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 by Coinbase, the total volume of stablecoin transactions exceeded $10.8 trillion in 2023. After excluding 'non-natural' transactions (such as bot-driven or automated transactions), the actual transaction volume was 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 with a peak market cap exceeding $100 billion, dominating the entire blockchain ecosystem. Such a high market cap is closely related to Ethereum's role as the primary platform for DeFi and stablecoin issuance, allowing it to maintain a strong position even amid market fluctuations. Other blockchains, such as BSC, Tron, and Solana, have relatively lower but stable market caps. Notably, Tron and BSC exhibit stable growth trends, 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 cap trends of the top 20 blockchains. Ethereum leads with a stablecoin market cap exceeding $8 billion, reflecting its significant role as a custodian of major stablecoins like USDT, USDC, and DAI. Ethereum's large market cap supports its position as a stablecoin hub, with demand primarily coming from DeFi applications and institutional users seeking compliant stablecoins. However, Tron stands out as a major competitor, with a stablecoin market cap of approximately $4 billion. Tron's appeal lies in its low transaction fees and fast processing speeds, making it particularly popular in high-frequency trading scenarios such as remittances and cross-border payments.
Other chains (such as BSC, Terra Classic, and Solana) have relatively small stablecoin market capitalizations but play key roles in diversified stablecoin ecosystems. For instance, BSC's stablecoin market cap is approximately $2 billion, attracting DeFi projects and retail users seeking lower fees compared to Ethereum. Smaller blockchains (such as Algorand and Stellar) are positioned as niche platforms for stablecoins, typically targeting specific use cases like cross-border payments and micropayments.
Existing Dominators
Ethereum: A Solid Leader
A mature and interconnected DeFi ecosystem: Ethereum's large and mature DeFi ecosystem includes well-known protocols like Uniswap, Compound, and Aave, which heavily rely on stablecoin liquidity in their operations. Stablecoins are crucial 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 crypto 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 main 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 enables Ethereum users to select stablecoins that best match their risk tolerance, regulatory requirements, and preferences. For instance, DAI's unique appeal stems from its lack of direct linkage to fiat reserves, aligning with the decentralized values embraced by the Ethereum community.
Layer 2 solutions address scalability issues: Ethereum faces scalability challenges, with high gas fees limiting participation from smaller 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 position in stablecoin use cases without sacrificing decentralization.
As Ethereum continues to develop its Layer 2 ecosystem and transition fully to Ethereum 2.0, it is expected to maintain its dominant position in the stablecoin market. As regulatory clarity around stablecoins increases, institutional adoption will further grow, potentially prompting more fiat-backed and compliant stablecoins to launch on Ethereum. Moreover, Ethereum's DeFi ecosystem is likely to continue innovating, 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 viewed 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:
The unique Proof of History (PoH) consensus mechanism of Solana supports high throughput and low latency, allowing the network to handle thousands of transactions per second at extremely low costs. This makes Solana an ideal choice for applications that require frequent transactions, such as micropayments and retail stablecoin transfers. As a result, stablecoins like USDC and USDT are often used on Solana for everyday payments and rapid transfers within the ecosystem.Integration of Payments and Gaming Applications:
Solana is positioned as an ideal platform for industries like gaming and payments, which require fast and inexpensive transactions. Its user-friendly development tools and support for high-performance applications make it the preferred platform for developers building decentralized applications (dApps), which are often integrated with stablecoins. For example, blockchain game Star Atlas and music streaming service Audius are leveraging Solana's speed and stability, using stablecoins as in-game currency and reward 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, especially in high-value transaction or institutional use cases. Solana's network resilience is still evolving, and it needs to address these technical challenges to gain the full trust of the stablecoin and DeFi markets.Collaboration with USDC and Cross-Chain Solutions:
Solana's partnership with USDC issuer Circle is a key factor in driving the adoption of stablecoins on the platform. The availability of USDC on Solana provides users with a reliable USD-backed stablecoin, enhancing Solana's appeal. Furthermore, Solana is exploring cross-chain solutions that would allow assets to flow seamlessly between Solana and Ethereum, offering users 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 its partnership with USDC and exploring cross-chain capabilities, Solana is poised to attract more stablecoin transactions and DeFi applications. However, its centralized validator structure and network outage issues may limit its appeal to institutions unless these problems are resolved.
Key Conditions for Stablecoin Growth
As the appeal of stablecoins continues to grow in cryptocurrency and financial markets, certain ecosystem features and environments are more conducive to the adoption and growth of stablecoins. These environments not only possess technical advantages but also strategically cater to the needs of retail users and institutional investors. Below are the specific characteristics of blockchain ecosystems most likely to experience a stablecoin boom, along with the latest data and trends observed in the market.
1. Low Transaction Fees
Stablecoin transactions are often 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 attractive because they can facilitate cost-effective transactions without network congestion.
