Chapter 1: Overview of Stablecoins
Stablecoins are a type of digital currency pegged to a specific asset (such as fiat currency, commodities, or other crypto assets), with the core goal of providing a relatively stable store of value and medium of exchange in the highly volatile cryptocurrency market. Compared to mainstream crypto assets like BTC or ETH, stablecoins significantly reduce price volatility, giving them unique advantages in global payments, cross-border transactions, and DeFi.
The concept of stablecoins can be traced back to the early development of the cryptocurrency industry. After BTC gradually became the dominant force in the digital asset market, people began to realize that its severe price fluctuations seriously hindered its application in daily payments. While BTC's decentralized and censorship-resistant characteristics are important, its rigid supply (21 million coin limit) and market sentiment-driven price volatility make it difficult to serve as a stable measure of value. Therefore, the introduction of stablecoins essentially corrects BTC's limitations, providing a stable pricing and trading tool while maintaining decentralization advantages.
The design mechanism of stablecoins determines their stability and market acceptance. The most common stablecoins are fiat-collateralized stablecoins (such as USDT, USDC, TUSD), whose value is supported by US dollar or other fiat currency reserves, meaning that for each stablecoin issued, a corresponding amount of US dollars is stored in a bank account or other regulated institution. The advantage of this model is its high transparency, allowing users to easily verify the adequacy of its reserve assets, and within legal and regulatory frameworks, such stablecoins can gain widespread recognition.
However, fiat-collateralized stablecoins also have some drawbacks. First, they still depend on the traditional financial system, requiring banks or financial institutions as reserve custodians, which to some extent weakens their decentralized characteristics. If regulators decide to block a stablecoin's bank account, the stablecoin's stability may be impacted. Additionally, this model has high operating costs, requires regular audits, and may face liquidity crises in extreme market conditions.
In comparison, crypto asset-collateralized stablecoins (such as Dai) provide a more decentralized solution. The value of these stablecoins is backed by over-collateralized crypto assets (such as ETH), typically requiring users to deposit assets in a smart contract that are worth more than the stablecoins being issued to ensure stability. For example, to mint 100 USD of Dai, a user might need to pledge 150 USD of ETH. The advantage of this mechanism is that it does not rely on bank accounts and runs entirely on the blockchain, thus having stronger censorship resistance. However, it also carries certain risks—if the collateral asset's price drops sharply, the smart contract may force liquidation of some assets to maintain Dai's stability, potentially causing losses to user funds.
Besides fiat-collateralized and crypto asset-collateralized stablecoins, there are algorithmic stablecoins (such as UST, Frax) that use mathematical models and market adjustment mechanisms to maintain coin value. For example, some algorithmic stablecoins use a dual-token system, where one token (like UST) serves as the stablecoin, while another token (like LUNA) absorbs market fluctuations. When UST's price falls below 1 USD, users can burn UST to exchange for LUNA, thereby reducing UST's supply and pushing up its price; conversely, when UST's price rises above 1 USD, users can exchange LUNA for UST, increasing UST supply and lowering the price. However, algorithmic stablecoins carry significant risks, as their stability depends on market confidence, and a large-scale sell-off could trigger a death spiral, causing the stablecoin to completely collapse, as demonstrated by the UST crash in 2022.
In terms of market scale, stablecoins have become an important component of the cryptocurrency market. According to the latest data, the global stablecoin market capitalization has reached billions of dollars, with USDT (Tether) and USDC (Circle) dominating the market. Stablecoin trading volume has even surpassed many mainstream crypto assets, as they are used not only for hedging risks but also widely applied in payments, lending, decentralized exchange (DEX) liquidity provision, and other areas. The widespread use of stablecoins has made them a "lubricant" in the crypto economy, driving the development of the entire ecosystem.
The success of stablecoins is not accidental but responds to the needs of the global payment market. Traditional cross-border payment systems involve high fees, slow settlement times, and complex intermediary processes, while stablecoins based on blockchain technology can achieve low-cost, real-time global transfers. For example, international remittances through traditional banking systems might take days and incur high fees, whereas using stablecoins for the same transfer is almost instant and costs only a few cents. Moreover, in regions with capital controls or unstable banking systems, stablecoins have become an important hedging tool.
Chapter 2: How Stablecoins Restructure the Payment Industry
The rise of stablecoins is profoundly changing the global payment industry. As a bridge between blockchain and traditional financial systems, stablecoins provide an efficient, low-cost, borderless payment method, gradually replacing some functions of traditional payment systems, especially playing an increasingly important role in cross-border payments, corporate settlements, e-commerce, remittances, and salary payments. The success of stablecoins is not just due to technical advantages but precise solutions to existing payment system pain points.
