By Paul Timofeev, 0xyanshu Source: Shoal Research Translator: Shan Ouba, Jinse Finance
The way we move money has been evolving, from barter to gold, to paper money and digital dollars. As stablecoins increasingly consume global payments and permeate other financial services, purpose-built infrastructure for stablecoins becomes crucial. In this report, we explore how Plasma can build the global rails for the future of money.
The evolution of the digital dollar
Money rarely stands still, and neither do the ways we move it.
Transferring value from one person to another is so fundamental and timeless. When ancient herders needed grain or tools, they traded their cattle and sheep. If a medieval farmer needed a pair of shoes, they would take sheaves of wheat to the local village market. Over time, as it became clear that carrying bulky objects and livestock was inconvenient, people turned to precious metals like gold and silver. But these soon became impractical, and precious metals were melted down into coins, which eventually gave way to paper money, IOUs, and banknotes. As technology became an increasingly important part of our daily lives, the way money moved accelerated.
Today, a person in the United States can send digital dollars to a friend in Peru or Thailand in seconds, paying just a penny. They can't do this through their local bank or Western Union; this borderless, low-cost, near-instant money movement is made possible by stablecoins.
Stablecoins are digital dollars issued and transferred on blockchain rails. They provide a stable unit of exchange in digital form: just as anyone with an email address or WhatsApp can communicate instantly around the world, stablecoins enable anyone with internet access to move money around the world.
Trillions of dollars have been transferred through stablecoins. Their supply continues to grow and reach new all-time highs. While stablecoins are not new, their adoption has recently surpassed many expectations.
What’s impressive is that stablecoins aren’t just growing. They’re already eroding traditional payment networks.
At Shoal, we believe that stablecoins will inevitably move beyond payments and into other financial services, ultimately disrupting consumer banking, lending, B2B settlements, payroll systems, and more. But this all begs the question: what’s so special about these digital dollars?
The value proposition of stablecoins
“Tools can be created that allow end users to create currency protocol layers with stable values, pegged to external currencies or commodities. In this way, users of these currencies can own stable virtual currencies that are pegged to dollars, euros, ounces of gold, barrels of oil.” — Mastercoin Whitepaper (2012)
Fundamentally, stablecoins are digital assets programmed to maintain the value of the underlying asset to which they are pegged. Most commonly, stablecoins are pegged to a fiat currency, particularly the US dollar (which is why we call them digital dollars). To maintain this peg and stable value, stablecoin issuers implement specific mechanisms to ensure that each stablecoin is backed 1:1 by its underlying asset. The most common approach is to hold cash and short-term US Treasury bonds as reserves to match the circulating supply of stablecoins. For each new stablecoin minted, users deposit US dollars with the issuer. These funds are held at regulated financial institutions and custodians. When a stablecoin is redeemed, an equivalent amount of funds is withdrawn from these reserves and returned to the redeemer, and the corresponding stablecoin supply is removed from circulation, or "burned."
A quick side note: There are other stablecoin pegs, some of which are represented by founding stablecoin protocols like Maker DAO (now Sky), which established a CDP protocol that allowed anyone to borrow DAI. Conversely, there are also examples of disastrous failures like Luna/UST, which wiped out tens of billions of dollars in value. Stablecoin design in general is a fascinating rabbit hole, but it's worth remembering that over 80% of the stablecoin supply is USDT and USDC, both of which are dollar-backed stablecoins maintained and operated by centralized issuing entities.
The value proposition of stablecoins is far from one-dimensional:
Global, 24/7 Settlement : Stablecoins can be transferred globally at any time of day, any day of the week. They operate on blockchain rails and are designed to settle in minutes or even seconds. For reference, traditional transfer systems like ACH or international wire transfers typically take days to clear and can only be processed during limited business hours, with further delays on weekends or holidays.
Superior user experience : Stablecoins offer an experience superior to traditional payment systems based on the simplicity of speed and cost . On some chains, stablecoin transfers can be settled in seconds. Traditional systems like ACH or wire transfers can take from hours to multiple business days.
Stablecoins are also several times cheaper than traditional payment networks. Stablecoin transactions are simply reallocations of balances on a digital ledger. The primary resource consumed is the computational power required to update these balances, paid for in the form of transaction or gas fees . Today, as low-cost transactions have become a requirement for most chains, gas costs are approaching zero.
By contrast, a wire or ACH transfer involves multiple intermediaries—the sending bank, the receiving bank, the clearing house—all of which impose significant fees on the funds being transferred. Traditional cross-border transfers still carry an average fee of 6.49%.
