Beyond Ethereum: Exploring the potential of emerging blockchains in stablecoin adoption
Reprinted from panewslab
12/23/2024·5M
Author: Aquariushttps://x.com/0xAquariusCap
Original link: https://mirror.xyz/0xa54017CA3461743Bf0A14d2C46931ECe151d6D2d/MSeodNADNYBe-M9hVj07sri44bZA9ZA-lY_XQk4VbQQ
background
The stablecoin market has grown rapidly and has become an important force in the digital economy, even competing with traditional financial networks. According to Coinbase research, the total transaction volume of stablecoins will exceed $10.8 trillion in 2023. After excluding "unnatural" trading (such as robot-driven or automated trading), the actual trading volume is approximately $2.3 trillion. This adjusted figure reflects stablecoin organic annual growth of 17%, highlighting the growing role of stablecoins in retail and institutional finance. The chart below provides visual insight into the current landscape and growth trajectory of stablecoins in major blockchain ecosystems.
This chart shows the overall market capitalization trend of the top 20 blockchains from 2020 to 2025. Ethereum performed particularly well, with a market capitalization exceeding US$100 billion at its peak, dominating the entire blockchain ecosystem. Such a high market capitalization is closely related to Ethereum 's role as a major platform for DeFi and stablecoin issuance, which allows it to maintain a strong position even amid market fluctuations. Other blockchains such as BSC, Tron, and Solana have relatively low market caps but stable performance. Tron and BSC, in particular, have shown a steady growth trend, highlighting their role as alternative platforms for stablecoins and DeFi, especially in regions and application scenarios where transaction costs and speed are critical.
Notably, emerging platforms like Arbitrum, Sui, and Optimism are gradually growing in market capitalization, showing increasing adoption. This growth trajectory suggests that as these ecosystems continue to mature, there may be opportunities to challenge existing leaders in the future by meeting specific needs or delivering competitive transaction efficiencies. The data suggests that despite Ethereum’s dominance in overall market capitalization, other blockchains are still attracting users and developers, signaling a potential shift in stablecoin activity as the ecosystem matures.
This chart shows the stablecoin market cap trends for the top 20 blockchains in more detail. Ethereum leads the way with a stablecoin market capitalization of over $8 billion, reflecting its important role as the custody platform for major stablecoins such as USDT, USDC, and DAI. Ethereum 's large market capitalization supports its status as a stablecoin hub, with demand mainly coming from DeFi applications and institutional users seeking compliant stablecoins. However, Tron stands out as a major competitor, with a stablecoin market value of approximately $4 billion. Tron’s appeal lies in its low transaction fees and fast processing speeds, which make it particularly popular in high-frequency trading scenarios, such as remittances and cross-border payments.
Other chains (such as BSC, Terra Classic, and Solana) have relatively small stablecoin market caps but play a key role in a diverse stablecoin ecosystem. For example, BSC's stablecoin has a market capitalization of approximately $2 billion, attracting DeFi projects and retail users seeking lower fees than Ethereum. Smaller blockchains such as Algorand and Stellar are positioned as niche platforms for stablecoins, often targeting specific use cases such as cross-border payments and micro-transactions.
Ethereum: The solid leader
Ethereum is often regarded as the cornerstone of decentralized finance (DeFi) and remains the dominant chain in stablecoin activity, with its stablecoin market capitalization exceeding $8 billion. Several factors allow Ethereum to maintain its leadership position in the stablecoin ecosystem:
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Mature and interconnected DeFi ecosystem: Ethereum’s large and mature DeFi ecosystem includes well-known protocols such as Uniswap, Compound, and Aave, which are highly dependent on stablecoin liquidity in their operations. Stablecoins are critical to liquidity pools, lending and yield farming, making Ethereum an indispensable platform for users seeking comprehensive DeFi services.
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Institutional and regulatory trust: Stablecoins on Ethereum (particularly USDC and DAI) have gained regulatory recognition and institutional trust. As more institutions enter the crypto space, Ethereum’s reputation as a secure and decentralized network makes it an ideal choice for a compliant, institutional-grade stablecoin. Circle's USDC and MakerDAO's DAI are the main stablecoins native to Ethereum, serving as the backbone of trust in the ecosystem.
