Stablecoins may have become the first "killer app" in crypto. As our latest State of Crypto report shows, stablecoins have achieved product-market fit as major scaling upgrades have significantly reduced costs. In March of this year, their trading volume reached an all-time peak of $1.82 trillion. But as the chart at the end of the article shows, stablecoin activity has a very low correlation with crypto market cycles - even if crypto trading volume fluctuates, its non-speculative organic use continues to grow widely and continuously.
Yet it’s easy to underestimate the potential of stablecoins without taking a closer look at their impact on users, builders, and businesses. As one of the few mediums of value other than cash and gold that don’t rely on centralized gatekeepers like payment networks and central banks, stablecoins are already one of the cheapest ways to transfer dollars (a $200 transfer from the U.S. to Colombia costs less than $0.01). But stablecoins offer more than just fee reductions: they are both permissionless programmable and scalable. This means that for the first time, developers can easily integrate globally accessible, fast, and nearly free stablecoin channels into their products while building new fintech features—something that companies from Stripe to SpaceX are already doing.
So how are stablecoins poised to disrupt the global payment industry? Which groups will benefit the most from their adoption? How should builders and companies consider this? This series summarizes the special articles and opinions on stablecoins released by a16z crypto, starting from the basic definition (and common misunderstandings) to the idea of reconstructing the monetary system based on first principles, to help you fully understand the evolution of this field.
1. Macro perspective: Stablecoins could become the “WhatsApp moment” of currency, making international transactions nearly free and instant
Stablecoins are our first real hope of doing to money what email did to communications: making it open, instant, and borderless.
Before apps like WhatsApp, sending text messages across borders cost 30 cents per message. Today, internet-based communications are instant, global, and free. Payments are where communications were in 2008: limited by borders, exploited by intermediaries, and expensive by design. Stablecoins can significantly improve this situation.
International remittance fees can currently be as high as 10% (the average cost of sending $200 in September 2024 was 6.62%). These fees are not just friction costs - they are essentially a regressive tax on the world's poorest workers. But businesses are also trapped by an inefficient global payments system. B2B payments on certain corridors take 3-7 days to clear, incur fees of $14 to $150 per $1,000 traded, and involve up to five layers of intermediaries that take a cut. Stablecoins can help bypass traditional systems such as the SWIFT international network and the associated clearing processes, making these transactions nearly free and instant.
This isn’t just theoretical — it’s already happening. Companies like SpaceX are using stablecoins to manage corporate funds (including repatriating funds from countries with volatile currencies like Argentina and Nigeria). Companies like ScaleAI are using stablecoins to pay employees around the world faster and at a lower cost.
2. Definition of Stablecoins: Two Types of Stablecoins and a Common Misjudgment
Now we need to clearly delineate the stablecoin landscape. An effective perspective for understanding the richness and limitations of the stablecoin design space is the history of banking: what worked, what failed, and why.
We expect stablecoins to accelerate the repetition of banking history. Similar to the evolution of U.S. currency, stablecoins began as simple tokens and then expanded their supply through complex lending. This history helps us establish a useful comparison between stablecoins and the banking system, helping builders avoid the pitfalls and inefficiencies of traditional institutions.
Currently, stablecoins are usually described in two dimensions: from undercollateralization to overcollateralization, and from centralization to decentralization. This classification helps to understand the relationship between technical structure and risk and clarify misunderstandings. On this basis, we define two types of stablecoins and a common misjudgment from the perspective of retail banks:
Fiat-collateralized stablecoins: The operating principle is equivalent to bank notes in the US National Bank era (1865-1913), and users can directly exchange tokens for trusted fiat currencies. The value of the token is anchored to the underlying currency, but its credibility depends on the reputation of the issuer and the convenience of redemption through exchanges such as Uniswap/Coinbase. Currently, this type of stablecoin accounts for more than 90% of the total supply.
Asset-backed stablecoins: A product of on-chain loans (i.e., CDPs), which imitate banks creating new money through lending similar to the fractional reserve system. When banks use mortgages, car loans, etc. to create money, lending protocols use on-chain tokens as collateral to generate such stablecoins. As economic elements continue to be put on the chain, it is foreseeable that: 1) more assets will become collateral for lending agreements; 2) such stablecoins will occupy a larger share of on-chain currencies.
Strategy-based synthetic dollars (SBSDs): denominated in $1 but representing a combination of collateral and investment strategies (such as yield generation or basis trading), which are fundamentally different from real stablecoins. SBSDs are essentially the dollar shares of open-ended hedge funds, which are difficult to audit and may expose users to centralized exchange risks and asset price fluctuations. Therefore, SBSDs do not have the core functions of stablecoins - reliable value storage and transaction medium.
We expect the on-chain dollar to continue to innovate to improve security, transparency, and capital efficiency…as the history of US banking has shown.
3. Increasing the adoption of stablecoins can significantly reduce corporate costs
Transaction fees eat into the bottom line of many companies. Reducing these fees through stablecoins will unlock huge profit margins for companies of all sizes. To illustrate this more vividly, we took the financial data of three public companies in fiscal year 2024 and simulated the impact of reducing payment processing costs to 0.1%. [To simplify the analysis, it is assumed that these companies currently pay a comprehensive payment processing cost of 1.6%, and the cost of fiat currency exchange channel is negligible.]
Walmart will realize $15.5 billion in profit on $648 billion in revenue in 2024, and its credit card processing fees may reach $10 billion. With cheaper payment solutions alone, Walmart's profitability can increase by more than 60%, assuming other factors remain unchanged.
