RootData Roundtable: The Development, Challenges, and Opportunities of Stablecoins

Compiled by: Scof, ChainCatcher

Against the backdrop of the booming global crypto market, stablecoins are becoming a hot topic in the industry as a bridge connecting traditional finance and the blockchain world. Represented by PayPal's PYUSD and XRP stablecoin, more and more institutions and enterprises are starting to lay out their plans in the stablecoin market, exploring the potential and opportunities in this field. In this discussion, several guests from Perena, IOSG VC, Frax Finance, BiXin Ventures, Plume Network, and OKX comprehensively analyzed the future development direction of stablecoins, covering market impact, institutional investment opportunities, and innovative technology applications. Meanwhile, the topic extended to trends such as AI agents and RWA, discussing how new technologies can help blockchain and DeFi achieve mass user adoption.

Click here to listen to the full discussion:

https://x.com/RootDataCrypto/status/1875149495287324898

Ray :

Hello everyone, I am Ray from ChainCatcher. The topic we are going to discuss today is the future direction and opportunities of stablecoins. The market is currently in the deep stage of a bull market, and various stablecoins are receiving increasing attention. For example, XRP has launched its own stablecoin, and PayPal has introduced PYUSD. Many large institutions and projects are also accelerating their plans or announcing the creation of their own stablecoins. For instance, PayPal collaborates with BlackRock, USDT, and other family funds, indicating that traditional institutions are accelerating their integration with the crypto world.

Today, we are very honored to invite several guests to discuss the topic of stablecoins. Let's start with a brief introduction from each guest; please introduce yourself and your project.

Shina :

Hello everyone, I am Shina from Perena. I am glad to communicate with you all. I am mainly responsible for growth and design at Perena. Perena is a stablecoin infrastructure on Solana, and we have launched several products to support efficient token exchange and liquidity provision on Solana.

Henry:

Hello everyone, I am Henry from IOSG, mainly responsible for investment and research. Recently, I have been focusing on stablecoins in the Ethereum ecosystem and also looking into the Solana ecosystem, such as the Perena mentioned by Shina. I have a positive outlook on their team and development prospects. Additionally, we are researching other stablecoin infrastructures and the opportunities for integrating stablecoins with payments.

Jae : Hello everyone, I am Jae from Frax Finance, responsible for business development. Recently, we released the Frax 2030 vision and announced a partnership with BlackRock. Our core dollar-pegged stablecoin Frax may be renamed to frxUSD, and the governance token FXS will also be renamed to FRE, around mid-January. To maintain consistency, I will still refer to them as Frax and FXS today. I am looking forward to sharing ideas with everyone in this discussion.

Vivi :

Hello everyone, I am Vivi from BIXIN Ventures, serving as the head of marketing. We recently incubated a stablecoin payment public chain called BenFen, and I am excited to share some thoughts here.

Shukyee :

Hello everyone, I am Shukyee from Plume Network, serving as the Chief Strategy Officer. I joined Plume in June last year. We are building a chain aimed at Arbitrum+DeFi and recently completed a Series A financing, as well as held a pre-staking event for our staking protocol NEST. Everyone is welcome to pay attention.

Kiwi:

Hello everyone, I am Kiwi from OKX Ventures. I am responsible for the research team here, and I am glad to communicate with you all!

Ray *: Recently, there have been many new developments in the stablecoin market, such as PayPal's PYUSD and XRP's stablecoin. What do you all think about the impact of these new stablecoins on the overall market landscape?*

Shina :

For us at Perena, the rapid growth of the stablecoin market over the past year is a very positive signal. It indicates that the decentralized stablecoin infrastructure we are building aligns with market demand. With the launch of new stablecoins, such as PayPal's PYUSD and XRP's stablecoin, and even Sky USD in the Solana ecosystem, the issuance of these stablecoins is rapidly increasing. For instance, Sky USD has minted over $100 million in stablecoins on Solana. This is an important development and validates the market's rapidly increasing demand for price-stable digital assets (rather than speculative assets).

Additionally, we observe that blockchain technology is gradually being adopted by the mainstream market. Especially with PYUSD, backed by credible financial institutions, I believe this will bring a large number of new users to the stablecoin ecosystem and help demonstrate the practical application value of stablecoins and crypto technology to more people.

Regarding XRP's stablecoin, I think this is a very interesting development. It is based on the XRP Ledger, showcasing innovative potential in the field of cross-border payments. In particular, it adopts a different blockchain from the current mainstream stablecoin liquidity, which is on Ethereum and Solana, and this differentiated choice makes me very optimistic about its future development.

