# Background

The stablecoin market is growing rapidly and has become an important force in the digital economy, even competing with traditional financial networks. According to research by Coinbase, the total trading volume of stablecoins exceeded $10.8 trillion in 2023. After excluding "non-natural" trades (such as bot-driven or automated trading), the actual trading volume is about $2.3 trillion. This adjusted data reflects an organic annual growth rate of 17% for stablecoins, highlighting their increasingly important role in retail and institutional finance. The following chart provides a visual insight into the current landscape and growth trajectory of stablecoins across major blockchain ecosystems.

The chart shows the overall market capitalization trends of the top 20 blockchains from 2020 to 2025. Ethereum stands out, with its market capitalization exceeding $100 billion at peak times, dominating the entire blockchain ecosystem. Such a high market capitalization is closely related to Ethereum's role as the primary platform for DeFi and stablecoin issuance, allowing it to maintain a strong position even amid market volatility. Other blockchains, such as BSC, Tron, and Solana, have relatively lower but stable market capitalizations. Notably, Tron and BSC exhibit a steady growth trend, underscoring their roles as alternative platforms for stablecoins and DeFi, especially in regions and use cases where transaction costs and speed are critical.

It is noteworthy that emerging platforms like Arbitrum, Sui, and Optimism are gradually increasing in market capitalization, indicating a growing adoption rate. This growth trajectory suggests that as these ecosystems continue to mature, they may challenge existing leaders by meeting specific needs or providing competitive transaction efficiencies. Data indicates that while Ethereum dominates in overall market capitalization, other blockchains are still attracting users and developers, signaling a potential shift in stablecoin activity as ecosystems mature.

The chart provides a more detailed view of the stablecoin market capitalization trends among the top 20 blockchains. Ethereum leads with a stablecoin market capitalization of over $8 billion, reflecting its significant role as a custodian for major stablecoins like USDT, USDC, and DAI. Ethereum's large market capitalization supports its position as a stablecoin hub, with demand primarily coming from DeFi applications and institutional users seeking compliant stablecoins. However, Tron stands out as a major competitor with a stablecoin market capitalization of around $4 billion. Tron's appeal lies in its low transaction fees and fast processing speeds, making 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 smaller stablecoin market capitalizations but play a crucial role in diversifying the stablecoin ecosystem. For instance, BSC has a stablecoin market capitalization of about $2 billion, attracting DeFi projects and retail users seeking lower fees than Ethereum. Smaller blockchains like Algorand and Stellar are positioned as niche platforms for stablecoins, typically targeting specific use cases such as cross-border payments and microtransactions.

# Existing Leaders

## Ethereum: The Solid Leader

Ethereum is often regarded as the cornerstone of decentralized finance (DeFi) and remains the dominant chain for stablecoin activity, with a stablecoin market capitalization exceeding $8 billion. Several factors contribute to Ethereum's leadership in the stablecoin ecosystem:

• Mature and Interconnected DeFi Ecosystem: Ethereum's large and mature DeFi ecosystem includes well-known protocols like Uniswap, Compound, and Aave, which heavily rely on stablecoin liquidity for their operations. Stablecoins are crucial for liquidity pools, lending, and yield farming, making Ethereum an indispensable platform for users seeking comprehensive DeFi services.

• 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 compliant, institutional-grade stablecoins. Circle's USDC and MakerDAO's DAI are the primary native stablecoins on Ethereum, serving as pillars of trust within the ecosystem.

• Diverse Stablecoins and Use Cases: Ethereum hosts a wide variety of stablecoins, including fiat-backed stablecoins like USDT and USDC, as well as algorithmic and decentralized stablecoins like DAI. This diversity allows Ethereum users to choose stablecoins that best fit their risk tolerance, regulatory needs, and preferences. For example, DAI has unique appeal due to its lack of direct ties to fiat reserves, aligning with the decentralized values championed by the Ethereum community.