In a 2023 survey of stablecoin users, over 60% of respondents indicated that transaction costs are the primary factor influencing 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 approximately 30% of the USDT supply, primarily due to its low fees, especially in regions with high remittance demand. Furthermore, Binance Smart Chain (BSC) continues to attract retail users into 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 and Solana) are also highly suitable for stablecoin growth. Solana can process up to 65,000 transactions per second with low average fees, particularly in payment and gaming applications, and its stablecoin adoption is gradually increasing.
2. A Robust DeFi Ecosystem with Diverse Use Cases
A robust DeFi ecosystem not only attracts stablecoin liquidity but also provides utility beyond simple transactions. In environments with applications for lending, yield generation, and more, stablecoins serve as stable mediums of exchange and collateral, becoming central to various DeFi products.
Ethereum hosts over 70% of global DeFi applications, with stablecoins accounting for nearly 50% of the total value locked (TVL) in Ethereum's DeFi protocols. The widespread use of stablecoins is a core reason why Ethereum maintains its lead in stablecoin adoption, despite its higher fees. As of the second quarter of 2024, Ethereum's DeFi TVL was approximately $40 billion, with stablecoins (like USDC, USDT, and DAI) occupying a significant share.
Binance Smart Chain (BSC) also has an active DeFi ecosystem, with platforms like PancakeSwap and Venus widely using stablecoins as the basis for liquidity pools and lending markets. In 2023, BSC's DeFi TVL exceeded $5 billion, with stablecoins accounting for around 40% of liquidity pools. This utility and accessibility of the ecosystem further encourage the adoption of stablecoins.
3. Interoperability
As the crypto space gradually moves towards a multi-chain ecosystem, interoperability has become an important factor in stablecoin adoption. Stablecoins need to circulate seamlessly across different blockchains to meet user demands for trading or holding assets across multiple chains. Ecosystems that enable easy cross-chain transfer of stablecoins will benefit from increased adoption.
According to Chainalysis's 2023 report, cross-chain stablecoin transfers account for about 25% of all stablecoin transactions. Solutions such as Cosmos's Inter-Blockchain Communication (IBC) protocol support the free flow of stablecoins across different chains in 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, with stablecoins easily transferable between chains, facilitating their adoption in specific ecosystems, such as Terra's UST (before its collapse) and other stable assets issued on Cosmos chains. Polkadot's parachain structure provides similar interoperability, which helps drive stablecoin adoption across DeFi and specialized applications.
Projects like USDC also prioritize multi-chain issuance, now supporting Ethereum, Solana, BSC, and Avalanche. By achieving cross-chain compatibility, these ecosystems can enhance the utility of stablecoins and promote 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 gain stronger adoption rates among institutional users and compliant stablecoin issuers.
In 2023, approximately 30% of stablecoin inflows on Ethereum were related to institutional trading, primarily due to the regulatory compliance capabilities of Ethereum stablecoins (such as USDC). In contrast, chains like Tron, with a more relaxed regulatory structure, 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 established partnerships with regulated financial institutions to ensure compliance. Meanwhile, Ethereum provides compliant options through Circle's USDC and MakerDAO's DAI, making it a preferred stablecoin issuance platform with significant institutional interest.
As the regulatory landscape around stablecoins becomes clearer, blockchain platforms prioritizing compliance may attract more institutional participation. For example, Avalanche's customizable subnet feature allows institutions to build regulated environments, which could appeal to stablecoin issuers that need 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 offer a viable alternative for everyday transactions and cross-border remittances. Ecosystems that can meet these market demands through low fees, high accessibility, and integration with payment providers have a competitive advantage in stablecoin adoption.
According to the World Bank's 2023 report, global remittance flows have surpassed $700 billion, with stablecoins capturing an increasing share of cross-border transactions in countries with limited financial infrastructure. Blockchain environments that offer low transaction fees and fast processing capabilities have the potential to capture this remittance market.
Tron is popular in regions like Asia, Africa, and Latin America, where its low fees make it an ideal choice for cross-border remittances. Tron’s network processes a large number of stablecoin transactions daily, especially USDT, which has been widely adopted in these regions as a tool for overseas remittances without traditional banking services. Tron’s average transaction fee remains below $0.10, making it an ideal platform for remittance-based stablecoin usage.
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 established trust. Additionally, chains like Celo are targeting emerging markets by focusing on mobile financial services to enable underbanked or underserved populations to use stablecoins.
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 (such as Arbitrum and Optimism) had a combined total value locked (TVL) exceeding $5 billion by mid-2024. Notably, the use of stablecoins in various DeFi applications and payments accounted for a significant proportion. Layer 2 solutions have reduced transaction costs by over 90%, making them highly attractive for stablecoin users.
Polygon is one of the leading Layer 2 scaling solutions, driving significant 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 also attracts DeFi protocols that rely on stablecoins.
As more chains adopt Layer 2 scaling solutions, stablecoin adoption 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 exhibit significant potential for stablecoin adoption due to their unique infrastructures, target user bases, and growth strategies. While established 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 TON and Sui's potential in driving stablecoin growth and compare them against current leaders, while exploring the financial implications of growing stablecoin activity within these ecosystems.
