Original by Huang Fan and Qin Shuo on WeChat
Recently, stablecoins have become a focal point in the capital market.
Not long ago, after Circle, the first stablecoin listed in the United States, was listed and became popular among investors, it initiated a strong upward trend on its first day of listing, soaring 168% from its $31 initial price. The stock continued to rise for some time thereafter.
In the Asian market, Guotai Junan International, which obtained a Hong Kong cryptocurrency trading license on June 25, also closed with a significant increase of 198.4% that day. These scenes clearly demonstrate the popularity of the concept of stablecoins in the capital market.
With legislation passed in the United States and China’s Hong Kong regarding stablecoins, internet giants like JD.com and Ant Group are also eagerly preparing to issue stablecoins in Hong Kong.
Indeed, not only internet giants but also various investment professionals are filled with anticipation for the “future” of stablecoins, expressing their belief that they cannot miss out on stablecoins after missing out on Bitcoin.
Is stablecoin really an opportunity that investors have been waiting for?
The recent hype surrounding stablecoin concepts mainly stems from ordinary investors’ lack of understanding and excessive expectations towards stablecoins.
As a new phenomenon, stablecoins are easily mistaken for virtual currencies similar to Bitcoin, which can be profited from through speculation on prices.
In fact, stablecoins are not investment or speculative assets but payment tools without appreciation potential, and their current application scenarios are relatively fixed. Therefore, retail investors should not view them as assets for speculation.
However, in today’s deep transformation of the financial industry by cryptocurrencies and blockchain technology, stablecoins have become an inevitable topic in the digital economy. Not only do they serve as a “stable anchor” to address the volatility of crypto assets, but they are also the driving force behind the rapid growth of the Web3 ecosystem and decentralized finance (DeFi).
So, when can stable coins truly achieve “stability”? What is their essence and what risks do they face? How do they influence and shape the Web3 world? We will delve deeper into these questions.
What kind of asset is a stable coin?
A stable coin is a type of cryptocurrency that anchors itself to a relatively stable external asset (usually fiat currency, such as the dollar or euro, or a basket of assets).
The design goal is to provide a “value anchor” for the blockchain’s financial ecosystem amidst highly volatile cryptocurrency markets, allowing users to enjoy the transparent, decentralized, and efficient advantages of blockchain while avoiding the inconvenience caused by price volatility.
Value stability: By anchoring to external assets, it strives to maintain a fixed exchange rate between the token price and the anchored asset.
Cryptocurrency characteristics: Retaining the advantages of blockchain technology, including decentralization (some types), programmability, global circulation, and low cost, fast settlement.
Main types of stable coins can roughly be divided into four categories based on their stabilization mechanism and collateral support method:
1. Currency-backed stable coins
Their mechanism involves the issuer holding equivalent fiat currency or high-liquidity assets as reserves. For example, issuing one USDT requires there to be $1 in bank deposit accounts corresponding to the value of the token. It needs to be audited regularly by a third party, but transparency relies on centralized operators.
Main advantages: Simple mechanism, theoretically high stability (if reserves are genuine);
Disadvantages: Relies on issuer reputation and compliance, centralization and custody risks, and transparency varies;
Typical representatives: USDT (Tether), USDC, BUSD, TrueUSD, Pax Dollar, etc.
2. Collateralized stable coins
Their mechanism involves chain-locking excess crypto assets (such as Bitcoin) as collateral, managed and settled automatically by smart contracts.
When the value of collateral drops, the system automatically auctions off the collateral to maintain solvency. The collateral ratio often exceeds 100%.
Main advantages: More decentralized, transparent on-chain, resistant to censorship;
Disadvantages: Mechanism complex, high volatility risk for collateral, requires overcollateralization, low capital efficiency;
Typical representatives: DAI, sUSD, LUSD, etc.
Its mechanism is adjusted through algorithms and smart contracts to regulate the issuance of stablecoins, not relying or partially relying on collateral. Commonly seen as a “dual currency system,” where a fluctuating coin (such as LUNA) and a stablecoin (such as UST) coexist, balancing prices through arbitrage mechanisms.
Main advantages: Theoretically highly decentralized, high capital efficiency;
Disadvantages: Extremely dependent on market confidence and arbitrage participation; can easily fall into a “death spiral” once confidence collapses; historical failure cases are numerous (such as UST);
Typical representatives: UST (collapsed), FRAX (mixed mode).
