The Future of Stablecoins

Transcript

hello everyone um we'll switch gears a little bit to this is the last talk I think before the price distribution and the winners so it's more lightweight it's more from an application perspective um and we'll F talk about how we are thinking about rebuilding the internet Financial system with stable coins so there are three concepts I'll talk about how do we think about stable coins as money what are the problems to solve a lot of the stuff that balic touched on we are actually working on that as well uh building to accelerate adoption the core problems to solve and then some very tangible examples if you are a developer building applications uh what kinds of use cases and opportunities are there uh opening up uh from our perspective we see a large number of web

2 and web3 companies uh building very interesting applications so we'll talk a little bit about uh the examples and the Returns on investments that they're getting so first thing uh we can we can we are at a point where we are starting to think of St coins as a new form factor for money on the internet so when you think about what is money it does three things it's a unit of account a medium of exchange and a store of value a very wellestablished definition from a very long time ago I think what stable coins are uniquely adding uh with the power of crypto and blockchains are programmability and scalability uh which is getting achieved much faster so these are the two aspects that think stable coins uniquely add for money um because until now money hasn't been programmable

but a smart contract s uh make make it so uh and these are the aspects that we are trying to leverage and figure out how interesting applications are opening up uh by uh by enabling the uh smart contracts and programmability uh what gives us confidence that stable coins have become the defao uh money or the new form factor for money uh if we see the the attaction that stable coins have gotten uh they the transaction volume of stable coins is far exceeds now of Bitcoin and ethereum and other l1s all combined so 70% of all transactions on the blockchains are with stable coins in 6 years from zero stable coins are now nearing the volume that Visa settles um every uh every single year

that's close to12 trillion so the Visa network uh settles $12 trillion of payments uh you all probably use uh Visa cards as well and uh stable coins now collectively are settling close to uh that amount per year uh so that's a that's a a lot of progress Within six years but the opportunity is even bigger than that uh these are these These are large numbers and and these are reasons to get excited if we think about uh how much of ahead how much ahead is there for us to solve so there is1 trillion dollar in electronic money so all the transactions on the internet combined uh amount to1 trillion out of that $3 trillion every year are um are are there waiting to be settled so when you

transfer a dollar from One bank to another there is some settlement delay and uh the total volume of such pending transfers across the internet is $3 trillion uh and then people uh pay $1.5 trillion per year on uh revenue from payment utility so which means that when you are making a payment someone somewhere is taking a small cut from it that all of the payments combined on the internet people pay up like $1.5 trillion and so these latter two numbers are a massive opportunity for everyone building on blockchains uh to uh to disrupt and the opportunity we have is to build a really open and Equitable internet Financial system where people are not bearing the hidden costs of

payments and hidden costs of law lendy settlement times when we think of the stable coins that are that are opening up this this this massive Market of Internet money there are three different types of stable coins so Fiat backed crypto collateralized and algorithmic algorithmic was uh a Terra and since it's collapsed we haven't seen any other stable coin that is purely algorithmic gaining traction crypto collateralized stable coins are D fra usde um they do a really good job as a store off value and uh in offering high yields uh but then because they are crypto collateralized and the collateral fluctuates a lot it's hard to use them as medium of exchange and ensure that you have like a unit of

account um so the stable coins that are largely Fiat bagged form 99% of the circulation and are denominated in US dollars um usdc is uh from circle is the largest regulated stable coin always redeemable one to one with the US dollar um and if if any company has a circle mint account uh they are able to redeem directly otherwise through OTC desks and onof RAM providers everyone can um exchange use use usdc and exchange it for uh US Dollars uh there's I won't go over all the stats but you get the idea that 15 trillion of volume has been settled with usdc and as of July 1st it is the only stable coin that is MAA compliant m is a regulation in Europe so usdc is now like