2.1 Pain Points of Traditional Payment Systems
In traditional payment systems, fund flows often require multiple intermediary institutions, such as banks, payment processors, and clearing institutions. Each intermediary charges a fee, resulting in high overall payment costs. For example, credit card payments typically charge 2% to 3% transaction fees, while international wire transfers can cost up to 20 to 50 USD or more. Additionally, third-party payment platforms (like PayPal, Stripe) may charge an extra 2.9% to 4.4% fee when processing international transactions, and with currency exchange fees, global payments become expensive. On the other hand, cross-border payments usually take days or even a week to complete, due to traditional banking systems relying on centralized clearing networks like SWIFT and ACH, which require significant time for transaction verification, fund clearing, and compliance review. For instance, a cross-border transaction from the US to Africa might involve multiple institutions—US banks, international clearing banks, local banks—with each institution conducting KYC (Know Your Customer) and AML (Anti-Money Laundering) reviews, increasing transaction time and uncertainty.
Currently, over 1.5 billion people worldwide lack bank accounts or basic financial services (the "unbanked" population), primarily distributed in developing countries and remote regions. These groups struggle to access international payment systems and conduct e-commerce transactions, wage payments, or cross-border remittances due to factors like lack of credit history, geographical restrictions, and government policies. International payments involve currency exchange, and exchange rate instability can increase transaction costs, especially in countries with high inflation. For example, in countries like Argentina and Venezuela, where local currencies rapidly devalue, businesses and individuals often incur additional foreign exchange conversion fees and economic losses from exchange rate fluctuations.
Traditional payment systems are strictly controlled by national regulations, especially regarding anti-money laundering (AML) and know-your-customer (KYC) policies. For some economically sanctioned countries or regions, international payment channels may be completely blocked, making it difficult for businesses and individuals to conduct legal transactions. For instance, companies in Iran and North Korea cannot use the SWIFT network, and some countries impose strict regulations on cryptocurrency transactions, limiting global fund mobility.
2.2 Payment Advantages of Stablecoins
Stablecoin payments do not rely on traditional banking systems but are based on blockchain peer-to-peer networks, bypassing expensive intermediaries to achieve lower-cost transactions. For example, using USDT (TRC-20 version on the TRON chain) for cross-border transfers can cost as little as $0.1, compared to traditional bank wire transfer fees of $30-50, which also take several days to process. Stablecoin payment confirmation times are typically between a few seconds to minutes, significantly improving fund liquidity.
Another core advantage of stablecoins is financial inclusivity. Anyone with internet access and a digital wallet can create a cryptocurrency account and begin global payments. This model dramatically lowers financial access barriers, enabling the global unbanked population to access payment and deposit services. Particularly in Africa, Southeast Asia, and Latin America, stablecoins have become an important tool for combating local currency inflation.
Compared to cryptocurrencies like BTC and ETH, stablecoins have minimal price volatility because their value is typically pegged 1:1 with the US dollar or other fiat currencies. For instance, stablecoins like USDC and USDT usually fluctuate no more than ±0.5%, far lower than high-volatility assets like Bitcoin. This makes stablecoins a reliable payment medium that merchants and consumers can confidently accept without worrying about sudden value drops.
Stablecoins based on blockchain smart contracts enable automated payments and programmable fund management. For example, companies can use stablecoins for smart contract salary payments, automatically distributing wages to employees monthly; cross-border trade companies can set conditions to trigger payments upon goods delivery. The programmable payment feature gives stablecoins significant potential in supply chain finance and smart settlement areas.
[The translation continues in the same manner for the remaining text, maintaining the specified translations for specific terms.]Here's the English translation: First, the anonymity of stablecoins poses potential compliance risks in cross-border payments. Although the decentralized nature of stablecoins provides high privacy protection, it also makes them easily used for illegal activities such as money laundering and terrorist financing. To address this issue, regulatory agencies require stablecoin issuers to comply with strict policies to ensure the authenticity and compliance of user identity information. For example, the U.S. Financial Crimes Enforcement Network () requires stablecoin issuers to register as and fulfill related anti-money laundering obligations. Secondly, the transparency of stablecoins has been a focus of regulatory agencies, especially for fiat-collateralized stablecoins. Since these stablecoins' value is backed by custodied fiat currency reserves, stablecoin issuers must conduct regular financial audits and disclose specific reserve details to ensure each stablecoin is supported by an equivalent amount of fiat currency. Otherwise, market trust in stablecoins will be questioned, potentially causing market instability. To address this, some stablecoin issuers have taken proactive measures, such as collaborating with