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Diversified stablecoins and use cases: Ethereum hosts a wide range of stablecoins, including stablecoins supported by fiat currencies such as USDT and USDC, as well as algorithms and decentralized stablecoins such as DAI. This diversity allows Ethereum users to choose the stablecoin that best suits their risk tolerance, regulatory needs and preferences. For example, DAI is uniquely attractive because it is not directly tied to fiat reserves, which is consistent with the decentralized values promoted by the Ethereum community.
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Second-layer solutions address scalability issues: Ethereum faces scalability challenges, and high gas fees limit the participation of small users in DeFi. However, second-layer solutions like Arbitrum, Optimism, and zk-Rollups are significantly reducing transaction costs and increasing throughput, allowing Ethereum to continue to be the leader in stablecoin use cases without sacrificing decentralization.
As Ethereum continues to develop its second-layer ecosystem and fully transition to Ethereum 2.0, its dominance in the stablecoin market is expected to continue. As regulations around stablecoins become clearer, institutional adoption will grow further, potentially prompting more fiat-backed and compliant stablecoins to be launched on Ethereum. In addition, Ethereum's DeFi ecosystem may also continue to innovate and develop new stablecoin use cases, including synthetic assets, cross-chain stablecoins, and more complex revenue-generating products.
Solana: A high-performance Ethereum alternative
Solana is often viewed as a high-performance alternative to Ethereum, known for its fast transaction speeds and low fees. Although Solana's stablecoin has a significantly smaller market capitalization than Ethereum, it has managed to attract a loyal user base and is growing in popularity among retail users and developers looking for low-cost solutions.
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High-speed and low-cost transactions: Solana’s unique Proof of History (PoH) consensus mechanism supports high throughput and low latency, allowing the network to process thousands of transactions per second with extremely low fees. This makes Solana ideal for applications that require frequent transactions, such as micropayments and retail stablecoin transfers. Therefore, stablecoins like USDC and USDT are often used on Solana for daily payments and fast transfers within the ecosystem.
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Integration of payment and gaming applications: Solana is positioned as an ideal platform for industries such as gaming and payments that have high requirements for fast and cheap transactions. Its user-friendly development tools and support for high-performance applications make it the platform of choice for developers building decentralized applications (dApps), which are often integrated with stablecoins. For example, blockchain game Star Atlas and music streaming service Audius are leveraging Solana's speed and stability to use stablecoins as in-game currencies and tipping tools, respectively.
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Network Stability Issues: While Solana's high performance is a major advantage, it also faces network outages and stability issues. These downtimes have led some users to question its reliability, especially in high-value trading or institutional use scenarios. Solana's network resiliency is still a work in progress, and it will need to solve these technical challenges to gain full trust in the stablecoin and DeFi markets.
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Cooperation with USDC and cross-chain solutions: Solana’s cooperation with USDC issuer Circle is a key factor in driving the adoption of stablecoins on the platform. The availability of USDC on Solana provides users with a trustworthy USD-backed stablecoin, enhancing Solana's appeal. In addition, Solana is exploring cross-chain solutions that will allow assets to flow seamlessly between Solana and Ethereum, providing users with more flexibility and expanding its influence in the stablecoin market.
Solana has significant growth potential in the stablecoin space, especially if it can maintain network stability and further solidify its position in gaming and retail payments. By continuing to cooperate with USDC and exploring cross-chain capabilities, Solana is expected to attract more stablecoin transactions and DeFi applications. However, its centralized validator structure and network outage issues may limit its appeal to institutions unless these issues are resolved.
Key conditions for stablecoin growth
As the appeal of stablecoins continues to grow in cryptocurrency and financial markets, certain ecosystem characteristics and environments are more conducive to the adoption and growth of stablecoins. These environments are not only technologically superior, but also strategically positioned to meet the needs of retail users and institutional investors. Here are the specific characteristics of the blockchain ecosystems most likely to experience a stablecoin explosion, as well as the latest data and trends observed in the market.
1. Low transaction fees
Stablecoin transactions are often frequent and require low latency, especially in scenarios where users rely on stablecoins for daily transactions, cross-border payments, and remittances. Ecosystems with low transaction fees and high scalability are more attractive because they enable cost-effective transactions without network congestion.
