Author: Robbie Petersen, Researcher at Delphi Digital
Compiled by: Luffy, Foresight News
The total supply of stablecoins is continuing to rise steadily, and this total masks a more concerning detail. Although cryptocurrency trading volumes remain below historical highs, the number of active addresses using stablecoins for transactions continues to climb each month. This discrepancy indicates that stablecoins are not merely serving as lubricant for the cryptocurrency speculation casino but are finally delivering on their core promise: to serve as the foundation of the 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 those companies that already possess established distribution channels. In just the past three months, four large fintech companies have formally expressed their intentions to enter the stablecoin space: Robinhood and Revolut are launching their own stablecoins; Stripe recently acquired Bridge to facilitate faster, cheaper global payments; and despite harming their own interests, Visa is assisting banks in launching stablecoins.
This marks a new paradigm shift: the adoption of stablecoins is no longer dependent on purely ideological assumptions. Instead, by offering fintech companies a simple proposition of lower costs, higher profits, and new revenue streams, stablecoins find themselves inherently aligned with the most reliable forces in capitalism: the relentless pursuit of profit. Therefore, as market-leading fintech companies leverage stablecoins to increase profit margins and/or expand more payment stacks, we will inevitably see their other competitors emulate and join the stablecoin battlefield. As I emphasized in the ‘Stablecoin Manifesto’, game theory suggests that the adoption of stablecoins is not an option but a necessary bet for fintech companies to maintain their market position.
Stablecoin 2.0: Revenue-sharing stablecoins
Intuitively, the most obvious beneficiaries of these structural tailwinds are the stablecoin issuers. The reason is simple: considering the monetary network effects, stablecoins are essentially a winner-takes-all game. Nowadays, these network effects are primarily reflected in three aspects:
Liquidity: USDT and USDC are the most liquid stablecoins in the cryptocurrency market, and using some emerging stablecoins means traders will have to bear more slippage.
Payment: USDT has become an increasingly common payment method in emerging economies, and its network effect as a medium of digital exchange can be said to be the strongest.
‘Denomination Effect’: Almost all major trading pairs on CEX and DEX are priced in USDT or USDC.
In simple terms, the more people who use USDT (Tether), the more convenient it becomes to use USDT, which leads to even more people using USDT. The result of this is that Tether increases market share while simultaneously enhancing profitability.
While Tether’s network effect is nearly impossible to fundamentally break, a new emerging stablecoin model seems best suited to challenge Tether’s existing model: revenue-sharing stablecoins. Importantly, this model is favorably positioned within the stablecoin paradigm increasingly adopted by fintech companies. To understand why, some prerequisites need to be understood.
Today, the stablecoin ecosystem stack typically includes two main participants: (1) stablecoin issuers (such as Tether and Circle) and (2) stablecoin distributors (i.e., applications).
Currently, stablecoin issuers create value of more than $10 billion each year, surpassing the total revenue of all blockchains. However, this represents a huge structural inefficiency: the value generated in the stablecoin stack is fundamentally in the downstream distributors. In other words, without exchanges, DeFi applications, payment applications, and wallets integrating USDT, USDT would have no utility and therefore generate no value. Nevertheless, the ‘distributors’ currently do not receive 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 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 profits from their own distribution channels.
From a scale perspective, this could represent a significant source of revenue, possibly even the primary source of revenue for large applications. Therefore, as profit margins continue to be compressed, we may be entering a world where the primary business model of crypto applications evolves into effectively selling ‘stablecoin issuance as a service’ (SDaaS). Intuitively, this makes sense, as today the value captured by stablecoin issuers exceeds the combined total of blockchains and applications, and the portion of value shared with applications can be substantially larger than that from other sources.
Despite numerous attempts to break Tether’s monopoly thus far, I believe that the revenue-sharing stablecoin model is the right direction for two reasons:
Distribution is everything: While previous attempts to issue yield-bearing stablecoins initially sought the support of end users, revenue-sharing stablecoins target participants who have users: distributors. This indicates that the revenue-sharing model is the first to inherently combine the incentive mechanisms of both distributors and issuers.
Quantity determines power: Historically, the only way applications could gain economic benefits from stablecoins was to launch their own independent stablecoin. However, this approach comes at a cost. Given that other applications have no incentive to integrate your stablecoin, its utility would diminish to being limited within their respective applications. Thus, it is unlikely to compete at scale with the network effects of USDT. In contrast, by creating a stablecoin that incentivizes numerous applications with distribution capabilities to integrate simultaneously, revenue-sharing stablecoins can leverage the collective network effect of the entire ‘distributor’ ecosystem.
In short, revenue-sharing stablecoins possess all the advantages of USDT (composability and network effects across applications) and have the added benefit 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’ USDG: Paxos announced the launch of USDG this November, regulated by the upcoming stablecoin framework of the Monetary Authority of Singapore, and has already secured several heavyweight partners including Robinhood, Kraken, Anchorage, Bullish, and Galaxy Digital.
M^0’s ‘M’: The team consists of former senior personnel from MakerDAO and Circle. The vision of M^0 is to serve as a simple, trusted, and neutral settlement layer that allows any financial institution to mint and redeem the revenue-sharing stablecoin ‘M’. However, one distinction of ‘M’ from other revenue-sharing stablecoins is that ‘M’ can also be used as ‘raw material’ for other stablecoins, such as USDN (Noble’s revenue-sharing stablecoin). Additionally, M^0 adopts a unique custody solution composed of a decentralized network of independent validators and a dual-token management system, providing higher trusted 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 integrating 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 start. Today, the total supply of AUSD is $50 million.
By 2025, I expect these stablecoin issuers to gain increasing attention as distributors collaborate and guide users to use stablecoins that benefit them. Additionally, we should see market makers (who play a crucial role in ensuring stablecoins maintain sufficient liquidity) show preference for these stablecoins, as they also gain certain economic benefits when holding inventory of such stablecoins.
While ‘M’ and AUSD currently rank 33rd and 36th respectively in stablecoin supply, and USDG has not yet launched, I expect that by the end of 2025, at least one of these stablecoins will enter the top 10. Furthermore, by the end of the year, I expect the overall market share of revenue-sharing stablecoins to 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 Eurodollars is often used as a historical analogy for stablecoins, this analogy is somewhat simplistic. Stablecoins are not Eurodollars; they are fundamentally digitized, usable globally, can settle cross-border instantly, can be utilized by AI agents, and are affected by massive network effects; most importantly, existing fintech companies and enterprises have clear incentives to adopt them because stablecoins align with every business's goal: to make more money.
Therefore, to say that the adoption of stablecoins will follow the trajectory of Eurodollar adoption overlooks a fundamental issue. I believe the only commonality between stablecoins and Eurodollars is that they will continue to emerge as a bottom-up phenomenon, and no institution or government that perceives the technology as contrary to their interests will be able to control them. However, unlike Eurodollars, the adoption of stablecoins will not occur slowly over 30-60 years. It will start slowly and then rapidly reach escape velocity as network effects kick in.
Regulatory frameworks are being established. Fintech companies like Robinhood and Revolut are launching their own stablecoins, and Stripe appears to be exploring stablecoins to gain more payment stack. Most importantly, even though they would cannibalize their own profits, existing enterprises like PayPal and Visa are still exploring stablecoins, as they are concerned that if they do not act, their competitors will.
While it remains 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.
