UST (before its collapse) and other stable assets issued on Cosmos chains. Polkadot's parallel chain structure provides similar interoperability, aiding in driving stablecoin adoption across DeFi and specialized applications.
Projects like USDC are also prioritizing multi-chain issuance, currently supporting Ethereum, Solana, BSC, and Avalanche. By achieving cross-chain compatibility, these ecosystems can enhance the utility of stablecoins and facilitate broader adoption.
4. Supporting regulatory compliance and institutional needs
As global regulatory scrutiny of stablecoins intensifies, compliance has become a key factor in stablecoin adoption. Blockchain ecosystems that support compliance requirements (such as Know Your Customer (KYC) and Anti-Money Laundering (AML) regulations) may achieve stronger adoption rates among institutional users and compliant stablecoin issuers.
In 2023, approximately 30% of stablecoin inflows on Ethereum were associated with institutional trading, largely due to the regulatory compliance capabilities of Ethereum stablecoins (like USDC). In contrast, chains with looser regulatory frameworks (like Tron) primarily serve retail users and remittance-based use cases.
Algorand and Ethereum have positioned themselves as regulatory-friendly ecosystems. Algorand supports compliant stablecoins (like USDC) and has partnered with regulated financial institutions to ensure compliance. Meanwhile, Ethereum offers regulatory-compliant options through Circle's USDC and MakerDAO's DAI, making it a preferred stablecoin issuance platform with significant institutional interest.
As regulatory clarity around stablecoins increases, blockchains that prioritize compliance may attract more institutional participation. For instance, Avalanche's customizable subnet features allow institutions to build regulated environments, which may appeal to stablecoin issuers needing to adhere to specific compliance standards.
5. Geographic and regional demand for low-cost remittances
In regions with limited financial inclusion or high banking fees, stablecoins provide a viable alternative for everyday transactions and cross-border remittances. Ecosystems that can meet these market needs through low fees, high accessibility, and integration with payment providers have a greater advantage in stablecoin adoption.
According to the World Bank's 2023 report, global remittance volumes have exceeded $700 billion, with stablecoins increasingly capturing cross-border transaction shares in countries with limited financial infrastructure. A blockchain environment that offers low transaction fees and fast processing capabilities has the potential to tap into this remittance market.
Tron is popular in regions such as Asia, Africa, and Latin America, with its low fees making it an ideal choice for cross-border remittances. Tron's network handles a large volume of stablecoin transactions daily, particularly USDT, which has been widely adopted in these regions as a tool for overseas remittances without traditional banking services. Tron's average transaction fees remain below $0.10, making it an ideal platform for stablecoin usage based on remittances.
BSC (Binance Smart Chain) is also suitable for the remittance market due to its low fees and strong presence in Asia. In these regions, Binance's exchange ecosystem has built up trust. Additionally, chains like Celo are targeting emerging markets by focusing on mobile financial services to facilitate stablecoin usage among the unbanked or underbanked populations.
6. High scalability
Layer 2 solutions provide an effective way for blockchains to address high transaction costs while maintaining security and decentralization. Blockchains that integrate Layer 2 scaling solutions can support larger volumes of stablecoin transactions at lower costs, attracting users who have been excluded due to high costs on Layer 1 networks.
Ethereum's Layer 2 protocols (like Arbitrum and Optimism) had a total locked value (TVL) exceeding $5 billion by mid-2024. Of this, stablecoins accounted for a significant portion of usage across various DeFi applications and payments. Layer 2 solutions have reduced transaction costs by over 90%, making them highly attractive to stablecoin users.
Polygon is one of the leading Layer 2 scaling solutions, driving substantial growth in stablecoins by providing Ethereum's security with lower fees. Platforms like Aave and Uniswap have deployed on Polygon to take advantage of lower costs. Meanwhile, the usage of USDC and DAI on Polygon has significantly increased. Similarly, the cost-effectiveness of Arbitrum and Optimism continues to attract DeFi protocols that rely on stablecoins.
As more chains adopt Layer 2 scaling solutions, the adoption of stablecoins in these environments may increase, allowing users to access stablecoin functionalities at lower costs.
Potential challengers
As global demand for stablecoins grows, emerging blockchain ecosystems like TON (The Open Network) and Sui show tremendous potential for stablecoin adoption due to their unique infrastructures, target user bases, and growth strategies. While mature blockchains like Ethereum, Tron, and BSC currently dominate stablecoin activity, TON and Sui are injecting differentiated competitiveness into the stablecoin market through innovative approaches. Below, we provide a detailed analysis of the potential of TON and Sui in driving stablecoin growth, comparing them with current leaders while exploring the financial implications of stablecoin activity growth within these ecosystems.
