In a recent Harvard Business Review, Marco Di Maggio and Nicholas Platias point out the key difference between a digital asset like Bitcoin or Ether and a stablecoin integrated on top of the Bitcoin or Ethereum public blockchains, “As their name suggests, stablecoins distinguish themselves from their more popular but highly volatile cryptocurrecy brethren, such as Bitcoin, in their focus on price stability.”
Now whether stablecoins, sometimes called digital dollars, will be the next killer blockchain app is still to be determined. To provide a little context to the state of stablecoins on public blockchains as of right now, I’ll point to a few publicly verifiable statistics. One being there is currently $7 billion worth of stablecoins (USDT, USDC, PAX, BUSD, DAI, and TUSD) on Ethereum’s blockchain alone. This does not account for the stablecoins on Omni, Tron, Binance Chain, Algorand, and EOS which would easily put the total amount closer to $10 billion. Although there are a lot of dollars represented on chain it is important to make sure those dollars are being put to use and not simply there for show. Below is a graphic from glassnode illustrating total value transacted on Ethereum over the past 18 months broken down by Ether, USDT, and all other stablecoins. As you can see USDT has surpassed $30 billion in transactional volume for the past 3 months while Ether and other stablecoins have hovered around the $10 billion range per month. To dig one layer deeper it may be beneficial to see where the majority of this volume is happening. From a quick look on etherscan, Ethereum’s block explorer, most USDT activity is between on-chain addresses and centralized exchanges, DEX trading, and DeFi platforms like Compound.
So all this talk about stablecoins is great but what am I really getting at here? Well this past week a story, not confirmed, was leaked that PayPal and Venmo would roll out crypto buy/sell/hold features within their platforms. This would introduce crypto to a user base north of 350 million people. The question people may ask is why do the leaders in the space need to do this? Couple reasons, they have seen CashApp’s success with Bitcoin and there is a unique opportunity to connect all payment apps using public blockchains as an alternative payment rail.
To provide some insight on how integrating crypto may be helpful for payment apps I’ll refer to some time I spent organizing events for a fintech payments company, Metal. Metal’s flagship product, Metal Pay, does the same thing as traditional payment apps such as Venmo and CashApp but with a twist. Using their own Ethereum token $MTL and Proof of Processed Payment consensus mechanism, the team behind Metal has been able to reward users for sending/receiving cash payments on their network. Metal was the first payments company to use an Ethereum token as an incentive for people to switch from their current payment app. While hosting these events, I received a lot of great questions and feature requests but one response that always stood out was “Can I use Metal Pay to pay a friend who has Venmo or Zelle?”. At the time I didn’t really know how to address the problem because all payment apps have their own network on which the money flows. So how can all these payment apps talk to one another? Simple, cryptocurrency whether thats Bitcoin or a digital dollar like USDC or USDT on Ethereum! Not only will this give payments applications the ability to talk to one another but it will also provide a money that is inherently programmable. These coins can be broken down into smaller units than cents which make them perfect for micro-transactions, think sending 1/10 of a cent when you like a tweet on Twitter. To be perfectly honest micro-transactions is just one use case we already know of, many more will come about as people learn how to use this technology and integrate business models into these new payment networks.
OMG Network Parent Company SYNQA raise $80m in Series C, Messari
PayPal/Venmo to start allowing 350m users a crypto purchase option, CoinDesk
Telegram settles with SEC and to pay $18.5m in fines, Bloomberg Law
Tezos-Based DAO goes live with launch of STKR token, CoinDesk
Value Capture & Quantification: Cryptocapital vs Cryptocommodities, Placeholder
Breaking down NY Fed claim that Bitcoin is Fiat money, Nic Carter