Shukyee :

Stablecoins play a crucial role in the blockchain ecosystem. We have always believed that stablecoins are the key bridge to drive users from Web2 to Web3. Compared to applications on other chains, stablecoins provide users with a smoother onboarding experience, effectively lowering the barrier to entry, and becoming a model for traditional finance users to enter DeFi.

At Plume, we have established partnerships with several stablecoin projects, including PayPal's PYUSD, Mountain, Zero, and Athena. We believe that stablecoins can not only serve as on-chain yield assets but can also become important tools in the payment sector in the future. We also plan to launch Plume's own stablecoin as an important asset in the ecosystem.

There are also many interesting trends emerging in the market, such as some government-backed stablecoin projects, like the Hong Kong Monetary Authority's Project Sela. Meanwhile, some large traditional enterprises are also entering the crypto space and launching their own stablecoins, such as the stablecoin project released by JD.com, and some telecommunications companies are exploring similar directions. These trends indicate that stablecoins are becoming a core tool connecting traditional finance and the blockchain world.

It can be said that this year will be a key development year for RWA and stablecoins, with stablecoins being one of the most important tools.

Jae :

I completely agree with the points made by the previous speakers. As our founder Sam said, stablecoins represent a market with significant potential, and the entry of giants indicates their confidence in the future of stablecoins. The launch of stablecoins by a typical Web2 payment company like PayPal is not a spur-of-the-moment decision but the result of long-term deliberation and preparation, serving as a demonstration for other Web2 companies.

PayPal can be considered a typical Web2 company; their launch of a stablecoin is not a whim but a well-considered outcome after years of thought. Their PY USD shows that every L2 ecosystem needs a strong stablecoin to support its development. PayPal has hundreds of millions of accounts, with a substantial number of active users. Their willingness to enter this new field and compete with decentralized projects is itself a very optimistic sign.

We have a joke in our community that we not only want to attract DeFi yield hunters but also "grandmas" to come on-chain because we are developing a more user-friendly UI to make DeFi easy to use. This is also why our stablecoin has transitioned from Frac to Frax USD, aiming to drive mass user adoption on-chain.

I believe that with companies like PayPal entering the market, other Web2 companies will follow suit. The entry of these traditional companies into the stablecoin market marks a significant development and transformation in this field.

Henry:

From an investor's perspective, the rapid growth of the stablecoin market is mainly due to the demand for liquidity mining and the increase in various trading activities, especially in asset trading between ecosystems like Ethereum and Arbitrum. I believe that the high demand for liquidity mining is the primary factor driving the expansion of the stablecoin market.

Additionally, there is a significant increase in market demand for high-yield, scalable stable financial products. Any product that can provide stable and scalable returns is a key pursuit in the current market, which is also an important reason for the sustained growth in demand for stablecoins.

At the same time, I have also noticed the development of the CDP (Collateralized Debt Position) market. Currently, some decentralized stablecoins are among the few truly decentralized products in the market. However, due to the strong competition from other participants in the stablecoin space, these decentralized stablecoins face certain pressures in the market.

Overall, the growth of the stablecoin market is driven by yield, while decentralized stablecoins need to find better ways to establish themselves in a competitive market. This is my observation and perspective on the current market.

Vivi:

I also believe that the launch of PayPal's PYUSD and XRP stablecoin indicates a very strong market demand. The entry of large companies shows that stablecoins have become an important segment in the crypto market and even in fintech. Coupled with the gradual shift in the regulatory stance in the U.S., more and more policymakers are adopting a more open attitude toward crypto innovation. Some experts predict that the market value of stablecoins could reach $400 billion or even higher by 2025.

We at Bixin Ventures are also participating in this wave, launching a Layer 1 based on stablecoin payments, aiming to provide a blockchain payment solution that is faster, safer, and easier to use than traditional Swift.

Ray *: Okay, let's derive another question: As traditional finance and crypto continue to merge, what opportunities do you think stablecoins can bring to institutional investors? This may lean more towards an investment perspective, so I would like to hear from a few guests with research or investment backgrounds first.*

Henry:

I believe that the most attractive stablecoins to investors right now are those centered around yield. These stablecoins can create high returns through various means, such as using different collateral or running algorithmic systems. As long as they can generate considerable yields, these types of stablecoins are worth investing in. I personally have a positive outlook on projects that can generate yield through innovative methods.

Additionally, I am also paying attention to some stablecoin issuance and infrastructure projects, such as M0. These infrastructures can serve as a bridge between traditional institutions and the crypto space, providing support for institutions and enterprises to enter the crypto ecosystem.

