Author: Robbie Petersen
Compiled by: Deep Tide TechFlow
Despite the total supply of stablecoins steadily increasing, this apparent growth figure conceals a more noteworthy trend. While trading volumes on cryptocurrency exchanges have yet to recover to historical highs, the number of addresses actively using stablecoins for transactions continues to rise monthly. This disparity indicates a shift in the role of stablecoins. They are no longer merely a lubricant for speculation in the crypto market but are gradually realizing their core promise: to become a solid foundation for a new digital financial system.
Data sources: Artemis, The Tie
(Excerpt from Delphi's (2025 DeFi Outlook Report))
What may be more noteworthy is that the driving force behind the widespread adoption of stablecoins may no longer rely on emerging startups, but rather on established enterprises that already have strong market coverage. In the past three months, four leading fintech companies have announced their official entry into the stablecoin space: Robinhood and Revolut are developing their own stablecoins; Stripe aims for faster and lower-cost global payments through the acquisition of Bridge; and Visa, despite knowing this will cut into its own profits, has begun assisting banks in issuing stablecoins.
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This series of actions marks a significant shift in the application of stablecoins: their popularity is no longer reliant on ideology or technological ideals, but rather on providing clear business value to win market favor. Stablecoins offer fintech companies obvious benefits—lower operational costs, higher profit margins, and new revenue sources. For this reason, stablecoins are gradually integrating deeply with the core driving force of capitalism: the pursuit of profit.
As leading fintech companies leverage stablecoins to enhance profit margins or gain control over more payment aspects, other competitors will inevitably follow suit to maintain market competitiveness. As I mentioned in the (Stablecoin Manifesto), from a game theory perspective, the adoption of stablecoins will no longer be optional but a necessity for fintech companies to maintain their market positions.
Stablecoin 2.0: Revenue-sharing Stablecoins
Intuitively, the most obvious beneficiaries in the stablecoin ecosystem are the issuers. This is because the stablecoin market possesses a 'winner-takes-all' characteristic, which stems from the network effect of currency. Currently, this network effect is primarily reflected in the following three aspects:
Liquidity: USDT and USDC are the most liquid stablecoins in the crypto market. Using some emerging forks of USDT may lead to higher trading slippage.
Payment functionality: In many emerging economies, USDT has already become a common payment tool. As a digital trading medium, its network effect is very strong.
Pricing effect: Almost all major trading pairs (whether on centralized or decentralized exchanges) are priced in USDT or USDC.
In short, the more users USDT has, the more new users it will attract. This self-reinforcing network effect helps Tether continuously expand its market share while enhancing profitability.
Although Tether's network effect is difficult to disrupt on a large scale in the short term, a new emerging stablecoin model—revenue-sharing stablecoins—is gradually coming to the forefront. This model is particularly suited for a new ecosystem of stablecoins driven by fintech companies. To understand its potential, we need to first grasp the basic structure of the stablecoin ecosystem.
Currently, the stablecoin ecosystem can be divided into two main roles: (1) stablecoin issuers (such as Tether and Circle) and (2) stablecoin distributors (such as various applications).
Currently, stablecoin issuers generate over $10 billion in annual revenue, a figure that exceeds the total revenue of all blockchains. However, this situation presents significant structural issues: the value of stablecoins is actually driven by distributors. In other words, without distribution channels such as exchanges, DeFi applications, payment platforms, and wallets, USDT would lose its practical utility and thus capture no value. Yet, distributors currently fail to benefit from these economic activities.
To address this issue, revenue-sharing stablecoins have emerged. This model fundamentally changes the existing stablecoin ecosystem by redistributing the economic benefits originally belonging to issuers back to the applications providing liquidity to the network. Simply put, revenue-sharing stablecoins help applications profit through their distribution capabilities.
If this model achieves scale, it could become an important source of revenue for applications, or even their primary source of income. As profit margins gradually compress, we may usher in an era of 'Stablecoin Distribution as a Service' (SDaaS), where crypto applications distribute stablecoins as their core business model. This trend is quite reasonable, as the value currently captured by stablecoin issuers already exceeds the sum of blockchains and applications.
Although countless attempts have been made to challenge Tether's monopoly in the past, the revenue-sharing stablecoin model is considered more promising for two main reasons:
The key role of distribution channels: Unlike previous revenue-generating stablecoins that target end users directly, revenue-sharing stablecoins focus on the distribution channels that control the users. This model combines the interests of distributors and issuers for the first time.