TON: Driving retail-oriented stablecoin adoption through the Telegram network
Key characteristics driving stablecoin adoption
Seamless integration with Telegram:
The direct integration of TON with Telegram makes stablecoins on its network highly accessible to Telegram users, enabling seamless peer-to-peer transfers and payments. This setup is particularly advantageous in countries where banking infrastructure is limited but Telegram is widely used (such as Russia, Ukraine, Turkey, and parts of the Middle East and Southeast Asia).
Use case: If stablecoins like USDT or USDC are widely adopted on TON, users could send stablecoins with a single click within the Telegram app. This integration could make stablecoins on TON as easy to use as Venmo or WeChat Pay, providing a low-barrier entry point for users unfamiliar with blockchain.
Low fees and high scalability:
TON's sharding architecture supports low-cost processing of high transaction volumes, making it attractive for stablecoin transactions. TON's average transaction fees are estimated to be below $0.01, comparable to Tron and BSC in terms of cost efficiency. This economic advantage may drive the adoption of everyday transactions and micropayments, especially for fee-sensitive users.
TON's high scalability ensures that it does not experience significant speed drops or fee increases during traffic spikes, which is crucial for stablecoin use in high-frequency trading scenarios (such as remittances and retail purchases).
Built-in custody options and user-friendly interface:
TON offers both custodial and non-custodial wallet options to accommodate different types of users. The embedded custodial wallet within Telegram simplifies the experience for regular users, while non-custodial wallets cater to crypto-savvy users focused on security and asset ownership. This dual approach can increase adoption among different user groups, including retail users and more experienced crypto asset holders.
If TON successfully attracts stablecoins or launches its dedicated ecosystem stablecoin, it could capture significant market share in retail and remittance markets. Given Telegram's widespread influence, TON has the potential to attract millions of new stablecoin users in emerging markets where Telegram is popular.
If TON can capture 1-2% of the current global stablecoin market (valued at approximately $120 billion), it could lead to an increase of $1.2 billion to $2.4 billion in the stablecoin market cap within the ecosystem. This additional activity could boost TON's valuation from $5 billion to $6-7 billion, positioning it as one of the top platforms for stablecoin transactions.
With a base of 700 million active Telegram users, even a 5% stablecoin adoption rate on TON could bring in 35 million users, a substantial increase compared to existing stablecoin adoption rates on other chains. This user base would not only drive stablecoin transactions but also increase demand for other TON services, promoting ecosystem growth.
TON's value proposition in use cases
The deep integration of TON with Telegram has significantly boosted stablecoin activity. This vast ready-made user base provides TON with audience coverage that other blockchain ecosystems cannot match. As of May 2024, the supply of Tether (USDT) on the TON blockchain has surged from $100 million to $1.2 billion, indicating a growing adoption rate among users within the Telegram ecosystem.
The popularity of Telegram in regions with traditionally inadequate banking infrastructure, such as Russia, Southeast Asia, and the Middle East, provides a practical alternative for stablecoins based on TON for peer-to-peer payments and remittances. If Telegram natively integrates stablecoins, users could seamlessly send funds as easily as Venmo or WeChat Pay, but with global coverage. This convenience could accelerate mainstream adoption of stablecoins in underbanked areas.
TON's sharding architecture allows it to achieve high scalability while maintaining low transaction fees, with per-transaction costs typically below $0.01. This cost-effectiveness is crucial for micropayments and high-frequency retail use cases. For example, stablecoins on TON can be used for tipping within Telegram communities, digital content payments, or transactions for small businesses. Additionally, the low costs of TON transactions make it a strong competitor in the global remittance market, particularly in emerging economies. According to the World Bank, global remittance flows exceeded $700 billion in 2023, with stablecoins playing an increasingly important role in these cross-border payments. The integration of TON with Telegram can simplify the remittance process, reducing fees to a fraction of traditional banking methods, making it an ideal alternative for millions of users worldwide.