Finally, interest rate products are also an important direction. For example, interest rate products like Pendle are very meaningful in the current market. They can serve as speculative tools and also be used for hedging risks, further enriching the application scenarios of stablecoins.

In summary, the three main directions investors are currently focusing on are: yield-centric stablecoins, stablecoin issuance infrastructure, and interest rate products. As for regulated fiat-backed stablecoins, I think they are less attractive to investors because they are relatively conservative and lack appeal. This is my perspective on the current market.

Kiwi :

Yes, I believe stablecoins have potential for collaboration and development in multiple areas. Here are my thoughts:

1. Shared Liquidity:

Stablecoins enable fast and low-cost capital transfers, which are very important for multinational companies (whether for legitimate purposes or otherwise). This shared liquidity helps improve the efficiency of global funds and encourages more enterprises to enter the blockchain space.

2. Promoting Enterprise Applications:

We have recently communicated with many companies and found that they are very interested in stablecoins. Many enterprises hope to build their own stablecoin ecosystems to facilitate transactions and payments. This is crucial for their business, as stablecoins can significantly enhance transaction efficiency and reduce costs.

3. Regulatory and Financial Integration:

Stablecoins can also be deeply integrated with the traditional financial sector, such as combining with the tokenization of financial products, especially attracting a lot of attention in the liquidity market. For example, using stablecoins can easily manage assets and provide new tools for investment, which is an important opportunity for market participants.

Overall, stablecoins are not only a key tool but also an important bridge connecting blockchain and traditional finance. I believe they will play a greater role in the future; these are some of my observations and viewpoints.

Jae :

Yes, I am not a member of a research institution or investment company, but I can share some observations from the perspective of an ordinary consumer:

In South Korea, stablecoins indeed provide many opportunities. Currently, due to the unstable political situation in South Korea, such as frequent presidential impeachments and changes, the exchange rate of the Korean won has been affected and has become increasingly weak. As a result, some Koreans have started purchasing other fiat currencies, such as yen or dollars, as hedging tools. They would exchange these foreign currencies back to won after the exchange rate changes, similar to a short-term investment strategy.

For those familiar with DeFi, they would choose to use stablecoins to hedge against currency volatility risks. This is not only more convenient but also allows them to earn additional yields by depositing stablecoins into currency markets like Frax Finance or other platforms. Therefore, these users can leverage the advantages of stablecoins on multiple levels.

As for the regulatory environment in South Korea, policies indeed vary by country. In South Korea, there is generally a relatively cautious attitude towards cryptocurrencies and stablecoins. Korean exchanges are often reluctant to list stablecoins developed by local teams, which makes it difficult for local projects to promote themselves in the domestic market. At the same time, institutional investors looking to operate in South Korea also face cumbersome compliance requirements, crossing numerous regulatory hurdles.

In summary, although there are many potential opportunities for stablecoins in South Korea, their promotion and application still need to overcome many challenges due to the market's regulatory attitude and policy environment.

Ray :** The next question is about yield-bearing stablecoins. What potential advantages do they have compared to traditional stablecoins? Please share your views, focusing on regulatory, compliance, and application differences.**

Shukyee :

As a member of the Plume team, we have been communicating with many traditional business owners, traditional institutions, and asset issuers, aiming to bring these assets on-chain so they can be converted into on-chain RWAs. In this process, one key question we face is: what kind of crypto capital can be used to pay for or invest in these on-chain assets? This is not only a question that the chain itself needs to consider but also a challenge that the entire ecosystem and retail users need to face.

1. On the Asset Side:
   We have high flexibility on the asset side. Currently, the tokenization standards for assets are becoming increasingly mature, and many compliance and legal teams are providing third-party services to help traditional asset issuers smoothly go on-chain. This makes the process of bringing assets on-chain smoother and more efficient.

2. On the Capital Side:
   The challenges on the capital side are more complex. Currently, in the process of connecting Web2 and Web3 (TradFi and DeFi), many traditional asset issuers cannot accept most crypto assets. For example, while stablecoins (like PayPal's PYUSD, USDC, and USDT) are widely accepted in the payment sector, they are currently primarily used as payment tools rather than investment tools.

At Plume, we are working hard to establish collaborations with different types of capital. For instance, although initially many asset issuers were reluctant to accept USDT, through our efforts, we have gradually pushed them to accept it. Additionally, we are promoting the issuance of some new stablecoins on Plume, which may also be recognized by some asset issuers in the future.

Two Development Paths:

1. Only as On-Chain Payment Tools: Stablecoins can be used solely as payment tools for on-chain transactions, meeting the basic needs of the on-chain ecosystem.

