Original author: @proofofnathan
Original translation: zhouzhou, BlockBeats
Editors note: Stablecoins break the traditional payment trilemma with better, faster, and cheaper, providing global users with an open payment network that is all-weather, low-cost, and permissionless. They are evolving from intermediary tools to mainstream value carriers. Although they still face bottlenecks such as fiat currency exchange, as the network effect expands, stablecoins are expected to reshape the global financial landscape.
The following is the original content (for easier reading and understanding, the original content has been reorganized):
These three characteristics make stablecoins different from traditional payment systems and break an old rule: you can’t have all three at once. Any upgrade has a cost. Improve quality, and delivery will slow down; speed up production, and costs will rise; reduce costs, and excellence will decline. Builders usually choose to optimize one of these dimensions - better, faster, or cheaper.
Historically, innovators have typically only been able to solve two of the three, but not all at once. Stablecoins solve this innovation trilemma.
This is very important for retail users. Now they can access an open payment network that operates 24/7, settles in seconds, and charges pennies instead of percentages.
Stablecoins are better. They represent the obvious next step in money transfer. As the world gradually becomes fully digital, it is only natural that value itself enters an inherently digital form. Stablecoins facilitate this evolution. They operate 24/7 on an open network, storing and exchanging value with greater simplicity than fiat currencies. Anyone can access them, and as I’ve written before, they are programmable.
Stablecoins are faster. Settlement speed depends on the blockchain, but even the slowest networks are far faster than traditional payment systems. Ethereum transactions are completed in about 12 seconds, Tron in about 3 seconds, and Plasma aims to confirm in milliseconds. Traditional payment systems can take anywhere from a few hours to multiple business days. Faster settlements reduce opportunity costs, reduce currency risk, and in emergencies, can quickly deliver funds to those who need them at a critical moment without delay.
Stablecoins are cheaper. Regardless of which blockchain they exist on, the cost structure is lighter. The fixed fees for global transfers are almost always cheaper than the percentage fees included in card network or international bank transfers. On Plasma, USD₮ transfers do not require gas fees, pushing marginal costs to near zero and opening up the realm of true on-chain micropayments.
Better, faster, cheaper. Stablecoins solve the innovation trilemma mentioned earlier. But why does this matter and who will benefit?
Why is this important?
Stablecoins have attracted a lot of attention, but the “why” is often overlooked. The answer is simple: because they are better, faster, cheaper, and they directly serve retail users around the world.
So far, we have analyzed stablecoins through the lens of the innovation trilemma. Now let’s look at the problem from a different perspective.
Mikey Kremer summed up the importance of cryptocurrency in the digital world beautifully:
“The crypto ecosystem didn’t invent a new financial system; it invented a new venue. By moving familiar services — payments, lending, market making — into nominally ‘permissionless’ code, projects exploited the gap left by the overly regulated post-2008 framework.”
Stablecoins operate in an open field that anyone can access - this is its biggest unlocking for retail users.
In a sense, stablecoins are just tokenized forms of the U.S. dollar, which is not very radical. But as Mikey brilliantly puts it, “The real innovation is not the service itself, but the ability to provide the service without permission.”
This is exactly the advantage of stablecoins: they break the trilemma while remaining completely open and permissionless. Throughout history, real breakthroughs often come from changes in the way humans collaborate, and money, as a core collaboration tool, has always evolved with society for centuries.
But every time the currency is upgraded, the value transfer is closer to the country. Todays payment system is regulated, owned and maintained by government agencies.
One of Bitcoins core tenets is libertarianism, and as more people around the world look to free themselves from state control, they are turning to Bitcoin.
Today, this pursuit of freedom is also leading them towards stablecoins.
The simplest reason why stablecoins are better for retail users is that they exist for everyone. In this sense, the blockchain on which stablecoins rely is essentially a permissionless payment system. People around the world can access it and freely transfer funds in a better, faster and cheaper way.
But stablecoins are not a perfect solution
Bottleneck problem
It would be idealistic to think that a new system has no flaws. Stablecoins certainly have their shortcomings. The most critical bottleneck is concentrated in the last mile - the final settlement link between stablecoins and fiat currencies. The main obstacles include but are not limited to:
Liquidity and settlement issues: Converting large amounts of stablecoins to fiat, and vice versa, still relies heavily on fragmented banking channels and partnerships;
Withdrawal and actual consumption issues: There are still many frictions in using stablecoins for daily consumption or transferring them to fiat currency, which is still not as convenient as fiat currency;
Local regulation and capital controls: Many countries have yet to establish clear rules for stablecoins, and strict capital controls in some countries directly restrict citizens’ access to U.S. dollars.
Since the last mile still relies on the traditional financial system, global capital flows at this stage are still inevitably restricted by the old framework.
I believe that stablecoins will eventually become the default medium for transferring value. As this day arrives, these frictions will gradually be eliminated and consumers will truly enjoy the full benefits of stablecoins.
To achieve such a future, the network effect of stablecoins must continue to expand.