legal tender it's a form of money that is recognized all over Europe uh and that is opening up a lot more opportunities so when we think about how will um what are the use cases that are driving ad option and what will this new internet uh internet Financial system enable we are today we are starting with like digital asset trading and defi that is where majority of the usage is uh that's where majority of the volume of stable coin trans actions is we are the yellow bucket that you see of store off value or remittance that is where we are starting to see uh some traction that's where we are starting to see a lot of uh early stage applications now building and uh some existing fintech players are also starting to understand the power of stable coins and they are building uh

faster cheaper remittance uh options and cross water payment options using stable coins however in order to do Mass scale consumer payments U the example that metallic talked about for instance like on poly Market you able to just pay with USD uh now imagine like there are n number of applications on any blockchain uh and you should be able to buy your coffee with stable coins you should be able to buy your tickets with stable coins anything if you want to pay for if you want to do it with stable coins there are some key problems to solve there are key ux and um scalability problems to solve and then when you get further into more complex use cases like uh tokenization and capital markets so if you were to have your entire stock market of publicly traded companies Kong

Stock Exchange Singapore Stock Exchange New York Stock Exchange all the companies listed there uh they have their stocks tokenized that would require like massive regulatory support and that is another uh key piece that is missing right now um in general there are like three core areas of problems to solve uh number one is blockchain scalability second is crypto ux and third is legal Clarity uh when we say blockchain scalability we are talking about the scale of hundred and uh hundreds of millions of users uh being online and a million plus users concurrently transacting with blockchains when we talk about crypto ux we think about uh better than or at least equivalent to web 2ux that we get with payments when you tap your when you

tap your phone you are able to get sub 1 second or sub three second payment confirmations that's what we need to Aspire for uh and legal Clarity is something that our teams are working on across the board uh to ensure that uh we work with the governments different governments and address their concerns and ensure that we can further the stable coin regulations around the world so the next part of the talk is going to focus exclusively on uh blockchain scalability and crypto ux and uh Circle efforts in uh furthering furthering and solving these two problems uh today the way we see scaling getting solved is that any application that gets uh enough fraction uh goes and Spins up their own app chain and the main reason is very simple they want

high throughput at really low costs and so if you see the screenshot from L2 beat there are more than 100 l2s and application chains that are live um what that does is like that fragments liquidity so a lot of what vitalic talked about was fragmented liquidity and you having to manage your assets on different chains or different applications um separately and then you have to swap your assets and Bridge and that's all a cumbersome ux so while app chains are solving for scalability they're creating even more fragmentation and that's degrading the ux even more so uh we are doing three things to ensure that we can get all the benefits of app chains and uh of l2s um while ensuring that we can solve for

scalability so number one is a bridged usdc standard for new evm chain so this is open sourced and there's an open source standard for usdc uh from Circle so in case you are building an L2 in case you're building an app chain you can go ahead today and Implement um a usdc you'll get a bridged usdc token and you can implement the standard through yourself or through a bridge like Axel Wormhole um and that'll enable you to have a bridged usdc token now when your app chain starts uh getting some traction uh eventually that enables an a smooth conversion to Native usdc so when your app chain has traction uh we'll connect the chain um with cctp and bring uh Native usdc so all the users uh bridg

usdc will work like native usdc so that the bridg usdc standard opens up a path to Native upgrades and finally like connecting all the chains that have usdc with cctp enables ability to move across from one chain to another easily so when you think about cctp which it stands for cross chain transfer protocol and uh it is enabling a multi-chain ecosystem so over here you see eight blockchains that are connected with uh blockchain nodes that are connected with uh cctp and the thickness of the line that you see connecting on the graphs is the volume of uh usdc that is moving uh cross chain so you see from for instance there's a lot of usdc that is Flowing between ethereum and arbitrum uh and between arbitrum and Avalanche so this is

something that um we see like as more and more blockchains get usdc and we connect them it creates uh it defragments the liquidity across chains because people can more easily teleport usdc from one chain to another um and as of as of like last week uh we have cumulatively transferred 10 billion plus assets on um uh on cctp and there's more than 300 million of weekly volume of usdc that is Flowing securely uh because the usdc it's a mint and burn method so uh or sorry burn and mint method so you burn um usdc on Source chain and mint it on the destination chain uh and we are now looking at how do we do it as fast as possible so as of today more than 80% of the usdc that is bridged is bridged

