The final product of Crypto Assets: stablecoin

Last year, three major events marked the entry of stablecoins into the mainstream:

1. Tether generated nearly $13 billion in profit with fewer than 200 employees;

2. Trump's inauguration and the shift in the U.S. attitude towards the regulation of digital assets;

3. Stripe acquires stablecoin infrastructure company Bridge for $1.1 billion.

When someone is making a fortune in a thriving ecosystem, regulation is becoming increasingly clear.

If you are issuing or utilizing stablecoins to develop your business, I hope this guide can help you understand how seasoned practitioners view this field.

To provide a multi-faceted perspective, we draw unique insights from leading contributors at the forefront of stablecoin transformation.

Let's get started!

Definition of stablecoin

Stablecoins are typically liabilities denominated in US dollars, supported by reserves of assets with equivalent or greater market value.

There are mainly two types:

• Fiat Support: Fully backed by bank deposits, cash, or low-risk cash substitutes ( such as government bonds ) collateral.

• Collateralized debt position ( CDP ): Mainly over-collateralized by crypto native assets ( such as ETH or BTC ).

The fundamental determining factor of stablecoin utility is its "peg" to the underlying asset ( USD ). This peg is maintained through two mechanisms: primary redemption and secondary markets. First, is it possible to immediately redeem the stablecoin liabilities for an equivalent amount of reserve support? If not, is there a deep and enduring secondary market where stablecoin liabilities can be traded at the pegged exchange rate?

Due to the unpredictability of the secondary market, primary redemption is a more durable peg mechanism. In addition, there have been many attempts at low-collateral or algorithmic stablecoins, but they lack support, which this guide will not elaborate on.

Importantly, stablecoins do not come out of thin air. When you hold a dollar deposit in a bank, the bank is responsible for safeguarding your dollars, ensuring you can use them, and allowing you to transact with others.

Stablecoins rely on blockchain to provide the same core functions.

Definition of Blockchain

Blockchain is a global "accounting system" that includes personal assets, transaction records, and the rules and terms of transactions.

For example, Circle's stablecoin USDC is issued based on the ERC-20 token standard, which specifies the rules for successful token transfers: a certain amount is deducted from the sender's account, and the same amount is added to the receiver's account. These rules, combined with the consensus mechanism of the blockchain, ensure that no user can transfer more USDC than they hold, which is commonly referred to as the double spending problem. In short, the blockchain functions like an append-only database or a double-entry ledger, having an initial state and recording every transaction that occurs within its closed-loop network.

All assets on the blockchain, including USDC, are held by external accounts (EOA or wallets ) or smart contracts, and under specific conditions, smart contracts can receive and transfer assets. EOA ownership, which is the ability to trade assets from a public address, is enforced by the underlying blockchain's public-private key encryption scheme, which binds each public address to a private key on a one-to-one basis. If you own the private key, you actually own the assets in the public address. "Not your keys, not your coins" (. Smart contracts hold and trade stablecoins based on pre-programmed transparent logic, allowing on-chain organizations ) such as DAOs or AI agents ( to trade stablecoins programmatically without human intervention.

The "trust" in the accuracy of the system comes from the execution and consensus mechanisms of the underlying blockchain ) such as the Ethereum Virtual Machine and Proof of Stake (. Accuracy can be demonstrated through the initial state of the blockchain and the publicly auditable history of each subsequent transaction. Transaction settlements are managed around the clock by a globally distributed network of node operators, allowing the settlement of stablecoins to be unaffected by traditional bank operating hours. To compensate for the service provided by node operators, transaction fees are charged during transaction processing ) Gas (, usually priced in the native currency of the underlying blockchain ) such as ETH (.

These definitions may seem a bit pedantic, and even a bit rebellious to some, but this concise and practical overview provides our readers with an appropriate common foundation. So, let's start with the more interesting part: how did we get here?

![A Comprehensive Guide to the Past and Present of Stablecoin Practitioners])08963cO8eX.png(

The History of Stablecoins

Twelve years ago, stablecoins were still a fantasy. Today, Circle, which issues the world's second-largest stablecoin USDC, is preparing for a sale or IPO. Circle's S-1 filing provides firsthand information from USDC founder Jeremy Allaire, detailing the founding journey of USDC. ) Note: Circle has completed its IPO (.

We invited Phil Potter and Rune Christensen, the founders of the world's largest stablecoin )USDT( and the third largest stablecoin )DAI(, to share their entrepreneurial stories.

) Tether: The Birth of a King

Back in 2013, the Crypto Assets market was in the Wild West era, and the main places to access and trade Crypto Assets were exchanges like Mt.Gox and BitFinex. Given that Crypto Assets were in their early stages, the regulatory environment at that time was more ambiguous than it is now: exchanges were advised to follow "best practices" by only accepting Crypto Assets deposits and withdrawals, such as BTC deposits and BTC withdrawals (. This meant that traders were forced to exchange dollars for Crypto Assets on their own, a mandate that hindered the widespread adoption of Crypto Assets. Additionally, traders needed a place to escape the violent price fluctuations of Crypto Assets without having to leave the "casino."