Network Effects
Stablecoins thrive on network effects. Tom Blomfield, co-founder of Monzo, explains the nature of network effects this way: “Network effects are different from other growth — the product itself gets better as more people join your network. Whatsapp and Skype are good examples. The more friends you have, the easier and freer it becomes to use them.”
This mechanism is very suitable for stablecoins. As the number of users increases, more merchants accept it, more companies begin to integrate it, and the trust foundation of the entire system accumulates.
The adoption path is usually divided into two stages: at first, people still use cash as the anchor of their mind when accepting stablecoins; but over time, they actively choose to use stablecoins because it is better, faster, and cheaper. At this point, the network effect is fully activated.
As the network effect of stablecoins continues to expand, it is naturally more suitable for a wider range of retail users. Although the threshold for using stablecoins is already low and the networks they are on are mostly permissionless, their global adoption is still gradually advancing. There are two key forces that really drive adoption:
Organic network effects spread
Innovative ways to make stablecoins more applicable to everyday life
The future of stablecoins is happening slowly but steadily.
Shhhigurh accurately describes the current state of this transition in The Stablecoin Paradox:
“The stablecoin ecosystem processes fewer transactions than Visa or PayPal, but the average transaction amount is much larger. In 2023, Visa processed 276 billion payments, averaging $54 per transaction; PayPal processed 25 billion, averaging $61. Fedwire processed only 193 million, but each transaction was as high as $5.6 million. In contrast, stablecoins processed 2.6 billion transactions in 2023, averaging $4,200 per transaction, right in the middle between retail and institutional transactions.”
This passage reveals a key trend: stablecoins are still in the middle zone - between daily retail card swipes and institutional-level large-value transfers. It has not yet become the default track for processing small-value, high-frequency payments - Visas card swipes and PayPals clicks still dominate this level.
However, due to the obvious advantages of stablecoins in terms of cost, speed and openness, it is only a matter of time before it further penetrates into daily consumer payment scenarios.
The world after stablecoins are fully popularized
I have long thought and written about how the future stack structure of a stablecoin-based payment network will be built.
If stablecoins truly become a mainstream payment tool, we may see a whole new paradigm of financial interaction:
Wallet = account, no need to open a bank account, global users only need one wallet address to receive and pay;
Smart contract = router, fund allocation, payment splitting, supply chain settlement, automatic execution of financial products, all completed on the chain;
On-chain identity = trust layer, social graph, reputation system and payment system are connected, identity is credit;
Open API = application interface, any product can directly integrate stablecoin payment without the need for intermediary agency permission;
Micropayments activate long-tail scenarios, from content rewards and creator income to real-time salary distribution and IoT device settlement, which will gradually become normalized.
In other words, stablecoin is not just a digital dollar, but the key to opening a new financial world that does not require permission, has real-time settlement, and is globally interconnected.
The distance from the current average transaction amount of US$4,200 to the future content reward of US$0.42 is slowly built up by infrastructure, supervision, experience and network effects.
We are witnessing the making of an era. Are you ready?
What I rarely explore in depth, though, is the ultimate, ideal vision.
If retail adoption continues to grow exponentially, we’ll eventually end up with a situation like this:
Stablecoins no longer need to be supported by seamlessly convertible into cash, but directly become the default form of currency. Everyone uses stablecoins as the underlying payment layer, replacing fiat currency for daily settlement.
In this future world:
Value naturally circulates on the chain.
People are used to using stablecoins to transfer, receive payments, pay wages, and shop.
Merchants, businesses and even governments use stablecoins as their main currency.
Traditional fiat currencies become off-chain assets, while stablecoins become the mainstream money in real life.
In such an ideal utopia, stablecoins have completely won. This is not only a change in the form of currency, but also a picture of a decentralized, cross-border, real-time programmable financial infrastructure that completely replaces the old financial system.
We’re not there yet, of course. But you can sense where the trend is heading:
From fringe players to mainstream adoption, stablecoins are rewriting the age-old question of “what is money?”
Ive obviously thought too far ahead. That ideal future is still far from our current world. The existing fiat currency system still feels safe and reliable, even though it has long fallen behind in terms of cost, speed, and accessibility. The key to achieving that future lies in whether the network effect can continue to expand.
Traditional network effects usually occur in walled gardens, such as Facebook, Instagram, Monzo, and Revolut - the more users, the better the experience, but the platform is closed.
Stablecoins flip this model on its head: they run on open, permissionless blockchains rather than closed systems.
But even so, as more and more people use stablecoins for payment, the overall user experience will continue to improve: more merchants and higher acceptance; faster transfers and lower fees; wallets, infrastructure and user interfaces are more user-friendly; trust and liquidity are constantly accumulating.
Imagine if everyone in the world had ready access to a borderless, permissionless, low-cost payment network, sending money quickly and cheaply would no longer be a privilege but a basic human right.
Final Thoughts
All of this is happening because stablecoins bring real benefits to ordinary users around the world: better use, faster transfer, cheaper, and most importantly: anyone can use it without permission.