using cctp um so that brings us to like we are solving for defragmentation of liquidity but then how do we solve for ux and how do we make sure that all the balances uh for instance your usdc is balances of your usdc are chain agnostic if you have 100 usdc on ethereum 100 usdc on polygon 100 usdc on arbitrum you should you should see 300 usdc in your single wallet and that um and that could be managed by a key store or by any other method but you should be able to spend that on any L1 any L2 uh and that is a future we are working towards so the three building blocks of that future are pay masters to abstract gas uh we'll need the eips like 7702 that is going to

connect um the e is make the EOS SCA smart contract account compatible uh we'll need a faster cctp to shorten transfer time that's something we are working on and then uh we'll need to work with uh wallets to be able to spend across chains so if you're building a wallet um talk to us we would love to uh ensure that we can you know together deliver a seamless ux to uh end users so overall the way we think about the platform stack is in three parts uh we have the stable coin protocols that we are working on uh that is like expanding access to usdc for more and more native for more and more chains uh on top we are connecting the chains with uh cctp and pay master so we abstract out the complexities of uh liquidity

management and Abstract the complexity of uh gas so you should be able to pay gas in usdc as well for instance um and then um right at the top of the stack is our application Services which we call web3 services uh it's bringing all the benefits of um defragmented chains and uh seamless ux to Enterprises so a lot of the Enterprises I'll uh show you guys in a few seconds you'll see they are asking us for not just wallets but they're asking for questions on compliance they're asking for how do they easily deploy contracts so that is what we have packaged together as web3 Services um if you're building if you're a blockchain developer if you're a community developer talk to us about you know working closely um for how to

improve the liquidity Management on l2s uh we have ideas and projects there if you're building applications talk to us about um you know the ation stack the web three services uh we do a ton of work uh with based on where your users are to ensure that you can comply with the government regulations easily so we want people to not be afraid of uh building applications on chain uh and we want to make it as easy as possible um finally we talked about like you know solving some challenges here are some very practical we here some practical things that businesses look for so if you're a developer building for a business or if you are an um app developer who is building a new application these are some of the things to think about uh as what how will your

app get Scaled so this framework basically just talks about the Core Business needs and what are the unique value props that blockchains unlock um hopefully this framework will help you in uh thinking about like what is your app how is your app going to sustain over a long period of time uh Beyond proof of concept or beyond the first early adopters uh so generally like any business would require three things they would either need to save costs grow revenue or improve retention uh all the fundamentals of business will boil down to these three Core Concepts so um blockchains are fundamentally enabling faster settlement time that lowers the cost of capital which uh lowers the cost of operating a business uh it removes credit risk which again lowers the cost

of credit management you grow Revenue by unlocking uh new C unlocking the capital that was locked up your Capital efficiency ensures that you're able to recycle the capital much faster that would otherwise be pending settlement uh you able to lower the barrier to bring any app now can become an embedded finance app you can embed uh uh embed through few lines of code uh yield bearing capability token management within an application so that's net new Revenue opportunity and with the 400 million plus users that are already uh on chain you can actually now you have a global audience of people who are actually holding value that you know about um as target audience for your Target demographic for your

application and finally improve retention loyalty points are uh loyalty points and a lot of loyalty programs uh nfts are all geared towards in one way or another improving retention so these are generally the three buckets of areas where we see application developers building uh some of the businesses that are that have gotten traction so this this last section over the next five minutes we'll uh talk about which are the key businesses that we see that are getting traction and um how are they getting benefits from building on chain because one thing which we talk very little about is the success and uh successful case studies uh and celebrate the success of businesses that are actually getting a real value or delivering real value with blockchains to end