2. As a Bridge for Users to Go On-Chain: Stablecoins can not only serve as payment tools but also become an important bridge to attract more Web2 users into the Web3 world.

Our goal at Plume is to lower the barriers for both Web2 and Web3, enabling them to collaborate closely on the same platform to drive RWAs on-chain. This open attitude allows us to seize new opportunities and continuously explore more efficient solutions. That is my perspective.

Ray :** From an investment perspective, what key factors should be considered when evaluating stablecoin projects?**

Jae :

When considering stablecoin investments, market acceptance is a very important factor. Stablecoins need to be widely recognized in the market and have actual use value to become worthy investment projects. For example, whether they can be used to split bills with friends, shop on overseas e-commerce platforms (like Shopify), or serve as a universally accepted payment tool directly impacts their value. A stablecoin that is trusted and regarded as truly equivalent to the dollar is likely to dominate the market.

In addition to market acceptance, the functionality and yield of stablecoins are also crucial. From an investment perspective, those that allow users to earn more returns through holding or using the token are more attractive. For instance, whether stablecoins can provide high returns or be used as investment capital for further appreciation determines investors' interest. Furthermore, for ordinary users, the convenience of using stablecoins is also a key evaluation criterion, such as whether stablecoins can be a reliable choice for paying daily expenses.

In summary, the market position and functional value of stablecoins are not only crucial for professional investors but also have a profound impact on ordinary users who use cryptocurrencies daily. Choosing a stablecoin that has influence in the market and is widely accepted is key to achieving long-term investment value.

Shina :

Okay, while we are not investors in stablecoins but rather a project focused on stablecoins, I strongly agree with Jae's emphasis on the importance of market influence. On this basis, I would like to add a key point, which is the liquidity of stablecoins.

For many investors holding large amounts of capital (such as millions of dollars), a major concern is whether they can withdraw funds from the protocol at any time and whether they will face liquidity constraints when using a certain stablecoin. The current trend is that the number of stablecoins issued on-chain is increasing, but this may also lead to further fragmentation of the stablecoin ecosystem. More issuers and more stablecoins may mean that market liquidity is dispersed, thereby increasing the demand for interoperability among stablecoins.

The interoperability of stablecoins, that is, the ease of exchange between stablecoins and their acceptance in different trading mediums, directly determines their trust and attractiveness among investors. This interoperability and liquidity issue is also a key focus that we at Perena are actively addressing. We hope to aggregate the liquidity of future issuers' stablecoins to provide a convenient liquidity access point for those looking to bring assets on-chain through stablecoins. Under this mechanism, issuers can not only quickly obtain liquidity support, but their stablecoins can also be more easily accepted and traded by investors.

Therefore, I believe that when considering stablecoin investments, liquidity and interoperability are two core indicators that cannot be ignored. This not only affects the ease of exit for investors but also determines the sustainable development and attractiveness of the entire stablecoin ecosystem. This is my view on this topic.

Henry:

From an investment perspective, there are several key indicators to focus on when evaluating stablecoin projects:

First, the governance mechanism is fundamental. Whether a stablecoin project has a sound governance system directly impacts its long-term stability and sustainable development. Governance relates not only to the transparency of the stablecoin's management but also to investor trust.

Second, we will pay attention to the actual application rate, which is the degree to which the stablecoin is adopted. For example, if a stablecoin can be used across multiple ecosystems, such as being widely applied in Layer 2 or DeFi protocols (like Aave or Pendle), then its market acceptance and competitiveness will be stronger. This broad application scenario can reflect the market influence of the stablecoin.

Anchoring stability is a core consideration. Whether a stablecoin can consistently maintain a stable relationship with its anchor asset (such as the dollar) is fundamental to its survival. If it cannot promptly restore its peg in the face of market fluctuations, this will significantly undermine investor confidence.

Next, we will evaluate the yield. In addition to traditional stablecoins like USDT and USDC, many emerging stablecoins attract investors by offering yields. If the yield is below 3%-4%, we may question the project's attractiveness, as such returns are insufficient to stimulate investment interest.

Finally, we will consider market positioning and competitive landscape. If competition in a market is too fierce and there are too many participants, it may lead to dispersed liquidity and resource waste. In such cases, we typically avoid entering that field.

In summary, these indicators help us comprehensively assess the investment potential of a stablecoin project while also helping us avoid those with higher risks or insufficient attractiveness. This is the basic analytical framework for stablecoin investments.

Ray :** Okay, thank you! In addition to the stablecoin projects mentioned earlier, there are many popular tracks and topics in the market that have attracted our attention, such as AI agents or trends like RWA. What are your thoughts on these? We can treat this as a brainstorming topic, not limited to stablecoins.**

Shina has just answered my question. If possible, I hope everyone can further introduce related content. Now is a free discussion session, and everyone is welcome to speak freely!

