The New Phase of the Stablecoin Ecosystem: Transitioning from Issuance to Distribution

Stablecoins have become an indispensable financial tool in the cryptocurrency space, with a market capitalization of $240 billion and an annual trading volume exceeding $3 trillion. However, there are some misconceptions and issues behind these numbers that are worth exploring.

Key Points

• The stablecoin issuer pays substantial fees to distributors to expand the market. For example, Circle paid $900 million to distributors like Coinbase in 2023, accounting for more than half of its revenue.

• Among the annual trading volume of $3.1 trillion, 31% comes from the high-frequency operations of MEV robots, and the actual trading volume involving human participation is far lower than the surface data.

• There is a phenomenon of high wealth concentration in the stablecoin sector. Among 150 million stablecoin wallets, 99% have a balance of less than $10,000, while only 20,000 wallets control $76 billion, accounting for 32% of the total supply.

• In the past six months, DeFi stablecoin trading volume surged from $100 billion to $600 billion, with meme coin trading generating $500 billion in stablecoin flow, accounting for 12% of the annual trading volume.

• The criteria for measuring the success of stablecoins need to be re-evaluated. A decline in TVL may reflect improved efficiency, while an increase in trading volume may only indicate increased bot activity; there are fundamental issues with existing metrics.

The Next Phase of Stablecoins

Stablecoins have entered a new era, and relying solely on issuance and liquidity is insufficient for sustained growth. Future development will involve:

• Share economic benefits with partners
• The convenience of on-chain and off-chain integration
• Deep utilization of programmable features

Understanding the practical application scenarios and functional utility of stablecoins is currently the clearest signal for considering stablecoins.

From Institutional Issuance to Market Distribution

The dominance of stablecoins is shifting from issuers to distributors:

• Trustworthy custody, liquidity, and redemption are no longer differentiating factors.
• Distributors integrate stablecoin into practical use cases, controlling user relationships and experiences.
• Distributors are monetizing their influence, such as Circle paying nearly $900 million in promotion fees to Coinbase.

Many distributors are further enhancing the platform architecture:

• PayPal launches PYUSD
• Telegram collaborates with Ethena
• Meta explores stablecoin channels again
• Financial technology platforms such as Stripe and Robinhood directly embed stablecoin functionality.

Issuers are also actively responding:

• Tether builds wallets and payment channels
• Circle achieves full-stack development through API, development tools, and acquisitions.

However, distribution has become a strategic high ground. New types of infrastructure are emerging, aimed at achieving programmability, compliance, and value sharing.

On-chain stablecoin use case analysis

The use of stablecoins is primarily concentrated in three environments:

• Centralized Exchange ( CEX )
• DeFi protocol
• MEV

These three types of addresses account for 38% of the total supply and 63% of the transaction volume. Unmarked addresses account for the majority of the remaining.

centralized exchange ( CEX )

• Account for 27% of the total supply
• Accounted for 11% of total trading volume
• Reserve income of $3 billion

The supply of top CEXs has increased significantly recently. However, since most activities occur off-chain, it is difficult to comprehensively assess the usage of stablecoins within CEXs.

Decentralized Finance ( DeFi )

• Account for 11% of the total supply
• Accounted for 21% of total trading volume
• Reserve income of 1.1 billion USD

The supply of DeFi stablecoins comes from collateral, LP assets, etc. In the past six months, the monthly trading volume has increased from $100 billion to over $600 billion.

Main application areas:

• DEX liquidity pool
• Lending Market
• Asset-backed debt rights
• perpetual contracts, etc.

MEV miner/node validation

• Less than 1% of total supply
• Accounting for 31% of total trading volume

The high-frequency behavior of MEV bots leads to an excessively high proportion of on-chain transaction volume, usually reusing the same funds.

unallocated wallet

• Account for 54% of the total supply
• Account for 35% of total trading volume
• Reserve income of 5.6 billion USD

Unattributed wallet activities are difficult to explain, but they account for a large portion of stablecoin supply and trading volume. This includes retail users, unknown institutions, startups, and others.

It is worth noting that:

• 60% unallocated wallet balance is less than 1 dollar
• 20,000 large wallets hold $76 billion, accounting for 32% of the total supply.
• 99% of small wallets hold only 9 billion, less than 4% of the total supply.

Conclusion

The stablecoin ecosystem has entered a new phase, with more value flowing towards participants building applications and infrastructure. This marks the maturation of the market, shifting the focus from the currency itself to programmable systems.

With the improvement of regulation and the surge of user-friendly applications, stablecoins are expected to experience exponential growth. The future financial world will be defined by the ecosystem formed around stablecoins, rather than just by the stablecoins themselves.