• Layer 2 Solutions Addressing Scalability Issues: Ethereum faces scalability challenges, with high gas fees limiting participation from smaller users in DeFi. However, Layer 2 solutions like Arbitrum, Optimism, and zk-Rollups are significantly reducing transaction costs and increasing throughput, allowing Ethereum to maintain its leadership in stablecoin use cases without sacrificing decentralization.

As Ethereum continues to develop its Layer 2 ecosystem and fully transitions to Ethereum 2.0, its dominant position in the stablecoin market is expected to persist. With regulatory clarity surrounding stablecoins gradually emerging, institutional adoption is likely to grow further, potentially prompting more fiat-backed and compliant stablecoins to launch on Ethereum. Additionally, Ethereum's DeFi ecosystem may continue to innovate, developing new stablecoin use cases, including synthetic assets, cross-chain stablecoins, and more complex yield-generating products.

## Solana: 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 market capitalization is significantly smaller than Ethereum's, it has successfully attracted a loyal user base and is increasingly popular among retail users and developers seeking low-cost solutions.

• High-Speed, Low-Cost Transactions:
  Solana's unique Proof of History (PoH) consensus mechanism supports high throughput and low latency, enabling the network to process thousands of transactions per second at minimal costs. This makes Solana an ideal choice for applications requiring frequent transactions, such as micropayments and retail stablecoin transfers. Consequently, stablecoins like USDC and USDT are frequently used on Solana for everyday payments and rapid transfers within the ecosystem.

• Integration with Payment and Gaming Applications:
  Solana is positioned as an ideal platform for industries like gaming and payments, which demand fast and inexpensive transactions. Its user-friendly developer tools and support for high-performance applications make it a preferred platform for developers building decentralized applications (dApps) that often integrate stablecoins. For example, blockchain games like Star Atlas and music streaming services like Audius are leveraging Solana's speed and stability, using stablecoins as in-game currencies and tipping tools, respectively.

• Network Stability Issues:
  Despite Solana's high performance being a significant advantage, it also faces network outages and stability issues. These downtimes have led some users to question its reliability, especially in high-value transactions or institutional use cases. Solana's network resilience is still evolving, and it needs to address these technical challenges to gain full trust in the stablecoin and DeFi markets.

• Collaboration with USDC and Cross-Chain Solutions:
  Solana's partnership with USDC issuer Circle has been a key factor in driving stablecoin adoption on the platform. The availability of USDC on Solana provides users with a trusted dollar-backed stablecoin, enhancing Solana's appeal. Additionally, 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 its collaboration with USDC and exploring cross-chain capabilities, Solana is poised 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 challenges are addressed.

# Key Conditions for Stablecoin Growth

As the appeal of stablecoins continues to rise in the cryptocurrency and financial markets, certain ecosystem characteristics and environments are more conducive to the adoption and growth of stablecoins. These environments not only possess technical advantages but also strategically meet the needs of retail users and institutional investors. Below are the specific characteristics of blockchain ecosystems most likely to experience a stablecoin explosion, along with the latest data and trends observed in the market.

1. Low Transaction Fees

Stablecoin transactions are typically frequent and require low latency, especially in scenarios where users rely on stablecoins for everyday transactions, cross-border payments, and remittances. Ecosystems with low transaction fees and high scalability are more attractive as they enable cost-effective transactions without network congestion.

In a 2023 survey of stablecoin users, over 60% of respondents indicated that transaction costs were a primary factor in their choice of blockchain platform. Ethereum's average transaction fees often exceed $10 during network congestion, while networks like Tron and BSC have average transaction fees below $0.10. This has attracted a significant amount of USDT to migrate from Ethereum to Tron, with Tron capturing about 30% of the USDT supply, mainly due to its low fees, particularly appealing in regions with high remittance demand. Additionally, Binance Smart Chain (BSC) continues to attract retail users to its DeFi ecosystem due to transaction fees far lower than Ethereum's.