It’s important to note that while stablecoins offer near-instant, low-cost on-chain transfers, transferring funds off-chain to a bank account or cash, known as “withdrawing,” can still involve traditional fees, foreign exchange spreads, and delays. Overall, however, even with this final step, stablecoin-based transfers are still significantly faster and cheaper than today’s traditional networks.
Permissionless Global Access : Stablecoins essentially democratize access to stable currencies like the US dollar. Anyone with an internet connection can send, receive, and hold stablecoins, regardless of whether they have a bank account or access to financial services. Despite growing global financial inclusion, over a billion adults remain unbanked, lack access to formal financial services, and are often excluded from the digital economy. Meanwhile, many countries continue to face hyperinflation and currency devaluation. By providing permissionless, global access to the US dollar, stablecoins provide a financial lifeline for residents of these developing regions.
Programmability : Because stablecoins are built on blockchain rails, they exist as smart contract tokens. Put more simply: they're code. This unique design means that specific conditions and regulations (such as settlement rules, transfer restrictions, and so on) can be programmed directly into the asset itself. This programmability helps streamline operations, as it's much easier and more predictable than anticipating human error. And because the crypto-native economy is a federation of open, permissionless protocols, stablecoins can naturally integrate with and enhance nearly any application built on a public blockchain: earning yield through lending or providing liquidity, serving as collateral to borrow other assets, using them as margin for perpetual contracts, betting on quirky prediction markets, and so on.
Localized, organic PMF
Stablecoins, unlike most other blockchain-native innovations, have stood the test of time because there has always been organic demand for them. Their history is largely defined by organic adoption sparked by clear catalysts at each chapter.
A trader's best friend
Stablecoins first gained traction among traders looking for an easy way to transfer value between volatile positions without withdrawing fiat. In the early 2010s, there was little else to do besides trade Bitcoin, but traders lacked an easy way to park their funds between exchanges.
An early mention of the concept of a stablecoin first appeared in the Mastercoin whitepaper and entered production in 2014 with the launch of Realcoin (now known as Tether).
USDT was initially issued on Bitcoin via the Omni Layer and offered through exchanges like Bitfinex. When it launched, USDT brought a new level of utility to crypto traders: the ability to transfer funds between assets, stabilize exposure to volatility, and execute more complex trading strategies without having to transfer to fiat and then back to crypto. However, given its niche audience, its adoption has been quite limited.
Global access to stablecoins
As stablecoins mature, their impact extends far beyond speculative markets. In countries plagued by hyperinflation, where local currencies can plummet overnight, the value of stablecoins like the US dollar is hard to underestimate. And today, the best way to obtain US dollars is through stablecoins.
Some notable data points:
In 2024, stablecoin purchases accounted for >4% of Türkiye's GDP.
In 2024, Argentina ranked first in Latin America in stablecoin trading volume share, with over 61% of the region's crypto trading volume attributed to stablecoins.
From June 2024 to June 2025, the amount of stablecoin transactions in the Asia-Pacific region alone reached US$2.36 trillion.
Sub-Saharan Africa (SSA) sees $205 billion in on-chain value growth in 2025, reflecting a 52% year-over-year increase in cryptocurrency adoption starting in 2024.
As a result, stablecoins have become an important tool for personal savings, payments, and remittances for millions of people across Latin America, Africa, and much of Asia.
The reserve currency's best friend
As stablecoins spread across emerging markets, their role in entrenching the dollar's global dominance has become clear. However, while the value of access to a digital dollar is self-evident in emerging economies, it's more difficult to demonstrate in the West, particularly in the United States. Most Americans have savings accounts. They can send money instantly through apps like Venmo. Few lose sleep over the fear of a 20-30% overnight devaluation of the dollar.
The most compelling reason for U.S. policymakers to support stablecoins is geopolitical : to bolster the dollar’s global dominance . The U.S. has long leveraged the dollar’s reserve currency status to maintain its global financial power, most commonly through the petrodollar system.
Today, that opportunity lies in stablecoins. The idea is simple: USD stablecoins, nearly all of which are backed by cash and short-term U.S. Treasury bills, require real dollars in reserve for each token issued. Every stablecoin minted is a new dollar that someone overseas chooses to hold, and therefore a new source of demand for U.S. government debt.
Arguably, the US has no choice but to embrace stablecoins at this point. In the fourth quarter of 2024, Tether ranked as the seventh-largest foreign buyer of US Treasury bonds, surpassing countries like Canada and Mexico in annual flows. Tether's latest stablecoin report confirmed that it holds over $127 billion in US Treasury bonds, making it one of the largest non-sovereign holders of US government debt.
