Many more people are now wondering whether stablecoins (or digital tokens backed with fiat currencies 1-to-1 like the US dollar) truly open “remarkable conditions” to enable business onchain?
According to a recent update, the answer to this pressing question is yes. However, where lies their massive potential? And what actually differentiates them from other blockchain focused initiatives?
An update from OnChain has attempted to get answers and came back with this report, including practical insights for entrepreneurs.
In the early days of cryptocurrency and blockchain tech, stablecoins were more like a “niche concept” designed to stabilize a relatively volatile market — no doubt “a fundamental issue to solve for a supportive character in the play.”
The report added that idea was simple: offer a digital asset that “maintains a steady value relative to traditional currencies like the US dollar.”
The report explained that this was meant to help crypto traders “avoid the wild price swings” of tokens like Bitcoin, Litecoin, or Peercoin.
The research report further explained that the first stablecoin, bitUSD, was introduced in 2014, “backed by Bitshares’ BTS token.”
According to the update, expectations were high, but the coin “failed to maintain its peg and collapsed in 2018.”
Despite the initial setback, a concept was born, and “a seed was planted in innovative minds.” The report also mentioned that the new stabilizing asset class would soon “become a vital digital economy pillar.”
10 years later, stablecoin usage has evolved “far beyond its original use case.”
Today, the new coin type plays a vital role in global finance.
According to Visa, stablecoins have facilitated “approximately $22.5 trillion in transactions in the last twelve months alone.”
Almost $180 billion of stablecoins in circulation; “400x in the last 5 years.”
To put this into perspective:
- Visa reported a total transaction volume of $14.8 trillion (Visa annual report) in 2023.
- Mastercard processed $9.03 trillion (Ycharts, 2023) in total transaction volume over the same period.
- PayPal recorded $1.53 trillion (PayPal, 2024) in total transaction volume in 2023.
Although these figures might suggest that stablecoins have already overtaken traditional financial giants, the reality is “more nuanced.”
Visa and Mastercard process everyday consumer transactions — payments for goods and services — whereas stablecoin transactions, are primarily driven by the following:
- Crypto trading on centralized exchanges.
- Decentralized finance (DeFi) activities.
- Liquidity provision within centralized and decentralized exchanges (DEXes).
These activities “naturally generate higher volumes” than typical consumer payments.
Stablecoins function as liquidity tools within the crypto ecosystem, “making their transaction volumes more comparable to financial market trading activities than day-to-day payments handled by Visa or PayPal.”
Survey data from the Onchain Research team underscores that stablecoins are predominantly “used for trading, investing, and storing value, with notable differences between consumers in advanced, emerging, and developing economies.”
In advanced economies, stablecoin usage is “concentrated on trading and storing value, while in emerging and developing economies, trading dominates, complemented by a growing use case for remittances.”
In terms of unique users, stablecoins are still “far from rivaling traditional payment networks.”
According to data provided by Visa:
- The total active unique wallet addresses within the last 12 months (November 2023 to November 2024) reached nearly 195 million across all stablecoin transactions.
In contrast:
- Visa served over 3.9 billion cardholders worldwide in 2023.
- In the same timeframe, Mastercard maintained a user base of approximately 2.6 billion active cards.
- PayPal reported 429 million active accounts in 2023.
Despite all this, stablecoins represent one of the few Web3 innovations that has found substantial product-market fit, “particularly in emerging markets with high demand for stable digital assets.”