Shukyee :

From Plume's perspective, to become a leading chain in the RWA and DeFi space, we must first be an open chain. This means we need to maintain an open mindset towards various types of DApps. For example, regarding AI agents and Meme Coins, we have been exploring with different developers and teams.

Regarding AI agents, we believe they can serve as an overlay layer to help users better participate in the Plume ecosystem, such as guiding users in liquidity mining or earning yields. Meme coins can be seen as a reflection of some aspects of the real world, so there is no doubt they will become part of the ecosystem. Of course, initially, we will focus on bringing traditional financial (off-chain) assets on-chain (on-chain) to serve DeFi users, but in the long run, many new trends will emerge.

As a chain, we always maintain an open attitude and are willing to collaborate with any developers and teams to explore the possibilities of bringing new trends into the Plume ecosystem.

Andy :

Hello everyone! I am Andy, and I am very grateful for the invitation to participate in this discussion. Let me briefly introduce myself: I am currently responsible for ecosystem and strategy at Frax Finance and also involved in a project called IQ. The discussions I have heard today have piqued my interest, so I want to share some of our dynamics and views.

First, regarding the hot topics we mentioned, I want to focus on the IVM tech stack that Frax is building. This is a brand-new consensus mechanism—a consensus system based on "Proof of Insurance." This mechanism utilizes AI and machine learning models to verify transactions on the blockchain network. We believe this technology will enable AI agents to become fully autonomous in the future, eliminating single-point control issues and achieving seamless collaboration between AI and blockchain.

Additionally, the IQ project is about to launch a platform called IQ ATP, the "Agent Tokenization Platform." Currently, there is a lot of discussion in the market about AI agents, but we believe this is just the beginning. Many people may view AI agents as tools similar to reply bots or for earning social points, but we hope to combine them with DeFi practicality. This will be an important opportunity to drive breakthroughs in stablecoins and DeFi use cases, as there is still a high learning curve in DeFi.

Imagine that with the help of AI agents, the process of investing in DeFi could become as simple as purchasing a meme coin on Solana. A transaction that originally required 10 steps could potentially be completed in just 1-2 steps. This would not only significantly reduce the difficulty for users to get started but also attract more users into the crypto and blockchain space.

We are developing a platform on Frax's L2 network that combines the IVM tech stack, allowing users to create and use AI agents. These AI agents can not only be used for entertainment but also provide practical DeFi and crypto use cases, thereby promoting the development of blockchain technology and ecosystems.

In summary, we hope to combine the potential of AI agents with the practicality of DeFi through these technologies and platforms, making crypto and blockchain truly accessible to the masses. That is what I wanted to add to the current topic; thank you all for your attention!

Ray :** Okay, thank you for sharing, Andy. Regarding the future development of stablecoins or projects like Frax Finance, do you have any suggestions? For example, what are your thoughts or suggestions regarding other projects within the Frax ecosystem? Please share your views.**

Andy :

I believe one of the biggest challenges we face in my strategic role at Frax is how to make it easier for the public to enter the DeFi space. This is actually a common challenge for many DeFi protocols, as the learning curve required to understand DeFi is very steep. For example, in Frax, users need to understand lending mechanisms, AMOs (Algorithmic Market Operations), the differences between stablecoins like Frax USD, USDC, USDT, and what fully-backed and partially-backed stablecoins are. This complex information is indeed difficult for ordinary users to digest.

Even at the UI and UX level, existing designs can make users feel complicated and confused, thus affecting the user experience. Therefore, my personal view is that we need to simplify these processes. While I cannot provide specific suggestions for other projects, at Frax, our vision is to achieve this through our upcoming 2030 Strategic Plan. Specifically, by 2025, we hope to lower the barriers for new users entering DeFi by optimizing the user experience.

We realize that merely providing documentation and products and letting users learn and operate on their own is far from sufficient. This approach does not effectively drive user growth. Therefore, our goal is to enable users to participate in yield opportunities with simple operations (like one or two clicks). Once users see that they can earn actual returns through these opportunities, they will be more willing to explore and learn further, thus integrating into the entire ecosystem.

In our view, the key breakthrough point will be AI agents. AI agents can help automate complex processes for users, such as selecting yield opportunities and optimizing strategies, thereby truly simplifying the experience and attracting more users into the DeFi space. This not only enhances user experience but also brings more growth opportunities to the entire ecosystem.

Ray :

Thank you all for sharing. This discussion comes to an end, and I hope we can continue to exchange insights in the future.