This dynamic is already reshaping policy. The United States recently passed the landmark GENIUS Act , which for the first time establishes a regulatory framework for the issuance of stablecoins within the United States. Unsurprisingly, the GENIUS Act requires that dollar-denominated stablecoins be fully backed by U.S. assets, provide monthly reserve disclosures, and undergo independent third-party audits. This helps reinforce the flywheel effect of stablecoins on debt financing: each newly minted token effectively creates another buyer for U.S. debt, making stablecoin adoption a powerful strategic tool for maintaining the dollar's dominance. Treasury Secretary Scott Bessent has publicly stated, "We will maintain the United States' position as the world's dominant reserve currency, and we will use stablecoins to achieve that goal."
In short, USD stablecoins are evolving from mere crypto products into key tools of US geopolitical strategy, which means the US government is highly motivated to see the adoption of USD-backed stablecoins continue to grow from here on out.
Today’s Stablecoin Landscape
These organic catalysts have helped shape and accelerate the adoption of stablecoins to this day. But to better understand where stablecoins are headed, it’s necessary to zoom out and examine the landscape where they currently exist.
In the last 30 days only:
Stablecoins processed $3.2 trillion in transactions
On-chain stablecoin transactions reached 1.2 billion
41.4 million addresses interacted with stablecoins
The total stablecoin supply continues to reach new all-time highs, exceeding $291 billion today. USDT accounts for approximately 58% of the total supply and has maintained its dominance for years.
Another important aspect of today’s stablecoin landscape is the distribution of stablecoins across different chains. Just as stablecoin supply is dominated by USDT, the distribution of stablecoins across chains is also dominated by Ethereum, which currently holds approximately 55% of the total supply, as is the total stablecoin transaction volume.
That being said, it’s important to recognize that there are more subtleties here that deserve attention.
Ethereum's dominance, while not to be underestimated, is largely historical. The first stablecoins like USDT, USDC, and DAI were all on Ethereum because there were no other blockchain rails available at the time for issuing and growing a programmable digital dollar. As liquidity deepened on Ethereum, it created a durable moat that persists to this day.
But the nuances start to emerge when we consider specific use cases: how stablecoins are used on their respective chains .
For example, if we look at the data for pure peer-to-peer transaction volume (which we can map to payments), it's clear that Tron has steadily grown and become the preferred choice. This isn't surprising to anyone who has actually used either blockchain; transactions on Tron are cheaper and faster. They're more accessible to everyday users, and the data reflects this.
In short, the stablecoin landscape is vast and expanding, but remains highly concentrated in specific stablecoins on specific chains. At first glance, the winners and losers appear to be well-defined. However, current infrastructure challenges and pain points suggest otherwise.
Current challenges and pain points
Despite the scale and adoption of stablecoins, today’s stablecoin rails are not designed to serve global payment networks outside of crypto-native rails. In particular, today’s stablecoin infrastructure falls short in three key areas: performance at scale, a practical user experience, and integration infrastructure with fiat rails.
Performance at scale
Since the Ethereum L1 gas fee wars, standards for chain performance and network capacity have made significant progress. Stablecoin transfer fees on L1, which could reach tens of dollars during peak network congestion, have now dropped significantly and stabilized. Even so, most public blockchains still lag behind traditional payment networks in terms of scalability and uptime. Ethereum and its L2 average approximately 244 daily transactions per second (TPS). Solana typically processes 2,000-3,000 TPS per day, having previously peaked at 4.8,000 (although the nuances between voting and non-voting transactions must always be noted). However, global payment networks are designed to support tens of thousands of TPS and cannot afford downtime even during peak congestion.
There are many promising developments to improve this. From the rise of application-specific perpetual contract DEX chains to Solana's Firedancer and Alpenglow, to the performance improvements Monad and MegaEth are expected to offer, and the rise of SVM L2. However, none of these are specifically focused on stablecoins. Stablecoin transfers on these chains still compete for more block space with swaps, perpetual contracts, and everything else users can do on these chains as network activity and adoption expand.
User Experience
While on-chain transactions are much faster than settling through banks, the user experience remains clunky. Boston Consulting Group’s 2025 Stablecoin Report cited “gas token management for transaction fees” and fragmented liquidity as key technical barriers facing retail and corporate users when using stablecoins for payments.
The most obvious and easily solvable problem is gas token friction: someone receiving USDC on Ethereum or Solana will themselves need ETH or SOL to transfer or spend their funds. For new users, onboarding remains impractical.
Liquidity is another challenge. Stablecoin supply is currently fragmented across hundreds of chains, making it more difficult to transfer large amounts or guarantee instant conversion back to fiat outside of Ethereum. This fragmentation also dilutes network effects, forcing users and institutions to deal with bridges, gas tokens, and liquidity sources rather than relying on a single, unified market for liquidity.