Blockchain environments that offer low fees and high scalability (such as Polygon's Ethereum Layer 2 solutions and Solana) are also well-suited for stablecoin growth. Solana can process up to 65,000 transactions per second with low average fees, particularly in payment and gaming applications, where its stablecoin adoption is gradually increasing.

2. Strong DeFi Ecosystem with Diverse Use Cases

A robust DeFi ecosystem not only attracts stablecoin liquidity but also provides utility beyond simple transactions. In environments with applications for lending, yield generation, and more, stablecoins become central to various DeFi products as stable mediums of exchange and collateral.

Ethereum hosts over 70% of DeFi applications globally, with stablecoins accounting for nearly 50% of the total value locked (TVL) in Ethereum's DeFi protocols. This widespread use of stablecoins is a core reason why Ethereum maintains its lead in stablecoin adoption, despite its higher fees. As of the second quarter of 2024, Ethereum's DeFi TVL is approximately $40 billion, with stablecoins (such as USDC, USDT, and DAI) occupying a significant portion.

Binance Smart Chain (BSC) also boasts an active DeFi ecosystem, with platforms like PancakeSwap and Venus widely using stablecoins as the foundation for liquidity pools and lending markets. In 2023, BSC's DeFi TVL exceeded $5 billion, with stablecoins accounting for about 40% of liquidity pools. This utility and accessibility of the ecosystem further encourage stablecoin adoption.

3. Interoperability

As the crypto space gradually moves toward a multi-chain ecosystem, interoperability has become an important factor for stablecoin adoption. Stablecoins need to flow seamlessly across different blockchains to meet users' needs for trading or holding assets across chains. Ecosystems that enable easy cross-chain transfers of stablecoins will benefit from increased adoption.

According to a 2023 report by Chainalysis, cross-chain stablecoin transfers accounted for about 25% of all stablecoin transactions. Solutions like Cosmos's Inter-Blockchain Communication Protocol (IBC) support the free flow of stablecoins across different chains within the Cosmos ecosystem, promoting broader liquidity and use cases.

Cosmos and Polkadot are two major ecosystems focused on interoperability. Cosmos's IBC protocol allows blockchains within its network to interact seamlessly, enabling stablecoins to transfer easily between chains, thus facilitating their adoption within specific ecosystems, such as Terra's UST (before its collapse) and other stable assets issued on Cosmos chains. Polkadot's parachain structure offers similar interoperability, which helps drive stablecoin adoption across DeFi and specialized applications.

Projects like USDC are also prioritizing multi-chain issuance, currently supporting Ethereum, Solana, BSC, and Avalanche. By achieving cross-chain compatibility, these ecosystems can enhance the utility of stablecoins and promote broader adoption.

4. Support for Regulatory Compliance and Institutional Needs

As global regulatory scrutiny of stablecoins intensifies, compliance has become a key factor for stablecoin adoption. Blockchain ecosystems that support compliance requirements (such as Know Your Customer (KYC) and Anti-Money Laundering (AML) regulations) may achieve stronger adoption rates among institutional users and compliant stablecoin issuers.

In 2023, approximately 30% of stablecoin inflows on Ethereum were related to institutional trading, primarily due to the regulatory compliance capabilities of Ethereum's stablecoins (like USDC). In contrast, chains with looser regulatory structures (like Tron) primarily serve retail users and remittance-based use cases.

Algorand and Ethereum have positioned themselves as regulatory-friendly ecosystems. Algorand supports compliant stablecoins (like USDC) and has established partnerships with regulated financial institutions to ensure compliance. Meanwhile, Ethereum offers regulatory-compliant options through Circle's USDC and MakerDAO's DAI, making it a preferred stablecoin issuance platform with significant institutional interest.

As regulatory clarity surrounding stablecoins continues to emerge, blockchain ecosystems prioritizing compliance may attract more institutional participation. For example, Avalanche's customizable subnet feature allows institutions to build regulated environments, which may attract stablecoin issuers needing to adhere to specific compliance standards.

