By Robbie Petersen, Researcher at Delphi Digital
Compiled by: Luffy, Foresight News
The total supply of stablecoins continues to rise steadily, a total that masks a more interesting detail. While cryptocurrency trading volume remains below all-time highs, the number of monthly active addresses transacting in stablecoins continues to climb. This discrepancy suggests that stablecoins are not just greasing the gears of the crypto speculative casino, but are finally delivering on their core promise: to become the foundation of a new digital financial system.
Source: Artemis, The Tie
Perhaps more importantly, there are clear signs that mass adoption will not necessarily come from emerging startups, but from companies that already have mature distribution channels. In the past three months alone, four large fintech companies have officially stated that they will enter the stablecoin field: Robinhood and Revolut are launching their own stablecoins; Stripe recently acquired Bridge to facilitate faster and cheaper global payments; and Visa is helping banks launch stablecoins despite its own interests.
This signals a new paradigm shift: stablecoin adoption no longer hinges on purely ideological assumptions. Instead, by offering fintechs a simple proposition of lower costs, higher profits, and new revenue streams, stablecoins find themselves intrinsically in common with the most reliable force in capitalism: the relentless pursuit of profit. As a result, as market-leading fintechs leverage stablecoins to increase margins and/or expand further into the payments stack, we will inevitably see their other competitors follow suit and join the stablecoin fray. As I highlighted in The Stablecoin Manifesto, game theory suggests that stablecoin adoption is not an option, but a necessary bet for fintechs to maintain their market position.
Stablecoin 2.0: Revenue-sharing Stablecoin
Intuitively, the most obvious beneficiaries of these structural tailwinds are the issuers of stablecoins. The reason is simple: stablecoins are essentially a winner-take-all game given the currency network effects. Today, these network effects are mainly manifested in three aspects:
- Liquidity: USDT and USDC are the most liquid stablecoins in the cryptocurrency market. Using some emerging stablecoins means that traders have to bear more slippage;
- Payments: USDT has become an increasingly common payment method in emerging economies, and its network effect as a digital medium of exchange is arguably the strongest;
- “Denomination Effect”: Almost all major trading pairs on CEX and DEX are denominated in USDT or USDC
Simply put, the more people use USDT (Tether), the more convenient it is to use USDT, and more people will use USDT. The result is that Tether increases its market share while enhancing its profitability.
While it is almost impossible to fundamentally disrupt Tether’s network effects, there is an emerging stablecoin model that seems best suited to challenge Tether’s existing model: revenue-sharing stablecoins. Importantly, this model is well-positioned within the stablecoin paradigm that is increasingly being adopted by fintech companies. To understand why, it is important to understand some prerequisites.
Today, the stablecoin ecosystem stack typically consists of two main players: (1) stablecoin issuers (e.g., Tether and Circle) and (2) stablecoin distributors (i.e., applications).
Currently, stablecoin issuers generate over $10 billion in value per year, more than all blockchain revenues combined. However, this represents a huge structural inefficiency: the value generated in the stablecoin stack is fundamentally downstream in the distributors. In other words, without exchanges, DeFi applications, payment applications, and wallets that integrate USDT, USDT will have no utility and therefore no value. Yet, despite this, the “distributors” are not currently reaping the economic benefits.
This has led to the rise of a new class of stablecoins: revenue-sharing stablecoins. This model disrupts the existing system (the USDT model) by redistributing the economic benefits that have traditionally been captured primarily by stablecoin issuers to applications that bring users to the collective network. In other words, revenue-sharing stablecoins enable applications to effectively share the revenue from their own distribution channels.
At scale, this could be a meaningful source of revenue, perhaps even the primary source of revenue for large applications. As such, as margins continue to compress, we may enter a world where the primary business model for crypto applications evolves to effectively selling “stablecoin issuance as a service” (SDaaS). Intuitively, this makes sense, as stablecoin issuers capture more value today than the blockchain and applications combined, and applications may capture a larger share of that value than other sources.
Although there have been numerous attempts to break Tether’s monopoly to date, I believe the revenue-sharing stablecoin model is the right direction for two reasons:
- Distribution is everything: While previous attempts to issue yield-based stablecoins first sought the support of end users, revenue-sharing stablecoins target participants who have users: distributors. This suggests that the revenue-sharing model is the first to intrinsically align the incentives of both distributors and issuers.