Privacy is also lacking in today's stablecoin infrastructure. Public blockchains expose transaction details by default. While privacy-preserving applications exist, users must specifically seek them out and use them. There's no integrated "switch" to enable private transactions. This means that everyday payments made with stablecoins are far less transparent than with cash or even traditional banking. For individual consumers, this may simply feel like an invasion of privacy. For businesses and financial institutions, however, it's simply unacceptable.
The on-chain user experience has improved significantly, but there is still room for improvement.
Lack of integrated infrastructure
An underappreciated challenge facing today's stablecoin rails is the lack of integration infrastructure, particularly with fiat rails. Sending USDT to a friend isn't the same as spending it at the grocery store. Indeed, when users try to transfer between blockchain rails and local payment systems, they still face foreign exchange spreads, hidden fees, and compliance bottlenecks.
Withdrawals involve using centralized exchanges or other intermediaries, which require users to create accounts, often undergo KYC verification, and pay service fees. This becomes even more cumbersome for cross-border transactions, which often introduce more intermediaries and foreign exchange spreads, further eroding the amount transferred.
Until stablecoins are seamlessly integrated into fiat rails, they will be very useful for transferring value between cryptocurrencies but will remain largely impractical for mainstream global payments.
So where do we go from here?
Stablecoins have crossed the chasm. They are no longer a niche byproduct of the crypto market. They process trillions of dollars in transaction volume annually, sometimes even monthly, and are already powering crypto trading, DeFi, and peer-to-peer markets in emerging economies.
But this level of adoption, while significant, is different from the requirements needed to serve as the backbone of global financial rails. Settlement systems like VisaNet, SWIFT, and ACH operate under stricter requirements: near-instant finality, reliability, and a unified compliance framework across diverse jurisdictions. Stablecoins already transfer enormous sums, but the chains they run on were never designed to consistently meet these standards globally.
One solution is to wait for general-purpose chains to develop and harden into payment-grade infrastructure. Another is to embrace infrastructure built specifically for stablecoins.
Infrastructure built specifically for stablecoins
Almost every major industry where reliability, risk management, and performance are imperatives is built around specialized, purpose-built infrastructure.
Global payment networks like Visa and SWIFT are purpose-built to securely move money around the world, operating in isolated environments optimized for data integrity, regulatory compliance, and uptime. In cloud computing, financial institutions and research centers don't use AWS or Google Cloud; they still rely on purpose-built setups built to handle massive amounts of physical data. In finance, high-frequency trading firms collocate their servers with exchanges' matching engines because general-purpose infrastructure can't provide the latency and reliability required in markets where every millisecond counts. In fields like healthcare, insurance, or finance, large language models (LLMs) trained using industry-specific data consistently outperform their general-purpose counterparts in terms of accuracy, error rates, and regulatory compliance.
The world of cryptography is no different. The standards crucial to the internet's expansion—RSA for secure communications, SSL for browser authentication, and ECDSA for digital transactions—were all purpose-built for a single task: protecting and authenticating data between two parties online.
Stablecoins are now at that inflection point.
Application of application chain theory
Blockchains follow the same logic. As applications gain traction and scale, the limitations of general-purpose chains become apparent. Unpredictable gas fees, throughput caps, compliance gaps—the list goes on. In response, applications are increasingly motivated to launch their own chains.
We're already seeing this happening: decentralized exchanges like Osmosis, dYdX, and most recently Unichain; gaming and NFT platforms like Immutable; and data networks like Python have all adopted some form of the Lisk model. This theory, originating in Cosmos, posits that applications should have sovereign blockspace optimized for their needs while still being able to interoperate with the broader ecosystem.
When a chain is purpose-built, it can deliver deterministic performance and predictable pricing, unconstrained by extraneous blockspace requirements. It can embed compliance procedures, disclosures, and risk management tailored for regulated products. It can directly align economic incentives, governance, and value capture with the needs of its user base and community.
Application-specific infrastructure allows chains to break free from a one-size-fits-all environment, enabling greater customization, enhanced performance, and a better user experience. Given the trajectory of stablecoin adoption, we believe it's only a matter of time before stablecoins require similarly specialized infrastructure. Plasma is one of the first teams building directly toward this vision.
Plasma: A blockchain built specifically for stablecoins
Plasma is a new layer 1 specifically designed for stablecoin liquidity. It combines a custom consensus protocol, an EVM-compatible execution layer, and specialized smart contracts to support high performance at scale, while publishing the state root to Bitcoin via a native Bitcoin bridge for security.
Plasma's mission is simple: to transform the way money flows globally through specialized stablecoin infrastructure. Just as TCP/IP enabled the internet to become a global information hub, Plasma aims to empower stablecoins to become a global payment hub.