5. Geographic and Regional Demand for Low-Cost Remittances

In regions with limited financial inclusion or high banking fees, stablecoins provide a viable alternative for everyday transactions and cross-border remittances. Ecosystems that can meet these market demands through low fees, high accessibility, and integration with payment providers have a competitive advantage in stablecoin adoption.

According to the World Bank's 2023 report, global remittance flows have exceeded $700 billion, with stablecoins capturing an increasing share of cross-border transactions in countries with limited financial infrastructure. Blockchain environments that offer low transaction fees and fast processing capabilities have the potential to capture this remittance market.

Tron is popular in regions like Asia, Africa, and Latin America, where its low fees make it an ideal choice for cross-border remittances. Tron's network processes a large volume of stablecoin transactions daily, particularly USDT, which has been widely adopted in these areas as a tool for overseas remittances without traditional banking services. Tron's average transaction fee remains below $0.10, making it an ideal platform for remittance-based stablecoin usage.

Binance Smart Chain (BSC) is also well-suited for the remittance market due to its low fees and strong presence in Asia. In these regions, Binance's exchange ecosystem has established trust. Additionally, chains like Celo are targeting emerging markets by focusing on mobile financial services to facilitate stablecoin usage among unbanked or underbanked populations.

6. High Scalability

Layer 2 solutions provide an effective way for blockchains to address high transaction costs while maintaining security and decentralization. Blockchains that integrate Layer 2 scaling solutions can support larger volumes of stablecoin transactions at lower costs, attracting users who have been excluded due to high Layer 1 network costs.

Ethereum-based Layer 2 protocols (like Arbitrum and Optimism) had a total value locked (TVL) exceeding $5 billion by mid-2024. Stablecoins account for a significant portion of usage across various DeFi applications and payments. Layer 2 solutions have reduced transaction costs by over 90%, making them highly attractive to stablecoin users.

Polygon is one of the leading Layer 2 scaling solutions, driving substantial growth in stablecoins by providing Ethereum's security with lower fees. Platforms like Aave and Uniswap have deployed on Polygon to take advantage of the reduced costs. Meanwhile, the usage of USDC and DAI on Polygon has significantly increased. Similarly, the cost-effectiveness of Arbitrum and Optimism has attracted DeFi protocols reliant on stablecoins.

As more chains adopt Layer 2 scaling solutions, stablecoin adoption in these environments may increase, allowing users to access stablecoin functionalities at lower costs.

# Potential Challengers

As global demand for stablecoins grows, emerging blockchain ecosystems like TON (The Open Network) and Sui exhibit significant potential for stablecoin adoption due to their unique infrastructure, target user bases, and growth strategies. While established blockchains like Ethereum, Tron, and BSC currently dominate stablecoin activity, TON and Sui are injecting differentiated competitiveness into the stablecoin market through innovative approaches. Below, we provide a detailed analysis of TON and Sui's potential in driving stablecoin growth, comparing them with current leaders while exploring the financial implications of stablecoin activity growth within these ecosystems.

## TON: Driving Retail-Oriented Stablecoin Adoption via Telegram Network

TON was initially developed by Telegram and later handed over to the open-source community, evolving into a high-performance blockchain. TON's market capitalization is currently around $5 billion, relatively small compared to Ethereum's $200 billion and BSC's $35 billion. Nevertheless, TON's potential lies in its unique integration with Telegram. With over 700 million monthly active users globally, this ready-made user base positions TON as a significant competitor for stablecoin adoption, especially in markets where Telegram is widely used for communication and peer-to-peer transactions.

Key Features Driving Stablecoin Adoption

1. Seamless Integration with Telegram:

• The direct integration of TON 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 usage, such as Russia, Ukraine, Turkey, and parts of the Middle East and Southeast Asia.