In a 2023 survey of stablecoin users, more than 60% of respondents stated that transaction costs were the main factor in their choice of blockchain platform. Ethereum’s average transaction fees tend to exceed $10 during periods of network congestion, while networks like Tron and BSC have average transaction fees below $0.10. This attracted a large amount of USDT to migrate from Ethereum to Tron, and Tron captured about 30% of the USDT supply, mainly due to its low fees, which is especially attractive in areas with high demand for cross-border remittances. In addition, Binance Smart Chain (BSC) continues to attract retail users to participate in its DeFi ecosystem as transaction fees are much lower than Ethereum.
Blockchain environments that offer low fees and high scalability, such as Polygon’s Ethereum second-layer solution and Solana, are also well-suited for stablecoin growth. Solana can process up to 65,000 transactions per second and has low average fees, especially in payment and gaming applications, where stablecoin adoption is gradually increasing.
2. Powerful DeFi ecosystem with diverse use cases
A strong DeFi ecosystem not only attracts stablecoin liquidity but also provides utility beyond simple transactions. In an environment with applications such as lending and revenue generation, stablecoins serve as stable transaction media and collateral and have become the core of various DeFi products.
Ethereum hosts more than 70% of DeFi applications globally, and stablecoins account for nearly 50% of the total lock-up volume (TVL) of the Ethereum DeFi protocol. This widespread use of stablecoins is the core reason why Ethereum remains the leader in stablecoin adoption, despite its higher fees. As of the second quarter of 2024, Ethereum's DeFi locked-up volume is approximately US$40 billion, of which stablecoins (such as USDC, USDT and DAI) account for an important part.
Binance Smart Chain (BSC) also has an active DeFi ecosystem, and platforms such as PancakeSwap and Venus extensively use stablecoins as the basis for liquidity pools and lending markets. In 2023, BSC's DeFi locked position will exceed US$5 billion, of which stablecoins account for approximately 40% of the liquidity pool. This utility and ecosystem accessibility further encourages stablecoin adoption.
3. Interoperability
As the crypto space gradually moves towards a multi-chain ecosystem, interoperability has become an important factor in the adoption of stablecoins. Stablecoins need to flow seamlessly between different blockchains to meet the needs of users to trade or hold assets across multiple chains. Ecosystems that enable the easy transfer of stablecoins across chains will benefit from increased adoption.
According to a report by Chainalysis in 2023, cross-chain stablecoin transfers accounted for approximately 25% of all stablecoin transactions. Solutions like Cosmos' Inter-Blockchain Communication Protocol (IBC) support the free circulation of stablecoins among different chains in the Cosmos ecosystem, promoting a wider range of liquidity and application scenarios.
Cosmos and Polkadot are two major ecosystems focused on interoperability. Cosmos' IBC protocol allows blockchains within its network to interact seamlessly and stablecoins to be easily transferred between chains, promoting their adoption in specific ecosystems, such as Terra's UST (pre-collapse) and other Cosmos chains Issued stable assets. Polkadot’s parachain structure provides similar interoperability, a feature that helps drive stablecoin adoption across DeFi and specialized applications.
Projects such as USDC also prioritize multi-chain issuance and currently support Ethereum, Solana, BSC and Avalanche. By enabling cross-chain compatibility, these ecosystems can increase the utility of stablecoins and promote wider adoption.
4. Support regulatory compliance and institutional needs
As regulatory scrutiny of stablecoins increases globally, compliance has become a key factor in stablecoin adoption. Blockchain ecosystems that support compliance requirements, such as know-your-customer (KYC) and anti-money laundering (AML) regulations, are likely to achieve stronger adoption among institutional users and compliant stablecoin issuers.
In 2023, approximately 30% of stablecoin inflows on Ethereum were related to institutional transactions, mainly due to the regulatory compliance capabilities of Ethereum stablecoins such as USDC. In contrast, chains with a looser regulatory structure, such as Tron, mainly serve retail users and remittance-based use cases.
Algorand and Ethereum have positioned themselves as regulatory-friendly ecosystems. Algorand supports compliant stablecoins such as USDC and has partnerships with regulated financial institutions to ensure compliance. And Ethereum offers regulatory compliance options through Circle’s USDC and MakerDAO’s DAI, making it the preferred stablecoin issuance platform with significant institutional interest.