Plasma aims to solve the pain points of today’s infrastructure — performance, user experience, and integration — through its core features:
Day 1 Liquidity : Plasma will launch with native USDT and $2 billion in day 1 stablecoin liquidity.
Zero-fee USDT transfers : Direct USDT transfers through the Plasma frontend are free. Gas fees are subsidized by the in-protocol Paymasters contract, which uses authorization-based transfer controls to limit rate and prevent abuse.
Custom Gas : Users and applications on Plasma can pay gas fees using whitelisted tokens. At launch, Plasma will support native USDT and pBTC as gas fees.
Purpose-built architecture : Plasma is built on a modular architecture that combines a custom high-performance consensus protocol with an EVM-compatible execution environment.
Bitcoin Security : Plasma anchors its state root to Bitcoin via a minimally trusted bridge to enable direct BTC-EVM programmability. This bridge also supports native BTC deposits, which are converted to pBTC on Plasma.
Integrated Infrastructure : At launch, Plasma will support over 100 DeFi applications, including leading protocols like Aave, Ethena, Fluid, and Euler, as well as various physical peer-to-peer cash networks. Furthermore, Plasma will support a broad ecosystem of developer tools and infrastructure, including account abstraction, on-chain analytics and block explorers, interoperability protocols, oracles, indexers, and RPC providers.
To better understand how Plasma achieves these functions , it is necessary to delve deeper into its core architecture.
System Architecture
Fundamentally, Plasma is a Bitcoin sidechain that maintains its own consensus and publishes state proofs to Bitcoin. It's built on a modular, multi-layered architecture that combines a custom BFT consensus protocol (PlasmaBFT), an EVM-compatible execution environment based on Reth, a trustless Bitcoin bridge, and protocol-native stablecoin smart contracts.
A transaction on Plasma begins at the user layer, through a supported frontend. It's broadcast to the Plasma chain via RPC. From there, it passes consensus, and once two-thirds of PlasmaBFT validators validate it, the user's transaction is executed. Plasma then periodically publishes the state root to Bitcoin via its native bridge.
PlasmaBFT
Consensus is the core of on-chain systems. It's the coordination mechanism that distinguishes blockchains from banks and fintech: rather than a single institution, a decentralized, distributed network of nodes validates incoming transactions. However, this design introduces latency, especially as the network scales and adds more validators, a performance trade-off many chains currently make.
To overcome latency bottlenecks, Plasma introduces PlasmaBFT, a custom consensus protocol designed to support high throughput. PlasmaBFT is a pipelined implementation of the Fast HotStuff protocol written in Rust. Finality is deterministic and can be achieved within seconds.
As the name suggests, PlasmaBFT adheres to the classic Byzantine Fault Tolerance (BFT) assumptions. In practice, this means that the network remains secure as long as the number of malicious validators does not exceed one-third (this can be expressed as n ≥ 3f + 1, where n is the total number of nodes and f is the number of Byzantine nodes).
To participate, validators must stake XPL and run supported hardware (2 CPU cores, 4 GB of memory, SSD-based persistent storage). They are then selected to propose and validate blocks on Plasma based on a voting process weighted by XPL stake.
The protocol finalizes blocks through a dual-chain submission process . Validators vote on block proposals, and a block is finalized once two consecutive quorum certificates (QCs) are formed. QCs are aggregated validator certificates; they are chained together to enforce a single canonical history.
PlasmaBFT is optimized to support high performance on L1. This is due to Plasma's use of pipelining : while one block is being finalized, the next block can already be proposed. As a result, blocks can be finalized in just two rounds.
This design is derived from Fast HotStuff , a modern BFT protocol designed to be fast. HotStuff introduced a leader-based structure and QC links to reduce communication overhead. Fast HotStuff further optimizes the chain submission path to achieve lower latency and higher throughput.
Like HotStuff, PlasmaBFT uses a leader-based round structure designed to minimize communication overhead while still maintaining fault tolerance. Leaders propose blocks, validators vote, and once enough votes are collected, a QC is generated. If a leader fails or goes offline, the protocol transitions to a new leader using the aggregated QC.
Plasma plans to expand validator participation in several phases . Initially, the biggest priority will be ensuring baseline network stability, so Plasma will be secured by a set of whitelisted validators at launch. Over time, the validator set will grow to stress-test performance under larger committees, until the final phase, when participation is opened to the public.
Plasma's execution environment
The virtual machine (VM) processes transactions, runs smart contracts, and keeps state synchronized across all participants on its underlying chain. The VM reads the current state of the chain, executes new inputs, and then deterministically updates the state. This ensures that the same code always produces the same results and that the state is synchronized across all nodes.
Plasma uses the general-purpose Ethereum Virtual Machine (EVM) execution environment. This means developers can deploy existing EVM smart contracts and use familiar tools and infrastructure.