4. Small and medium-sized enterprises will be the first to switch from credit cards to stablecoins
It’s easy to assume that the first adopters of stablecoins would be the most internet-based businesses, such as social platforms and paid games. But profit-margin-sensitive businesses—restaurants, coffee shops, corner stores, and other brick-and-mortar retailers—have more to gain by accepting stablecoins. These businesses are most affected by transaction fees, and they don’t benefit from many of the features provided by credit card companies that don’t justify the high fees.
For example: for every $2 a customer spends on a cup of coffee, the coffee shop collects only $1.70 to $1.80. Nearly 15% of that is paid to intermediaries like credit card companies and banks just to facilitate the transaction. But using a credit card here is all about convenience: neither the consumer nor the shop needs the extra credit card features that justify the high rates. For example, the consumer doesn’t need fraud protection (they’re just buying a cup of coffee) or a loan (the coffee is only $2). Coffee shops also have limited compliance and bank integration needs (they use comprehensive restaurant management software or none at all). So if there’s a cheap and reliable alternative, expect these businesses to take advantage of it.
Using stablecoins can help small businesses get back some of that profit. Of course, there is a cold start problem here: not many consumers are using stablecoins right now. But as people build connections with their local coffee shops and corner stores, strong local brands have the potential to drive more people to use stablecoins in the early adoption phase.
Fast-food chain Chipotle earned $1.2 billion in profit on $9.8 billion in revenue, and its credit card fees were about $148 million. Reducing payment processing fees would increase profit margins by 12%.
Kroger, the national supermarket chain, would benefit the most because its profit margin is the lowest (less than 2% like most grocers), and its net profit is almost equal to the payment cost. Using stablecoins for payment could double its profits.
Note: Retailers and payment processors are not in opposition here, they are fighting against high-fee payment schemes together. Payment processors themselves are also low-profit businesses, and most of their profits need to be transferred to card organizations and issuing banks. For example, Stripe charges 2.9% of the transaction amount plus $0.3 when processing online retail payments, but more than 70% of it needs to be transferred to institutions such as Visa.
Stablecoin transactions create higher profit margins for payment processors—low fees and no need to pay network gatekeepers. The first signs of this are already here: Stripe charges only 1.5% for stablecoin payments (more than 50% less than credit card rates). To this end, the company acquired its largest-ever target—the stablecoin-based payment platform Bridge.xyz.
As more payment processors such as Block (formerly Square), Fiserv, and Toast adopt stablecoins, competition will not only drive fees down, but will also make stablecoins more accessible to a wider range of businesses.
5. Beyond Payments: Stablecoins as Public Goods Will Give Birth to New Software Categories
Traditional finance is built on private, closed networks. The Internet has shown us the power of open protocols (such as TCP/IP and email) to drive global collaboration and innovation.
Blockchains are the native financial layer of the internet. They combine the composability of public protocols with the economic power of private enterprise, with trusted neutrality, auditability, and programmability. When you add stablecoins into the mix, we get an unprecedented open money infrastructure. Think of it as a public highway system - private companies can still build vehicles, operate businesses, and develop roadside services, but the roads themselves are neutral and open to everyone.
Stablecoins have the potential to revolutionize the payments industry (for all the reasons listed above), but they are not just a tool to reduce fees, they also enable new types of software:
Programmatic payments between machines: Imagine a market driven by AI agents automatically matching transactions for services such as computing resources
Micropayments for media, music, and AI: Imagine setting a budget through simple rules, with payments automatically executed by a “smart” wallet
Transparent payments with full audit trails: Imagine a government using this type of system to track public spending
Global commerce without redundant intermediaries: international transactions can now be settled instantly at near zero cost
The time is ripe for blockchain networks and stablecoins: technology, market demand, and political will are converging to make these applications a reality. Cryptocurrencies are ready to cross the chasm — from financial experiments for the few to infrastructure pillars for the many, and stablecoins are leading the charge.
6. Decentralized stablecoins are the foundation of digital native currencies
Stablecoins allow digital financial system designers to reimagine money from first principles. One of the core principles is control: which people and institutions create money and control the money supply.
Today’s monetary system is built on a tightly intertwined relationship between the Treasury, the central bank, and commercial banks. Over time, this system has revealed fundamental flaws—from poor risk management to ineffective governance to its inability to meet the demands of an increasingly digital economy.
As mentioned above, stablecoins have the potential to revolutionize the entire financial intermediation system. However, when prioritizing the functional advantages of stablecoins (such as low-hanging fruit use cases with obvious pain points such as international payments), many centralized stablecoins still rely on existing traditional systems for reserves and currency creation, and naturally inherit the deep-rooted inefficiencies and vulnerabilities in these systems.
Decentralized stablecoins that maintain price pegs through algorithms can do better. Overall, decentralized finance (DeFi) has several advantages over traditional financial frameworks:
Enhanced resilience: Decentralized stablecoins reduce single points of failure and systemic risk by being issued through a distributed network
Improved transparency: real-time on-chain verifiable asset reserves, allowing system designers, market participants and regulators to better oversight
Higher efficiency: DeFi’s inherent modularity and programmability improve capital efficiency and specialization, reversing the trend of traditional finance towards centralized profit grabbing
Future-proof: As a digital native financial tool, decentralized stablecoins are more suitable for seamless development and deployment of consumer financial applications than outdated banking APIs
Decentralized stablecoins are creating a new type of reliable, efficient, and trustless system where anyone can issue highly transparent forms of money in a permissionless or semi-permissionless manner. These systems aim to rebuild checks and balances, allowing users to trust the value behind their dollar balances, directly linking assets (i.e. reserves) to liabilities, and thus helping to create truly digital native currencies.