As regulations around stablecoins become clearer, blockchains that prioritize compliance may attract more institutional participation. For example, Avalanche’s customizable subnet feature allows institutions to build regulated environments, a feature that may appeal to stablecoin issuers who need to adhere to specific compliance standards.
5. Geographic and regional demand for low-cost remittances
In regions where financial inclusion is limited or banking fees are high, stablecoins offer a viable alternative for daily transactions and cross-border remittances. Ecosystems that can meet these market needs through low fees, high accessibility, and integration with payment providers will have an advantage in stablecoin adoption.
According to a 2023 World Bank report , total global remittances have exceeded $700 billion, with stablecoins accounting for an increasing share of cross-border transactions in countries with limited financial infrastructure. A blockchain environment that offers low transaction fees and fast processing capabilities has the potential to capture this part of the remittance market.
Tron is popular in regions such as Asia, Africa, and Latin America, and its low fees make it ideal for sending money across borders. Tron’s network handles a large number of stablecoin transactions every day, especially USDT, a stablecoin that has been widely adopted in these regions as an overseas remittance tool without the need for traditional banking services. Tron’s average transaction fees remain below $0.10, making it an ideal platform for remittance-based stablecoin usage.
BSC (Binance Smart Chain) is also suitable for the remittance market due to its low fees and strong presence in Asia. In these regions, Binance’s exchange ecosystem has built trust. Additionally, chains like Celo are targeting emerging markets by focusing on mobile financial services to promote the use of stablecoins among unbanked or underserved populations.
6. High scalability
Layer 2 solutions provide blockchain with an efficient way to address high transaction fees while maintaining security and decentralization. Blockchains integrating Layer 2 scaling solutions can support larger stablecoin transaction volumes at lower costs, thereby attracting users who have been excluded due to the high cost of Layer 1 networks.
Ethereum-based Layer 2 protocols such as Arbitrum and Optimism have exceeded $5 billion in total volume locked (TVL) in mid-2024. Among them, the use of stablecoins in various DeFi applications and payments accounts for a significant proportion. Layer 2 solutions reduce transaction costs by more than 90%, making them extremely attractive to stablecoin users.
Polygon is one of the leading Layer 2 scaling solutions, driving significant stablecoin growth by providing the security of Ethereum with lower fees. Platforms like Aave and Uniswap have been deployed on Polygon to take advantage of lower costs. At the same time, USDC and DAI usage increased significantly on Polygon. Likewise, the cost-effectiveness of Arbitrum and Optimism has also attracted DeFi protocols that rely on stablecoins.
Stablecoin adoption in these environments is likely to increase as more chains adopt Layer 2 scaling solutions, allowing users to access stablecoin functionality at a lower cost.
potential challenger
As global demand for stablecoins grows, emerging blockchain ecosystems such as TON (The Open Network) and Sui have shown huge potential for stablecoin adoption due to their unique infrastructure, target user groups, and growth strategies. Although mature blockchains such as Ethereum, Tron and BSC currently dominate stablecoin activity, TON and Sui are injecting differentiated competitiveness into the stablecoin market through innovative methods. Below we provide a detailed analysis of TON and Sui’s potential to drive stablecoin growth, comparing them to current leaders while exploring the financial implications of growing stablecoin activity in these ecosystems.
**TON: Relying on the Telegram network to drive retail-oriented
stablecoin adoption**
TON was originally developed by Telegram and later handed over to the open source community, and has now developed into a high-performance blockchain. TON's market cap is currently around $5 billion, which is relatively small compared to Ethereum's $200 billion and BSC's $35 billion. Nonetheless, TON's potential lies in its unique integration with Telegram. Telegram has over 700 million monthly active users worldwide, and this ready user base makes TON a serious contender for stablecoin adoption, especially in markets where Telegram is widely used for communications and peer-to-peer transactions.
