Author: @HadickM
Translation: Plain Language Blockchain
Recently, I have received many questions about the future development direction of the stablecoin market and which areas will be the most valuable. Therefore, I am sharing some rough thoughts here.
To analyze the market clearly, I have divided it into several categories - more refined than most of the frameworks out there (though not as complex as the market map by @artemis__xyz). The reason for this division is that the payment system itself is very complex and detailed. It is particularly important for investors to understand the role and ownership of each link, as many people often overlook the subtle differences. These categories include:
(1) Settlement Network
(2) Stablecoin Issuers
(3) Liquidity Providers
(4) Value Transfer/Payment Services
(5) Aggregator API/Messaging Platforms
(6) Merchant Payment Gateways
(7) Stablecoin-Driven Applications
You may ask: why divide into so many categories, especially when I haven't even covered core infrastructure like wallets or third-party compliance? The reason is that each field has its own unique "moat" and different ways of capturing value. Although there may be overlaps between different providers, understanding the unique value of each part is crucial.
Here are some of my thoughts on the future value distribution:
1. Settlement Network
The core of this field is network effects, including deep liquidity, low fees, fast settlement times, stable uptime, and built-in compliance and privacy protection. This field is expected to form a "winner-take-all" market pattern. Personally, I believe that general blockchains will have difficulty meeting the scale and standards of mainstream payment networks. In the future, it is more likely that extensions of general chains or second-layer solutions will play a role. But more importantly, we need solutions tailored for payments. The winners in this field will be very valuable and may focus on the stablecoin and payment sectors.
2. Stablecoin Issuers
Currently, issuers like @Circle and @Tether_to are already obvious winners, mainly benefiting from strong network effects and high interest rates. But in the future, if they continue to operate like asset management companies rather than payment companies, they will face development bottlenecks. They need to invest in the following areas: fast and reliable infrastructure, high-standard compliance systems, low-cost minting and redemption processes, integration with central banks and core banks, and better liquidity management (like what @withAUSD is doing).
While "stablecoin-as-a-service" platforms (like @Paxos) may spawn many competitors, I still believe that neutral non-bank or fintech company-issued stablecoins will become the biggest winners, as the competitive environment allows transactions between closed systems to rely on a trusted neutral third party. Stablecoin issuers have already accumulated a lot of value, but to continue to succeed, they must break through the limitations of simply issuing.
3. Liquidity Providers (LPs)
Current liquidity providers are usually over-the-counter (OTC) platforms or trading platforms. These institutions are either large successful cryptocurrency companies or some small companies with insufficient competitiveness, who have turned to focus on the stablecoin business. This field appears highly homogeneous, with low pricing power. The moat is mainly reflected in low-cost capital acquisition, stable uptime, and deep liquidity and wide trading pairs. In the long run, large players may dominate this field, and I believe liquidity providers focused on stablecoins will have difficulty establishing strong and lasting competitive advantages.
4. Value Transfer/Payment Services (the "PSP" of the stablecoin realm)
These platforms are sometimes also called "stablecoin orchestration" platforms, such as @Stablecoin and @ConduitPay. They build competitive advantages by having dedicated payment networks and direct relationships with banks (rather than relying on third-party providers). The moats of these companies are: strong banking relationships, flexibility in handling multiple payment forms, global coverage, liquidity advantages, stable uptime, and high-level compliance capabilities.
Although many companies claim to have these capabilities, there are few that truly have dedicated infrastructure. The winners in this field will have some pricing power, forming regional duopolies or oligopolies, and will develop into large-scale enterprises while complementing traditional payment service providers.
5. Aggregator API/Messaging Platforms
These platforms often claim to be doing the same thing as Payment Service Providers (PSPs), but in reality, they only encapsulate or aggregate APIs and do not directly bear compliance or operational risks. More accurately, they are marketplaces for PSPs and Liquidity Providers (LPs). Although they can currently charge high fees, these fees will be squeezed (or even completely replaced) over time, as they do not handle the "pain points" of payment flows or infrastructure building. They often refer to themselves as the "Plaid of the stablecoin realm," but they overlook the fact that blockchain has already solved many of the core issues that Plaid dealt with in traditional banking/payments. Unless these platforms get closer to end-users and take on more functions in the technology stack, they will have difficulty maintaining profit margins and business growth.
6. Merchant Gateways/Payment Channels
Companies in this field help merchants and businesses accept stablecoin or cryptocurrency payments. They sometimes overlap with PSPs, but more often provide convenient developer tools, integrate third-party compliance and payment infrastructure, and package them into user-friendly interfaces. Their goal is to become something like Stripe, winning the market through easy integration, and then expanding horizontally. However, unlike Stripe's early days, developer-friendly payment options are now ubiquitous, and "distribution capability" is the key. Traditional payment companies can easily partner with orchestration companies to add stablecoin payment options, making pure crypto payment gateways hard to carve out their own market. Although companies like Moonpay or Transak once had strong pricing power, I don't believe this advantage will last. In the B2B space, companies that provide unique software features for large-scale stablecoin use or asset management may still have a chance to succeed, but in the B2C space, it is more likely to be a failure. Overall, this field faces huge challenges.
7. Stablecoin-Driven Fintech and Applications
Today, building a "new-style bank" or "fintech" application with stablecoins at the core is easier than ever, so this field will be fiercely competitive. The eventual winners will depend on distribution capability, market entry ability, and product differentiation, just like traditional fintech. However, when well-known brands like Nubank, Robinhood, and Revolut can easily add stablecoin features, startups will have a hard time standing out in developed markets, especially when their differentiation is merely "stablecoin-driven finance".
In emerging markets, there may be more opportunities (for example, the case of @Zarpay_app), but in developed markets, startups relying solely on stablecoin features are likely to fail.
Overall, I expect the failure rate in this field to be extremely high, and consumer crypto/stablecoin startups will face huge challenges. However, enterprise-focused solutions may still have a chance to carve out a niche market.
Of course, this does not involve some edge cases and cross-fields. But this framework provides guidance for us as investors to delve deeper into this field. If you have any feedback, feel free to share it.
Link to this article: https://www.hellobtc.com/kp/du/12/5578.html
Source: https://x.com/HadickM/status/1866101987021836289