- Strength in Numbers: Historically, the only way for applications to reap the benefits of stablecoin economics is to launch their own independent stablecoin. However, this approach comes at a cost. Given that other applications have no incentive to integrate your stablecoin, its utility is reduced to being confined to their respective applications. As a result, it is unlikely to compete with USDT's network effects at scale. In contrast, by creating a stablecoin that incentivizes numerous distribution-capable applications to integrate simultaneously, revenue-sharing stablecoins are able to leverage the collective network effects of the entire "distributor" ecosystem.
In short, revenue-sharing stablecoins have all the benefits of USDT (composability across applications and network effects) with the additional benefit of incentivizing participants who own distribution channels to integrate and share revenue with the application layer.
Currently, there are three leaders in the revenue-sharing stablecoin space:
- Paxos’ USDG: Paxos announced the launch of USDG in November this year, which is regulated by the Monetary Authority of Singapore’s upcoming stablecoin framework. It has currently obtained a number of heavyweight partners including Robinhood, Kraken, Anchorage, Bullish and Galaxy Digital.
- The "M" in M^0: The team consists of former MakerDAO and former Circle veterans, and the vision of M^0 is to act as a simple, trusted neutral settlement layer that enables any financial institution to mint and redeem M^0's revenue-sharing stablecoin "M". However, one of the differences between "M" and other revenue-sharing stablecoins is that "M" can also be used as the "raw materials" of other stablecoins, such as USDN (Noble's revenue-sharing stablecoin). In addition, M^0 adopts a unique custody solution consisting of a decentralized network of independent validators and a dual token manager system, which has higher trusted neutrality and transparency than other models. You can read more about M^0 in my post.
- Agora’s AUSD: Similar to USDG and “M”, Agora’s AUSD also shares revenue with applications and market makers that integrate AUSD. Agora also has strategic support from a number of market makers and applications, including Wintermute, Galaxy, Consensys, and Kraken Ventures. This is notable because it aligns incentives with these stakeholders from the beginning. Today, the total supply of AUSD is $50 million.
In 2025, I expect these stablecoin issuers to gain more and more attention as distributors collaborate and steer users toward stablecoins that work in their favor. Additionally, we should see market makers (who play an important role in ensuring stablecoins remain liquid) showing a preference for these stablecoins as they also gain economic benefits from holding their inventory.
While “M” and AUSD currently rank 33rd and 36th by stablecoin supply, respectively, and USDG has yet to launch, I expect at least one of these stablecoins to be in the top 10 by the end of 2025. Additionally, by the end of the year, I expect the overall market share of revenue-sharing stablecoins to rise from 0.06% to over 5% (~83x) as large fintechs with distribution capabilities drive the next wave of stablecoin adoption.
Stablecoins are ready to take off
While the Eurodollar adoption curve is often used as a historical analogy for stablecoins, the analogy is somewhat simplistic. Stablecoins are not Eurodollars, they are digital in nature, they are globally available, they settle instantly across borders, they can be used by AI agents, they are subject to massive network effects, and most importantly, existing fintechs and enterprises have clear incentives to adopt them because stablecoins align with every enterprise’s goal: to make more money.
Therefore, to say that stablecoin adoption will follow the trajectory of Eurodollar adoption misses a fundamental problem. The only thing I think stablecoins have in common with Eurodollars is that they will continue to emerge as a bottom-up phenomenon, uncontrolled by any institution or government that sees the technology as being contrary to their interests. However, unlike Eurodollars, stablecoin adoption will not happen slowly over 30-60 years. It will start out slow and then explode suddenly as network effects quickly reach escape velocity.
Regulatory frameworks are being established. Fintechs like Robinhood and Revolut are launching their own stablecoins, and Stripe appears to be exploring stablecoins to gain more of the payment stack. Most importantly, incumbents like PayPal and Visa are exploring stablecoins despite cannibalizing their own profits because they fear that if they don’t, their competitors will.
While it is not yet clear whether 2025 will be a turning point in the history of stablecoin development, it is clear that we are approaching this turning point.