Plasma’s execution engine is Reth , a modular, Rust-based Ethereum client that separates consensus from execution. This makes updates more efficient, the line between block production and execution clearer, and performance and behavior more predictable.
When transactions are submitted on Plasma, Plasma's execution environment processes them through the EVM, ensuring that the relevant smart contracts run and the state is consistently updated across all Plasma nodes.
Bitcoin-level security
A blockchain is typically secured solely by its own validator set. This security is limited by the size of the validator pool and the economic weight behind it. For stablecoins, relying solely on a new or relatively small validator set can be risky given the potentially large amount of value involved.
To mitigate this issue, Plasma periodically publishes its state root to Bitcoin . Anchoring to Bitcoin provides additional settlement guarantees: once a Plasma state is recorded on Bitcoin, changing it requires rewriting Bitcoin's history. This makes censorship or rollbacks far less feasible and gives Plasma a stronger security baseline than relying solely on its validator set.
Plasma achieves this through a Bitcoin-native bridge . This bridge consists of a network of validators, each running a full Bitcoin node, that observe deposits and verify state anchors. Plasma's state roots are periodically submitted to Bitcoin via transactions (e.g., OP_RETURN), and the validator network attests that these anchors match Plasma's canonical chain.
In addition to settlement, the bridge also enables native BTC to flow into Plasma. Users deposit BTC to a designated address, validators confirm the transaction on Bitcoin, and Plasma mints pBTC: a fungible ERC-20 token backed 1:1 by BTC. Withdrawals follow the reverse process: users burn pBTC on Plasma, and once confirmed by validators, BTC is released on the base chain.
This bridge enables native BTC to be used within Plasma smart contracts. pBTC is issued as a standard ERC-20 token, built on LayerZero's OFT standard to allow cross-chain portability without compromising verifiability against the underlying Bitcoin. Users always receive pBTC on Plasma at a 1:1 ratio with the amount of BTC they deposited.
To ensure secure withdrawals, Plasma relies on multi-party computation (MPC) . Instead of a single party holding the private key, multiple validators jointly generate signatures, preventing any single entity from unilaterally releasing funds.
Stablecoin native smart contracts
In the current stablecoin ecosystem, stablecoins exist as general-purpose ERC-20 tokens. They are applications built on top of a base chain. This design works to a certain extent, but friction still exists: transaction fees are paid in a separate gas token. Each application or wallet must operate and maintain its own custom paymaster. Private payments are unfeasible.
On Plasma, this functionality is built directly into the protocol. A set of in-protocol contracts , written in Solidity and integrated into the execution layer, grants stablecoins first-class citizenship. These contracts, written in Solidity and integrated into Plasma's execution layer, are compatible with any EVM wallet or contract system, including AA standards like EIP-4337 and EIP-7702.
Plasma will launch with two core modules. The first is the protocol manager Paymaster for zero-fee USDT transfers . This contract will sponsor the gas costs for direct USDT transfers (transfer() and transferFrom()), allowing users to send stablecoins without XPL. Its scope is designed to be very narrow: it only applies to official USDT and only to direct peer-to-peer transfers, not arbitrary contract calls. To prevent abuse, eligibility is restricted through lightweight identity checks (such as zkEmail, zkPhone, or a captcha system), and usage is rate-limited. Its economic model is overlaid by a pre-funded XPL pool managed by the foundation, which pays gas fees on behalf of users. Developers do not need to perform custom integrations beyond routing transfers through the standard Smart Account process, and the system supports EOAs and smart contract wallets. Over time, Plasma is exploring features such as reserving block space for eligible USDT transfers to ensure inclusion even during network congestion.
The second module is an ERC-20 Paymaster for custom gas tokens . This contract allows users to pay fees for any transaction, not just transfers, using whitelisted tokens (initially these will be USDT and pBTC). The process is simple: the user authorizes the paymaster to spend the chosen token, the paymaster consults an oracle to calculate how much of that token equals the required gas, and then pays the validator in XPL behind the scenes while deducting an equal amount from the user. This eliminates the need for swaps or native token balances, simplifying the onboarding process for new users. Developers benefit because the paymaster is handled at the protocol level, so they don’t have to build or maintain their own fee abstraction system. Wallets only need to display authorization and processing errors, while users see a unified and intuitive user experience.
By running these modules at the protocol level rather than leaving it to individual applications, Plasma ensures consistent behavior across applications, subsidizes gas without the need for external funding tokens, and ties these functions directly to block production and execution.
XPL and the Economics of Plasma
At the core of Plasma's business model is its native token, XPL , which is used to secure the network and subsidize PlasmaBFT validators.