4. Commodity Collateral Stablecoins
The mechanism is anchored to physical commodities such as gold, silver, etc., with each stablecoin representing a certain amount of ownership in real assets. High-credibility custody and auditing mechanisms are required.
Main advantages: Resists inflation and provides exposure to commodities;
Disadvantages: Limited commodity volatility, limited liquidity, high centralization;
Typical representatives: Paxos Gold, Tether Gold.
Where does the fundamental value of stablecoins lie?
Major virtual cryptocurrencies (such as Bitcoin, Ethereum, etc.) have high volatility, making them difficult to serve as daily pricing, payment, and value storage tools.
For example, using Bitcoin to settle a coffee purchase would be unimaginable if the price of Bitcoin was already over $100,000 at that level. Moreover, from deciding to buy the coffee to having it ready in a matter of moments, the Bitcoin price could suddenly rise by more than 10% (which is over $10,000).
这样的支付和收款是极为不便利的。因此需要稳定币这个中间介体来进行交易结算。
同时，投资者在市场不确定时希望将资金从波动性资产“避险”到一个稳定、但又不离开区块链生态的资产。而DeFi应用则更需要一个稳定的价值单位，作为借贷、衍生品交易等的底层基础。
因此，连接虚拟货币与现实中的日常商业以及金融交易场景是稳定币的最核心功能。除此之外，还有其他的使用场景包括——作为加密货币交易媒介、作为避险与价值储存工具、充当DeFi活动基石、用于支付与结算，以及用于企业与国库管理等。
其实，稳定币还有一个非常重要的发展场景——跨境支付。比如，我近期到了被认为是“全球下一个机会之地”的非洲，发现中国货在当地是性价比高、品质优良的标志，不少国内贸易商也很想把国内的货卖到非洲，但非洲国家的金融体系发展程度普遍比国内滞后20年以上。当地的进口商往往拿不出美元、欧元等硬通货来结算货款，如果支付他们当地的货币则中国卖家普遍很难接受，而此时稳定币就能发挥其巨大的潜能，因为它的区块链特性将大大提升国际汇款效率，降低成本。
稳定币会替代传统央行发行的货币吗？
既然稳定币有上述各种使用场景上的优势，那么可以很快取代各国央行发行的纸币或数字货币而迅速走入普通百姓的钱包中吗？
我认为一定不会，因为稳定币并非由各个国家与地区央行所发行，也没有主权信用做背书，更没有主权背后的税收基础来支持。
Instead, holders of stablecoins must confront a series of “unstable” issues, including the risk of decoupling, trust and transparency concerns, regulatory risks, centralization risks, systemic risks, technological and hacking risks, and bank system risks, among others.
In fact, there is much that regulators can do. For instance, requiring reserve compliance, formulating and collaborating with international regulations, guiding innovation directions, accelerating the CBDC process in central banks, etc. The value of stablecoins has become one of the focal points of global financial and regulatory attention. How will further regulatory efforts evolve? We can wait and see.
Regardless, as the current Web3 digital economy becomes a trend in the development of the digital economy, stablecoins have their positive role and room for growth.
The core of the Web3 ecosystem is decentralized applications (DApps) and decentralized finance (DeFi), while stablecoins serve as anchors and settlement units ensuring their stability. Without stablecoins, DeFi lending, DEX liquidity, and on-chain derivatives would struggle to scale due to price volatility.
Stablecoins, as a type of “digital currency (e.g., the dollar)”, greatly enhance the practical implementation capabilities of Web3 payments, cross-border transfers, corporate Treasury management, etc., enabling on-chain economies to link real-world assets, promoting asset tokenization, creator economies, and the development of new business models like GameFi.
In summary, stablecoins are the core bridge connecting the traditional financial world with the Web3 digital economy. By providing price stability, they address the core pain points brought by high volatility in the blockchain world, becoming fundamental elements for new financial applications such as DeFi, on-chain payments, and asset tokenization. Meanwhile, stablecoins themselves face multiple challenges: trust, transparency, regulation, and technology.
In the future, with the perfection of regulatory frameworks, advancements in technology, and the continuous expansion of real-world application scenarios, stablecoins are expected to truly “stabilize” and play a more crucial, regulated, and innovative role in the global digital economy.
No.6428 Original First-Time Article | Author: Huang Fan
Title: When Will Stablecoins Truly “Stabilize”?