Key Features Driving Stablecoin Adoption
- Seamless integration with Telegram:
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TON’s direct integration with Telegram makes stablecoins on its network highly accessible to Telegram users, enabling seamless peer-to-peer transfers and payments. This setup is particularly advantageous in countries with limited banking infrastructure but widespread Telegram use, such as Russia, Ukraine, Turkey, and parts of the Middle East and Southeast Asia.
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Case use case: If stablecoins such as USDT or USDC are widely adopted on TON, users can send stablecoins with one click within the Telegram app. This integration could make stablecoins on TON as easy to use as Venmo or WeChat Pay, providing a low-barrier entry point for users unfamiliar with blockchain.
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Low fees and high scalability:
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TON’s sharded architecture allows it to handle high transaction volumes at low cost, making it attractive for stablecoin trading. TON’s average transaction fees are estimated to be less than $0.01, which is comparable to Tron and BSC in terms of cost efficiency. Such economics could drive adoption of daily transactions and micropayments, especially among fee-sensitive users.
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TON’s high scalability ensures that it does not experience significant speed drops or fee increases as traffic increases, which is critical for stablecoin usage in high-frequency trading scenarios such as remittances and retail purchases.
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Built-in hosting options and user-friendly interface:
- TON offers custodial and non-custodial wallet options to suit different types of users. The custodial wallet embedded in Telegram simplifies the experience for ordinary users, while the non-custodial wallet serves crypto veteran users who value security and asset ownership. This dual approach could increase adoption among different user groups, including retail users and more experienced crypto asset holders.
If TON succeeds in attracting stablecoins or launching its own ecosystem stablecoins, it could capture a significant share of the retail and remittance markets. Given Telegram’s widespread reach, TON has the potential to attract millions of new stablecoin users in emerging markets where Telegram is popular.
If TON can capture 1-2% of the current global stablecoin market (valued at approximately US$120 billion), it will bring an increase in the market value of stablecoins within the ecosystem of US$1.2 billion to US$2.4 billion. This additional activity could increase TON's own market cap from $5 billion to $6-7 billion, positioning it as one of the top platforms for stablecoin trading.
On the basis of 700 million active Telegram users, even with only a 5% stablecoin adoption rate, TON can bring 35 million users, which is a significant increase compared to existing stablecoin adoption rates on other chains. This user base will not only drive stablecoin trading, but also increase demand for other TON services, thereby promoting ecosystem growth.
TON’s value proposition in use cases
TON’s deep integration with Telegram has significantly increased stablecoin activity. This large, ready-made user base provides TON with audience coverage unmatched by other blockchain ecosystems. The supply of Tether (USDT) on the TON blockchain has surged from $100 million to $1.2 billion as of May 2024, demonstrating growing user adoption within the Telegram ecosystem.
Telegram’s popularity in regions such as Russia, Southeast Asia, and the Middle East, where traditional banking infrastructure is often inadequate, provides a practical alternative to TON-based stablecoins for peer-to-peer payments and remittances. If Telegram natively integrated stablecoins, users could send funds seamlessly, with the same ease as Venmo or WeChat Pay but with global reach. This convenience could accelerate mainstream adoption of stablecoins in less-banked regions.
TON's sharding architecture allows it to achieve high scalability while maintaining low transaction fees, with a single transaction cost typically less than $0.01. This cost-effectiveness is critical for small transactions and high-frequency retail use cases. For example, stablecoins on TON can be used for tips, digital content payments, or small business transactions in the Telegram community. Additionally, the low cost of TON transactions makes it a strong contender in the global remittance market, especially in emerging economies. According to World Bank data, global remittance flows will exceed US$700 billion in 2023, with stablecoins playing an increasingly important role in these cross-border payments. TON's integration with Telegram simplifies the remittance process and reduces fees to a fraction of traditional banking methods, making it an ideal alternative for millions of users around the world.
**Sui: A high-performance blockchain focused on DeFi and institutional
use cases**
Developed by Mysten Labs, Sui is a relatively new blockchain with a current market capitalization of approximately $800 million. Although still in its early stages, Sui is a strong candidate for stablecoin adoption due to its high-performance capabilities and focus on DeFi. Compared with Ethereum and BSC, Sui's market capitalization is relatively small, but its specialized technology and appeal to institutions give it promising growth prospects in the stablecoin and DeFi fields.