Sui: A high-performance blockchain focused on DeFi and institutional use cases
Key characteristics driving stablecoin adoption
Advanced consensus protocols support high throughput and low latency
Sui adopts the Narwhal and Tusk consensus protocols, supporting high transaction speeds and low latency. This design offers the capability for high transactions per second (TPS), making Sui an ideal platform for DeFi applications that require high transaction speed and reliability, such as loans, borrowing, or complex trading scenarios. Low latency also benefits stablecoin users who need instant settlements.
Use case: High-frequency trading is an important component of DeFi, and stablecoins are crucial for rapid collateral swaps and liquidity provision. Sui's high throughput could attract institutional-grade DeFi protocols that rely on stablecoins, positioning it as a competitor to Ethereum in high-value DeFi transactions.
DeFi-centric ecosystem attracting institutional users
Sui is actively positioning itself as a blockchain focused on DeFi, with its early applications centered on lending, decentralized exchanges (DEX), and asset management. Given the critical role of stablecoins in DeFi applications, Sui's emphasis on building a robust DeFi foundation may drive demand for stablecoins used as collateral, liquidity pools, or exchange mediums.
Institutional interest: Sui's programmable infrastructure allows for customized compliance solutions, which may attract institutions seeking a secure, compliance-friendly environment for stablecoin transactions. This capability could facilitate partnerships with regulated stablecoin issuers, enhancing credibility and attracting institutional interest.
Security and flexibility based on the Move programming language
Sui uses the Move programming language, designed specifically for security and asset protection. Move's resource-oriented programming model minimizes the risk of errors, ensuring a secure trading environment appealing to both retail and institutional users. Enhanced security may position Sui as a safe environment for high-value stablecoin transactions and complex DeFi protocols.
If Sui can capture 0.5-1% of the Ethereum DeFi market driven by stablecoins (valued at approximately $40 billion), it could bring an additional $200 million to $400 million in stablecoin market cap growth for the Sui ecosystem. Given Sui's current valuation of $800 million, such an influx of activity could potentially double its valuation to over $1 billion.
Meanwhile, Sui's architecture and compliance potential may attract institutional users prioritizing stable and secure digital asset environments. If Sui becomes the preferred chain for institutional DeFi, it may see significant capital inflows, establishing its core position in the DeFi space alongside Ethereum and BSC.
Sui's value proposition in use cases
The use of the Move programming language enhances the Sui ecosystem, providing a secure environment for developers to build robust financial applications. Move's resource-oriented programming model reduces the risk of errors, ensuring the safe handling of digital assets within smart contracts. This makes Sui particularly attractive for institutional-grade stablecoin use cases that focus on security and compliance. For example, programmable stablecoins deployed on Sui can support highly secure lending and borrowing protocols, enforcing collateral and repayment through algorithmic rules. This feature may attract large financial institutions looking to integrate stablecoins into their operations.
For example, in November 2024, Sui established a strategic partnership with the digital asset department of global investment firm Franklin Templeton. This collaboration aims to support developers within the Sui ecosystem and leverage the Sui blockchain protocol to deploy innovative technologies. Franklin Templeton's involvement highlights Sui's potential in driving institutional growth.
Sui's compliance-focused infrastructure makes it a viable platform for cross-border trade, where stablecoins can be used for real-time settlement of international transactions and enforce trade terms via smart contracts. This institutional appeal and flexibility enable Sui to compete with Ethereum in high-value stablecoin use cases.
Disclaimer: This article is for general informational purposes only and does not constitute investment advice, recommendations, or any solicitation for the purchase or sale of any securities. The content of this article should not be the basis for any investment decisions, nor should it be used as a reference for accounting, legal, tax advice, or investment recommendations. You should consult your own advisors regarding any legal, business, tax, or other matters related to any investment decision. Some information contained in this article may be sourced from third parties, including companies invested in funds managed by Aquarius. The opinions expressed in this article are solely those of the author and do not necessarily reflect the views of Aquarius or its affiliates. These views are subject to change at any time and are not guaranteed to be updated.
Reference
https://www.coinbase.com/en-gb/institutional/research-insights/research/market-intelligence/stablecoins-new-payments-landscape
https://defillama.com/stablecoins
https://www.theblock.co/post/315362/ethereum-stablecoin-volume-hits-record-1-46-trillion-as-defi-demand-surges
https://remittanceprices.worldbank.org/sites/default/files/rpw_main_report_and_annex_q124_final.pdf
https://www.federalreserve.gov/econres/notes/feds-notes/primary-and-secondary-markets-for-stablecoins-20240223.html
https://www.chainalysis.com/blog/stablecoins-most-popular-asset/