TON: Driving Retail-Oriented Stablecoin Adoption Through the Telegram Network
Key Features 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 especially advantageous in countries with limited banking infrastructure but widespread Telegram usage, such as Russia, Ukraine, Turkey, and parts of the Middle East and Southeast Asia.
Use Case: If stablecoins such as USDT or USDC are widely adopted on TON, users could send stablecoins with one 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 shard architecture supports low-cost processing of high transaction volumes, making it attractive for stablecoin trading. TON's average transaction fee is estimated to be below $0.01, making it cost-effective compared to Tron and BSC. This economic advantage may drive the adoption of everyday transactions and micropayments, particularly for cost-sensitive users.
TON's high scalability ensures that it does not experience significant speed reductions 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 Custodial Options and User-Friendly Interface:
TON offers custodial and non-custodial wallet options to cater to different types of users. The embedded custodial wallet in Telegram simplifies the user experience for ordinary users, while non-custodial wallets serve more security-conscious and asset-owning crypto-savvy users. This dual approach can increase adoption across different user segments, including retail users and more experienced cryptocurrency holders.
If TON successfully attracts stablecoins or launches its proprietary 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 a stablecoin market cap increase of $1.2 billion to $2.4 billion within the ecosystem. This additional activity could raise TON's own market cap from $5 billion to $6-7 billion, positioning it as one of the top platforms for stablecoin trading.
With a user base of 700 million active Telegram users, even a 5% adoption rate for stablecoins on TON could yield 35 million users, significantly higher than the current stablecoin adoption rates on other chains. This user base will not only drive stablecoin transactions but also increase demand for other TON services, thus fostering ecosystem growth.
The Value Proposition of TON in Use Cases
The deep integration of TON with Telegram has significantly increased 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 continuous increase in user adoption 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 TON-based stablecoins for peer-to-peer payments and remittances. If stablecoins are natively integrated into Telegram, users could send funds seamlessly, as easily as Venmo or WeChat Pay, but with global reach. This convenience may accelerate mainstream adoption of stablecoins in underbanked areas.
TON's shard architecture allows it to achieve high scalability while maintaining low transaction fees, with the cost of a single transaction typically below $0.01. This cost-efficiency is crucial for micropayments and high-frequency retail use cases. For instance, stablecoins on TON can be used for tipping within Telegram communities, digital content payments, or small business transactions. Furthermore, the low cost of TON transactions makes it a strong contender in the global remittance market, especially in emerging economies. According to World Bank data, 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 costs 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 Features 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 provides the ability for high transactions per second (TPS), making Sui an ideal platform for DeFi applications that require high transaction speeds and reliability, such as lending, borrowing, or complex trading scenarios. Low latency also benefits stablecoin users who require instant settlement.
Use Case: High-frequency trading is an important component of DeFi, where stablecoins are crucial for rapid collateral swaps and liquidity provision. Sui's high throughput may attract institutional-grade DeFi protocols that rely on stablecoins, thus becoming 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 early applications centered around lending, decentralized exchanges (DEX), and asset management. Given that stablecoins are crucial for DeFi applications, Sui's focus on building a robust DeFi infrastructure may drive the demand for stablecoins as collateral, liquidity pools, or exchange mediums.
Institutional Interest: Sui's programmable infrastructure allows for customized compliance solutions, which could attract institutions seeking a secure, compliance-friendly environment for stablecoin trading. This capability may facilitate collaborations with regulated stablecoin issuers, enhancing credibility and attracting institutional interest.
Security and Flexibility Based on Move Programming Language
Sui utilizes the Move programming language, designed specifically for security and asset protection. Move's resource-oriented programming model minimizes the risk of errors and ensures a secure trading environment, appealing to both retail and institutional users. Enhanced security may make Sui a safe environment for high-value stablecoin transactions and complex DeFi protocols.
If Sui can capture 0.5-1% of the Ethereum stablecoin-driven DeFi market (valued at approximately $40 billion), it could bring an additional stablecoin market cap increase of $200 million to $400 million to the Sui ecosystem. Given Sui's current $800 million market cap, this surge in activity could elevate its valuation to over $1 billion, effectively doubling its market cap.
Meanwhile, Sui's architecture and compliance potential may attract institutional users who prioritize a stable and secure digital asset environment. If Sui becomes the preferred chain for institutional DeFi, it could see significant capital inflows, establishing its core position in the DeFi space alongside Ethereum and BSC.
The Value Proposition of Sui 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 and ensures the safe handling of digital assets in smart contracts. This makes Sui particularly attractive for institutional-grade stablecoin use cases that prioritize 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 assets division of global investment firm Franklin Templeton. This collaboration aims to support developers within the Sui ecosystem and leverage 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 through smart contracts. This institutional appeal and flexibility allow 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 an offer to buy or sell any securities. The content of this article should not be used as a basis for any investment decisions and should not be construed as 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 of the information contained herein may come from third parties, including companies invested in by funds managed by Aquarius. The opinions expressed herein 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/