• Use Case Example: If stablecoins like USDT or USDC are widely adopted on TON, users could send stablecoins within the Telegram app with a single click. 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.

1. Low Fees and High Scalability:

• TON's sharding architecture supports low-cost processing of high transaction volumes, making it attractive for stablecoin transactions. TON's average transaction fee is estimated to be below $0.01, comparable to Tron and BSC in terms of cost efficiency. This economic advantage may drive adoption for everyday transactions and micropayments, particularly among fee-sensitive users.

• TON's high scalability ensures that it does not experience significant speed drops or fee increases during traffic spikes, which is crucial for stablecoin use in high-frequency trading scenarios (like remittances and retail purchases).

1. Built-in Custodial Options and User-Friendly Interface:

• TON offers both custodial and non-custodial wallet options to cater to different types of users. The embedded custodial wallet in Telegram simplifies the experience for average users, while non-custodial wallets serve crypto-savvy users focused on security and asset ownership. This dual approach can increase adoption among diverse user groups, including retail users and more experienced crypto asset holders.

If TON successfully attracts stablecoins or launches its proprietary ecosystem stablecoin, it could capture a significant share of the retail and remittance markets. Given Telegram's extensive reach, TON has the potential to attract millions of new stablecoin users in emerging markets where Telegram is popular.

If TON can capture just 1-2% of the current global stablecoin market (valued at approximately $120 billion), it could lead to a growth of $1.2 billion to $2.4 billion in stablecoin market capitalization within its ecosystem. This additional activity could increase TON's own market capitalization from $5 billion to $6-7 billion, positioning it as one of the top platforms for stablecoin transactions.

With a base of 700 million active Telegram users, even a 5% stablecoin adoption rate could yield 35 million users for TON, a significant increase compared to existing stablecoin adoption rates on other chains. This user base would not only drive stablecoin transactions but also increase demand for other TON services, fostering ecosystem growth.

TON's Value Proposition in Use Cases

The deep integration of TON with Telegram has significantly boosted stablecoin activity. This vast ready-made user base provides TON with audience coverage that other blockchain ecosystems cannot match. As of May 2024, the supply of Tether (USDT) on the TON blockchain surged from $100 million to $1.2 billion, indicating a growing adoption rate among users within the Telegram ecosystem.

Telegram's popularity in regions like Russia, Southeast Asia, and the Middle East, where traditional banking infrastructure is often lacking, provides a practical alternative for TON-based stablecoins for peer-to-peer payments and remittances. If stablecoins are natively integrated into Telegram, users could send funds seamlessly, as easily as Venmo or WeChat Pay, but with global coverage. This convenience could accelerate mainstream adoption of stablecoins in underbanked areas.

TON's sharding architecture allows it to achieve high scalability while maintaining low transaction fees, with single transaction costs typically below $0.01. This cost efficiency is crucial for micropayments and high-frequency retail use cases. For example, stablecoins on TON could be used for tipping within Telegram communities, digital content payments, or transactions for small businesses. Furthermore, the low cost of TON transactions positions it as a strong competitor in the global remittance market, especially in emerging economies. According to World Bank data, global remittance flows exceeded $700 billion in 2023, with stablecoins playing an increasingly important role in these cross-border payments. The integration of TON with Telegram could simplify the remittance process, reducing costs to a fraction of traditional banking methods, making it an ideal alternative for millions of users worldwide.

## Sui: High-Performance Blockchain Focused on DeFi and Institutional Use Cases

Sui, developed by Mysten Labs, is a relatively new blockchain with a current market capitalization of about $800 million. Although still in its early stages, Sui's high-performance capabilities and focus on DeFi make it a strong candidate for stablecoin adoption. Compared to Ethereum and BSC, Sui's market capitalization is relatively small, but its specialized technology and appeal to institutions suggest promising growth prospects in the stablecoin and DeFi space.