Key Features Driving Stablecoin Adoption
- Advanced consensus protocol supports high throughput and low latency
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Sui uses Narwhal and Tusk consensus protocols to support high transaction speed and low latency. This design provides high transaction per second (TPS) capabilities, making Sui an ideal platform for DeFi applications such as lending, lending or complex trading scenarios that require high transaction speed and reliability. Low latency also benefits stablecoin users who require instant settlement.
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Case use case: High-frequency trading is an important part of DeFi, and stablecoins are crucial in fast mortgage exchange and liquidity provision. Sui's high throughput could attract institutional-grade DeFi protocols that rely on stablecoins, becoming a competitor to Ethereum in high-value DeFi transactions.
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DeFi-centered ecosystem attracts institutional users
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Sui is actively positioning itself as a centralized blockchain for DeFi, with its early applications focused on lending, decentralized exchanges (DEX), and asset management. Since stablecoins are critical to DeFi applications, Sui's focus on building a strong DeFi foundation may drive demand for stablecoins as collateral, liquidity pools, or media of exchange.
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Institutional interest: Sui’s programmable infrastructure allows for customized compliance solutions, which may appeal to institutions seeking a secure, compliance-friendly environment for stablecoin trading. This capability could potentially lead to partnerships with regulated stablecoin issuers, enhancing credibility and attracting institutional interest.
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Security and flexibility based on the Move programming language
- Sui uses the Move programming language designed for security and asset protection. Move's resource-oriented programming model minimizes the risk of errors and ensures a secure trading environment that is attractive to both retail and institutional users. Enhanced security may make Sui a secure environment for high-value stablecoin transactions and complex DeFi protocols.
If Sui can capture 0.5-1% of the Ethereum stablecoin-driven DeFi market (valued at approximately US$40 billion), it will bring an additional US$200 million to US$400 million in stablecoin market value growth to the Sui ecosystem. Given Sui's current market cap of $800 million, this surge in activity could push its valuation to over $1 billion, doubling its market capitalization.
At the same time, Sui's architectural and compliance potential may appeal to institutional users who prioritize a stable and secure digital asset environment. If Sui becomes the go-to chain for institutional DeFi, it could see significant capital inflows, establishing its core position in the DeFi space alongside Ethereum and BSC.
Sui’s value proposition on use cases
The use of the Move programming language enhances the Sui ecosystem and provides a secure environment for developers to build robust financial applications. Move’s resource-oriented programming model reduces the risk of errors and ensures the safe handling of digital assets in smart contracts. This makes Sui particularly attractive for institutional-grade stablecoin use cases focused on security and compliance. For example, a programmable stablecoin deployed on Sui could support highly secure lending and borrowing protocols, with collateral and repayment enforced through algorithmic rules. This feature may appeal to large financial institutions looking to integrate stablecoins into their operations.
For example, in November 2024, Sui formed a strategic partnership with Franklin Templeton Digital Assets, the digital asset arm of global investment firm Franklin Templeton. The partnership aims to support developers within the Sui ecosystem and deploy innovative technologies using the Sui blockchain protocol. Franklin Templeton's involvement highlights Sui's potential to drive agency growth.
Sui’s compliance-focused infrastructure makes it a viable platform for cross-border trade, with stablecoins used to settle international transactions in real-time and enforce trade terms through smart contracts. This institutional appeal and flexibility allows Sui to compete with Ethereum in high-value stablecoin use cases.
Disclaimer: This article is for general information purposes only and does not constitute investment advice, a recommendation, or a solicitation to buy or sell any security. The content of this article should not be relied upon as the basis for any investment decision, nor should it be used as a reference for accounting, legal, tax advice or investment recommendations. It is recommended that you consult your own advisors regarding legal, business, tax or other matters related to any investment decision. Certain information contained in this article may have been obtained from third parties, including companies in which funds managed by Aquarius invest. The views expressed in this article are those of the author and do not necessarily reflect the position of Aquarius or its affiliates. These views may change at any time and are not guaranteed to be updated.
Reference
https://defillama.com/stablecoins
https://remittanceprices.worldbank.org/sites/default/files/rpw_main_report_and_annex_q124_final.pdf
https://www.chainalysis.com/blog/stablecoins-most-popular-asset/