Every transaction on Plasma requires a base fee, with dynamic fees based on demand. These fees, along with newly minted tokens, form the reward pool that maintains validator incentives.
Plasma takes a unique approach to slashing . Instead of punishing malicious validators, it incentivizes honest behavior through a novel reward-slashing mechanism. In this model, validators who misbehave or fail to participate lose their block rewards but retain their staked capital. The penalties are mild, but they reduce the risk of participation for institutional operators, as sudden capital loss is generally commercially unacceptable. Importantly, Byzantine safety is preserved under the standard assumption that less than one-third of validators behave maliciously.
Validators are compensated in XPL for proposing blocks, voting in consensus, and validating transactions. Their rewards come from a mix of transaction fees and token emissions, tying validators’ incentives directly to network activity and the broader XPL economics.
Plasma Ecosystem
There is a growing, integrated ecosystem surrounding the technical work surrounding Plasma, which is launching with $2 billion in stablecoin liquidity and over 100 DeFi integrations , including well-known projects like Aave, Ethena, Fluid, and Euler .
Plasma recently announced Plasma One , its primary consumer-facing application. As a stablecoin-native wallet and card interface, it provides users with a one-stop shop for holding, sending, and spending USDT. Transfers are gas-free, balances can be used directly for payments, and the onboarding process is incredibly fast, with a virtual card issued in minutes.
On the integration front, Plasma has partnered with Binance Earn , allowing users to access yield products directly from the network. Additionally, work is underway with emerging market fiat on- and off-ramps and peer-to-peer cash networks, aiming to make conversions between stablecoins and local currencies less reliant on centralized exchanges.
Plasma will also launch with an extensive ecosystem of developer tools and infrastructure, covering account abstraction, on-chain analytics and block explorers, interoperability protocols, oracles, indexers, and RPC providers.
The Future of Plasma
Given what we now know about Plasma, it’s worth zooming in and thinking about some of the most important catalysts and considerations influencing its future path.
Competitive Landscape
Plasma has an ambitious and important mission: to change how the world’s money moves. Not surprisingly, they face competition from many angles.
First, general-purpose blockchains aren't going away. Ethereum still dominates in stablecoin liquidity and network effects. Tron controls the lion's share of USDT transfers and peer-to-peer trading volume, while Solana is continuously developing to improve performance. Meanwhile, new chains like Monad and MegaETH are competing on the basis of high performance and full EVM compatibility.
At the same time, we're seeing the rise of dedicated stablecoin chains , or "stablechains," similar to Plasma. Circle is building Arc , a permissioned chain designed for regulated USDC settlement. Stripe is working on Tempo , focused on embedding stablecoins into merchant payments. Google recently announced Google Cloud Universal Ledger (GCUL) , a Layer 1 focused on digital payments and tokenization for financial institutions. Meanwhile, other projects are standing out with differentiated approaches and unique value propositions. For example, Payy is also introducing neobank stablecoin infrastructure, including its own dedicated chain, but with a core focus on privacy-preserving transfers.
Even outside of cryptocurrencies, non-blockchain payment rails are converging to offer many of the same key advantages as stablecoins. This means Plasma must not only meet crypto benchmarks, but also these traditional standards for performance, speed, and reach.
Key areas of focus
With this in mind, what are some key areas of focus that could help the Plasma team?
First and foremost, distribution is everything. Like any business, a chain can't grow if it can't get its products into the hands of users. For blockchains, this is primarily limited to crypto-native applications, exchanges, connected chains, and DeFi protocols. While Plasma launched with over 100 integrations and $2 billion in liquidity, the more daunting challenge lies in moving beyond crypto-native adoption and into retail and enterprise crypto-related use cases . Plasma plans to support over 100 countries, 100 currencies, and 200 payment methods, laying the foundation for a strong initial distribution footprint. However, sustaining real-world adoption in the long term will require ongoing efforts: onboarding merchants, collaborating with fintech partners, and leveraging existing networks like Tether and Bitfinex. The rise of Tron demonstrates the power of grassroots distribution. The question is whether Plasma can retain users and establish lasting channels beyond its crypto-native foundation.
Liquidity is another area of focus. For a chain built specifically for stablecoins, deep liquidity is essential for survival. Plasma is launching with billions of native USDT in circulation, making it the eighth-largest USDT chain on day one. To ensure it can sustain future growth, bridging, channels, and deposit processes must be as simple and frictionless as possible.
Privacy is another underrated aspect. Confidential Payments are planned, but will not be released with the Plasma mainnet beta. The core idea being explored is protecting sensitive transaction data while maintaining composability and auditability. This feature will initially be implemented as a lightweight, opt-in module, although Plasma will likely seek to solidify privacy features at the protocol level in the future.