Key Features Driving Stablecoin Adoption

1. Advanced Consensus Protocol Supporting High Throughput and Low Latency

• Sui employs the Narwhal and Tusk consensus protocols, enabling high transaction speeds and low latency. This design provides the capability for high transactions per second (TPS), making Sui an ideal platform for DeFi applications (like lending, borrowing, or complex trading scenarios) that require high transaction speed and reliability. Low latency also benefits stablecoin users needing instant settlement.

• Use Case Example: High-frequency trading is a crucial component of DeFi, and stablecoins are vital for rapid collateral swaps and liquidity provision. Sui's high throughput may attract institutional-grade DeFi protocols reliant on stablecoins, positioning it as a competitor to Ethereum in high-value DeFi transactions.

1. DeFi-Centric Ecosystem Attracting Institutional Users

• Sui is actively positioning itself as a DeFi-centric blockchain, with its early applications focusing on lending, decentralized exchanges (DEX), and asset management. Given the critical role of stablecoins in DeFi applications, Sui's focus on building a robust DeFi foundation may drive demand for stablecoins as collateral, liquidity pools, or mediums of exchange.

• Institutional Interest: Sui's programmable infrastructure allows for customized compliance solutions, which may attract institutions seeking secure, compliance-friendly environments for stablecoin trading. This capability could facilitate partnerships with regulated stablecoin issuers, enhancing credibility and attracting institutional interest.

1. Security and Flexibility Based on Move Programming Language

• Sui utilizes the Move programming language, designed for security and asset protection. Move's resource-oriented programming model minimizes error risks, ensuring a secure transaction environment that appeals to both retail and institutional users. Enhanced security may make Sui a safe environment for high-value stablecoin transactions and complex DeFi protocols.

If Sui can capture 0.5-1% of the Ethereum-driven DeFi market (valued at approximately $40 billion), it could lead to an additional $200 million to $400 million in stablecoin market capitalization growth for the Sui ecosystem. Given Sui's current market capitalization of $800 million, such an activity surge could elevate its valuation to over $1 billion, effectively doubling its market cap.

Meanwhile, Sui's architecture and compliance potential may attract institutional users prioritizing stable and secure digital asset environments. If Sui becomes the preferred 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 in Use Cases

The use of the Move programming language enhances the Sui ecosystem, providing a secure environment for developers to build robust financial applications. Move's resource-oriented programming model reduces error risks, ensuring the secure handling of digital assets in smart contracts. This makes Sui particularly attractive for institutional-grade stablecoin use cases focused on security and compliance. For instance, programmable stablecoins deployed on Sui could support highly secure lending and borrowing protocols, enforcing collateral and repayment through algorithmic rules. This feature may attract large financial institutions looking to integrate stablecoins into their operations.

For example, in November 2024, Sui established a strategic partnership with Franklin Templeton's digital assets division, Franklin Templeton Digital Assets. This collaboration aims to support developers within the Sui ecosystem and leverage the Sui blockchain protocol to deploy innovative technologies. Franklin Templeton's involvement highlights Sui's potential in driving institutional growth.

Sui's compliance-focused infrastructure positions it as a viable platform for cross-border trade, where stablecoins can be used for real-time settlement of international transactions, enforcing trade terms through smart contracts. This institutional appeal and flexibility enable Sui to compete with Ethereum in high-value stablecoin use cases.

Disclaimer: This article is for general informational purposes only and does not constitute investment advice, recommendations, or any offer to buy or sell securities. The content herein should not be relied upon as a basis for any investment decision, nor should it be used as a reference for accounting, legal, tax advice, or investment recommendations. It is advisable to consult your own advisors regarding any legal, business, tax, or other matters related to any investment decision. Some of the information contained in this article may come from third parties, including companies invested in by funds managed by Aquarius. The views expressed in this article are solely those of the author and do not necessarily reflect the views of Aquarius or its affiliates. These views are subject to change at any time and are not guaranteed to be updated.

Reference

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