Phil Potter entered the Crypto Assets space with a background from Wall Street and a pragmatic perspective, keenly sensing the market bottleneck. His solution was simple: a "stablecoin"—a dollar-backed cryptocurrency liability supported by a dollar reserve—allowing traders to manage exchange and market fluctuations through dollar-denominated liabilities. In 2014, he brought this idea to one of the largest exchanges at the time, BitFinex. Eventually, he partnered with BitFinex to create Tether, an independent entity with the necessary currency transmission licenses to integrate with a broader financial network of banks, auditors, and regulators. These providers were crucial for Tether to hold reserve assets and to process complex fiat transactions in the background, enabling BitFinex to maintain its "pure Crypto Assets" positioning.

The product is simple, but the structure is very aggressive: Tether issues dollar-denominated liabilities )USDT###, and only certain trusted entities that have undergone KYC certification can directly mint or redeem USDT for its underlying reserve assets.

However, USDT operates on a permissionless blockchain, which means any holder can freely transfer USDT and exchange it for other assets in the open secondary market.

For a full two years, this concept seemed to have died in the womb.

Until 2017, Phil noticed that the adoption rate of USDT was increasing in regions such as Southeast Asia. After investigation, he found that export companies began to view USDT as a faster and cheaper alternative to the regional dollar payment network. Eventually, these companies started using USDT as collateral for imports and exports. Around the same time, crypto asset pioneers began to notice the growing liquidity of USDT and started using USDT as margin for cross-exchange arbitrage. At this point, Phil realized that Tether had built a faster, simpler, and always-open parallel dollar network.

Once the flywheel starts spinning, it never slows down. Since issuance and redemption are always conducted within a regulated framework, while the tokens circulate freely on blockchains such as TRON and Ethereum, USDT has reached escape velocity. Every new user, merchant, or exchange that accepts USDT will only enhance its network effect, increasing the utility of USDT as a store of value and a payment method.

Currently, the circulating value of USDT is nearly 150 billion USD, far exceeding the circulating volume of USDC at 61 billion USD. Many people call Tether the company with the highest per capita profit in the world.

Phil Potter is an outstanding figure in the Crypto Assets field, and his philosophy is quite unique.

However, we cannot call him an "outsider" in traditional finance; he is the kind of person you would expect to create the world's largest stablecoin. Rune Christensen, however, is not that.

( DAI: The first decentralized stablecoin

Rune discovered it when Crypto Assets were still in their infancy and quickly crowned himself as the "Bitcoin Boss." He is a typical Crypto Assets adopter, viewing BTC and blockchain as tickets to escape an unfair and exclusive financial order. In 2013, the opening price of BTC was around $13 ) does anyone have a time machine? (, and by the end of the year, it broke through $700, giving early adopters every reason to believe that Crypto Assets could truly replace our financial system.

However, the subsequent economic recession forced Rune to accept one fact: the ultimate utility of Crypto Assets depends on the management of this volatility. "Stability is beneficial for business," Rune concluded, giving rise to a new idea.

In 2015, after witnessing the failure of BitShares' "first" stablecoin, Rune collaborated with Nikolai Mushegian to design and construct a USD-pegged stablecoin. However, unlike Phil, he lacked the connections to execute a strategy similar to Tether and had no intention of building a solution reliant on the traditional financial system. The emergence of Ethereum, as a programmable alternative to Bitcoin, allowed anyone to encode logic onto the network through smart contracts, providing Rune with a platform for creation. Could he utilize the native asset ETH to issue a stablecoin based on it? If the volatility of the underlying reserve asset ETH is as significant as that of BTC, how would the system maintain solvency?

The solution proposed by Rune and Nikolai is the MakerDAO protocol, which is based on Ethereum and was launched in December 2017. MakerDAO allows any user to deposit $100 worth of ETH and receive a fixed amount of DAI), for example, $50###, thereby creating an over-collateralized stablecoin liability backed by ETH reserves. To ensure the system's solvency, smart contracts set a liquidation threshold(, for example, when the price of ETH reaches $70), once breached, third-party liquidators can sell the underlying ETH assets, thereby relieving the DAI debt. Over time, new modules have emerged to simplify the auction process, set interest rates to regulate the issuance of DAI, and further incentivize those third-party liquidators acting for profit.

This clever solution is now known in the Crypto Assets field as "Collateralized Debt Position ( CDP )" stablecoin, a concept that has sparked the interest of dozens of imitators. The key to the system's ability to operate without a centralized gatekeeper lies in the programmability of Ethereum and the transparency provided by the public blockchain: all reserve assets, liabilities, liquidation parameters, and logic are known to every participant in the market. In Rune's words, this achieves "decentralized dispute resolution," ensuring that every participant understands the rules for maintaining the system's solvency.

With the circulation of DAI( and its sister project USDS) exceeding $7 billion, Rune's creation has evolved into a systemically important pillar within decentralized finance( DeFi). However, in the rapidly changing competitive landscape, it has become increasingly difficult to manage the ideological appeal of breaking away from a collapsing system; the capital inefficiency of CDPs and the lack of efficient and direct redemption mechanisms have stifled its scalability. Recognizing this reality, MakerDAO began a significant transformation towards traditional reserve assets( such as USDC) in 2021, and in 2025 shifted to BlackRock's tokenized money market fund( BUIDL). During this transformation, MakerDAO( is now establishing its position as the most critical liquidity provider for tokenized assets through the Tokenized Grand Prix), a tokenized money market fund( MMF) RFP managed by Steakhouse Financial, valued at $1bn, and a $220 million private credit fund issued in collaboration with BlockTower Credit and Centrifuge that issues blockchain-native securities.

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