With its novel architecture, ecosystem reach, and liquidity foundation, Plasma is well-positioned to:
Anchoring to Bitcoin provides a differentiating advantage. Plasma periodically publishes its state root to Bitcoin, providing additional settlement guarantees beyond relying solely on its validator set.
Additionally, as a public, permissionless chain , Plasma can reach a wider audience while being able to enforce features like identity-based transfers for professional experiences like zero-fee USDT transfers.
The use of a custom consensus protocol enables Plasma to support fast execution at high throughput.
It launched with over 100 DeFi integrations and $2 billion in USDT on day one , making it the eighth-largest chain by stablecoin supply from day one.
Applications and Use Cases
Plasma provides the rails to support a variety of stablecoin-specific use cases and applications.
Global Payments and Remittances
One of the most immediate applications is as a global payment rail. A worker in the US could send $100 USDT to a relative in Nigeria. The relative could then spend it directly through integrated merchants, use it directly with a crypto card, or cash it out through a local OTC counter or exchange.
In countries like Nigeria, Argentina, and Turkey, stablecoins already serve as a hedge against inflation and a lifeline for remittances, and Plasma can further reduce friction. Success here depends on integration with local wallets, ATMs, and payment systems. Tron achieved this through years of grassroots adoption, so Plasma will need similar partnerships, potentially leveraging Tether's existing network. If executed well, Plasma could serve as the backend for remittance companies or neobanks, providing instant USD transfers without the need for their own blockchain infrastructure.
Merchant payments and micropayments
Paying with cryptocurrency has always been rare due to volatility and fees, but zero-fee USDT transfers on Plasma could change that. Merchants can accept stablecoins via QR codes at the point of sale, avoiding credit card fees and chargebacks.
Privacy features will allow businesses to hide revenue data from competitors, and micropayments will become feasible. Platforms can charge a few cents per article, stream, or download without worrying about fees eroding profits. For merchants, user-friendly tools and regulatory compliance will be key. Stablecoin payment processors may emerge on Plasma, and over time, even traditional providers may integrate it in regions with high fees or insufficient banking services.
Foreign exchange and cross-currency trading
The stablecoin market has already expanded beyond the US dollar, with euro, offshore renminbi, and gold-backed tokens already in circulation. By supporting multiple fiat stablecoins, Plasma could become an on-chain foreign exchange hub.
For example, users can swap USDT for EURT at near-zero cost on a Plasma-based DEX. This makes foreign exchange transactions faster and cheaper than through a bank. Imagine a multinational corporation paying a European supplier by instantly converting millions of dollars into euros and settling the transaction on-chain. This would require deep liquidity, but zero fees and institutional demand could attract market makers.
Stablecoins and BTC DeFi
Plasma’s EVM compatibility opens the door to decentralized finance focused on stablecoins and Bitcoin. Potential applications include:
Stablecoin DEXes and AMMs : Low-cost, high-volume trading of stablecoin pairs (USDT/USDC, USDT/EURT) or stablecoin/BTC pairs.
Money Market and Lending : The platform allows users to lend or borrow USDT using BTC as collateral.
BTC-DeFi Innovation : Minting Bitcoin-backed stablecoins on Plasma without custodians.
Institutional treasury and settlement
Institutions such as exchanges, fintech companies, and even banks can use Plasma as a settlement layer for large transfers. Due to its speed and zero fees, exchanges may prefer Plasma over Tron or Ethereum for handling inter-exchange USDT flows.
A consortium of banks or companies could also run a private overlay on Plasma to settle large interbank transfers with the finality backed by Bitcoin. For a corporate treasury, transferring $50 million between subsidiaries could take seconds, rather than days like with SWIFT. The privacy module would enable selective disclosure to auditors or regulators. If US legislation like the GENIUS Act progresses, regulated institutions may adopt public stablecoins like USDT and USDC, and Plasma is poised to capitalize on this demand.
Beyond this, there are many more crypto-native use cases we'd love to see teams exploring building on Plasma. Zero-fee USDT transfers could provide a very compelling case for building autonomous proxy payment infrastructure on Plasma. With $2 billion deployed on its first day, Plasma can provide the deep stablecoin liquidity that prediction markets need to sustain meaningful user activity. Plasma can also serve as a routing layer for stablecoin liquidity across multiple chains.
Summarize
Plasma's mainnet beta is now live. We're excited to see how this purpose-built infrastructure for stablecoins develops. Stablecoins are poised to disrupt other parts of the global payments and financial services landscape, but they require dedicated, purpose-built rails to thrive. While Plasma isn't the only project chasing this North Star, it offers one of the most promising solutions to capture the trillion-dollar stablecoin opportunity .