Ecosystem synergy effect: In the past, applications wanting to profit from the stablecoin economy usually needed to issue their own independent stablecoin. However, the limitation of this approach is that other applications have no incentive to integrate your stablecoin, whose utility is confined to its own application and struggles to compete with USDT's network effect. In contrast, revenue-sharing stablecoins can leverage the collective network effect of the entire distribution ecosystem by incentivizing multiple applications to integrate simultaneously.
Revenue-sharing stablecoins inherit the advantages of USDT—such as composability and network effects across different applications—and further incentivize partners with distribution capabilities to integrate by sharing revenue with the application layer.
Currently, there are three leading players in the field of revenue-sharing stablecoins:
Paxos's USDG: Set to launch this November and bound by the upcoming stablecoin regulatory framework from the Monetary Authority of Singapore. Paxos has already partnered with several heavyweight partners to integrate USDG, including Robinhood, Kraken, Anchorage, Bullish, and Galaxy Digital.
The 'M' of M^0: Developed by the core team from MakerDAO and Circle, M^0 aims to be a streamlined and trusted neutral settlement layer that allows any financial institution to mint and redeem its revenue-sharing stablecoin—'M'. Unlike other similar stablecoins, 'M' can also serve as the base asset for other stablecoins (such as Noble's USDN). Furthermore, M^0 employs a unique custody model comprised of a decentralized independent validator network and a Two Token Governance (TTG) system. This design offers greater transparency and trusted neutrality compared to other models. More information about M^0 can be found in my article [link to be added].
Agora's AUSD: Similar to USDG and 'M', Agora's AUSD also attracts partners by sharing revenue with the applications and market makers that integrate it. Agora has received support from several well-known market makers and applications, including Wintermute, Galaxy, Consensys, and Kraken Ventures. This cooperation has aligned Agora's incentive mechanisms with these stakeholders early on. Currently, the total supply of AUSD has reached $50 million.
Looking ahead to 2025, I expect these stablecoin issuers to further expand their market influence, and distributors may prioritize recommending stablecoins that can generate more revenue. Additionally, market makers may also be more inclined towards these revenue-sharing stablecoins, as they can benefit from holding large inventories.
Despite 'M' and AUSD currently ranking 33rd and 36th in stablecoin supply, respectively, and USDG not yet officially launched, I predict that by the end of 2025, at least one of these stablecoins will break into the top ten. Meanwhile, the market share of revenue-sharing stablecoins will grow from the current 0.06% to over 5% (approximately 83 times). With the entry of fintech companies with strong distribution capabilities, this type of stablecoin will usher in a new wave of popularity.
Slow accumulation, sudden explosion
Although the process of adopting stablecoins is often compared to the historical development trajectory of Eurodollars, this analogy oversimplifies the situation. Stablecoins are not Eurodollars—they are digital; accessible globally without barriers; capable of achieving cross-border instant settlement; even usable by AI entities; and will form strong network effects in large-scale applications; most importantly, they provide clear economic incentives for existing fintech companies and enterprises, aligning with the core goal of all businesses: to earn more profits.
Therefore, the view that the popularity of stablecoins will develop slowly like Eurodollars overlooks a core fact. The only similarity between stablecoins and Eurodollars may be that they both rise in a bottom-up manner and cannot be easily controlled by any existing giants or governments, especially by those governments that see this technology as a threat to their interests. However, unlike Eurodollars, the popularity of stablecoins will not gradually occur over 30 to 60 years but will undergo a 'slow accumulation, sudden explosion' process, as their network effects will rapidly reach a critical point.
Currently, the stablecoin ecosystem is rapidly taking shape. Regulatory frameworks are gradually being improved; fintech companies like Robinhood and Revolut have begun launching their own stablecoins; and Stripe also seems to be exploring the possibility of controlling more payment aspects through stablecoins. More notably, even industry giants like PayPal and Visa are actively positioning themselves in the stablecoin space, knowing that stablecoins may weaken their profit margins, because they fear that if they do not act, other competitors will seize the opportunity.
While it is uncertain whether 2025 will be the year of a turning point for stablecoins, it is certain that we have never been closer to that moment.
Perhaps we are still underestimating the potential of stablecoins for the future.