users so let's talk about a few of them uh grab so grab is a large company based out of Singapore uh 200 million plus users in Southeast Asia across 12 countries uh they built using web3 Services um and they spent zero time literally building on the blockchain they just spend time uh using rest apis which they already know about um and 80% of their users completed the wallet setup during the Formula 1 season last year they had Formula 1 coupons that were redeemable at any um at at at many Merchants uh and uh what you see over here is uh how some of those coupons look like in their F1 pack um airtm is a company that is ensuring that a business can actually

hire developers any anywhere in the world and get and pay them easily uh in usdc so they do a global payouts uh anywhere in the anywhere in the world you can be baseed uh airtm will enable you to get paid using usdc um they have reduced like their cost by 35% uh by using uh blockchain based settlement uh with usdc and as of today they are doing like annual transaction volume of 900 million so 900 million um dollars per year is getting paid using airtm to a global Workforce um the next use case is global payouts so ARF is another company that is accelerating the settlement time uh so why is acceleration of settlement time important as an example um one of the wealth funds based in u based in the

Middle East loses $1 million per uh week uh where they are waiting for the dollar payment to settle in their accounts and the jet fuel is waiting at the port to be shipped there are many such examples where even 24 hours delay in settlement cost businesses a lot of money uh and the you can see like this one company has 1.4 billion plus dollars of liquidity volume in usdc that they used for ensuring faster settlements and they improve the capital efficiency 50x times for businesses that's a lot of meaningful cost savings for business it unlocks a lot of capital for businesses and the this company has gotten a lot of fraction quickly so what they do is they basically like just front some of the liquidity to ensure that uh settlement

happens with usdc much faster um this is this is one of my favorites it's a small app so a small team uh they are based out of turkey they are called senoa uh they created a dollar savings account for Grand moms and Granddad so in Turkey like where inflation is really high a lot of the compan a lot of the people they de facto convert luras into um uh into US dollars and they save in US dollars so senoa team created a created a wallet a non-custodial wallet that um literally like Grand moms and grandads can use so basically any any common use user should be able to use and they have a risk management contract that wraps the a smart contract for generating 5% yield for these users so they guarantee 5%

yield uh on usdc that is stored in this um in this app and they have quickly gotten 350,000 users who are actually storing their savings their life savings in this wallet for guaranteed returns and um this is like proving to be an inflation Hedge for a lot of users in inflation High inflation countries so these are some of like the common use cases uh and the last one I'll talk about is this company called Felix Pago based in um Mexico I believe and they are doing remittances using usdc so uh for Mexican workers to send um money from us to Mexico uh they can just use WhatsApp uh send money using WhatsApp and on the back end usdc is transferred from a US wallet to a Mexican wallet and

then cashed out using the off-ramp in Mexico so they are they have seen like 40% decline in their costs um while increasing profitability because they using usdc instead of um the regular settlement rails which would be like a and would have 5day DeLay So we have a lot more businesses which are this is these are businesses that are still building and some of them are not published yet uh but Electra based in Mexico and New Bank uh based in Brazil if you if you think about it they're like uh close to 500 million plus users that are covered uh globally by this by these set of companies and they're all building on change but they are not successful yet many of them aren't of course coinbase is Robin

Hood is um but in building on chain the others are still early and in their success will accelerate mainstream adoptions so if they succeed uh we'll have many more companies uh that will come on chain that'll build on chain and that is where we need your help we need to solve the core problems that we talked about and uh we need to think from uh like business value perspective on how we are going to enable these businesses uh uh succeed how we going to build uh applic that will enable many more of these businesses to come on chain um so to recap last 30 seconds let's build an equitable internet Financial system we have a massive opportunity ahead of us um stable coins are by now proven to be the new form factor for money on the internet uh we

are going to solve for scalability and us are the two core problems that we want to solve with you uh we are working on it from our perspective on Circle platform but there's a lot of opportunity to partner um reducing cost grow growing revenue and improving retention are the is the core framework for uh solving a real business need keep that in mind if you're building an application um and then finally come partner with us uh we are all in this together we can't wait to partner with you to build something meaningful um let's collaborate and if you want to start building you can sign up today uh if you want to reach out to me uh you can use the other QR code thank you so much