Circle CEO: Stablecoin Market At Least $120 Trillion

Like most things in cryptocurrency, the stablecoin market is still in its infancy. Over the next decade, we certainly will see evolution that makes the idea of "programmable money" interwoven deeper into our lives. It is another area where the technological trend is in operation.

Jeremy Allaire is the founder and CEO of Circle. It is the company behind the second largest stablecoin, USDC. He understands the importance of this market and how large it truly is.

Over the past few weeks, we discussed some of the potential of the Hive Backed Dollar (HBD). When watching a recent interview with Allaire, it was confirmed, based upon his views, how large this can actually be.

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Everything Is Bigger Online

There is a saying in the United States: Everything is bigger in Texas.

We can adapt that to the online world. Whatever exists in the physical realm grows by an order of magnitude when dealing in the digital world. This applies to information, communication, and number of individuals. We use the term "exponential" for a reason.

Since the introduction of the Internet, there was a massive explosion in all the abovementioned areas. There is now more information available to use than we could consume in 10,000 lifetimes. Of course, it keeps expanding on a daily basis. What was scarce in the past is now to the point where it is overwhelming.

We also have to take note that the majority of it is completely free. While there are some paywalls, much of what is out there is open to everyone. That is another radical shift compared to the past where most information was paid for, especially in the print world.

The Internet now has come to money.

This is an idea that we covered in the past so it is not really that novel. Nevertheless, as the same mechanisms that drove information and communication to explode is applied to money, we are going to see the same results.

Trillions In Stablecoins

How big is the potential stablecoin market? Using the thought process from the preceding section, much bigger than we think.

According to the interview, Allaire said the TAM (total addressable market) at least $120 trillion, the value of the global M2 money supply. Of course, it is a mistake to equate the size of something in our present system to that in the digital world.

The novelty of stablecoins and Decentralized Finance (DeFi) means we are not very advanced with the platforms. This is going to change over the next few years. At present, we are dealing with individuals. Businesses are still largely absent. However, we know many low-risk application where people can use stablecoins to earn anywhere from 6%-10% (annual rate) on their short-term capital. That is not something we see in the present system.

When businesses find out about this, we are going to see a massive explosion in the number of transactions. In fact, this is also in keeping with what we see in the digital realm.

Consider the number of global transactions: What do we think it will look like in this new world that is being created?

According to Allaire, it is going to explode:

At least 1,000x increase in the network of output payments transactions

Presently, the cost of an electronic payment transaction is 89 cents (in 2020).

So what happens when storing and transmitting value and exchange value where the cost of that goes to zero and it becomes programmable?

It only stands to reason that the number of transactions, along with the total value, is going to explode. We can already see this to a degree in the early days of blockchain financial activities. DeFi is being integrated into a lot of non-financial applications such as social media. Suddenly, many transactions have financial value that can be transferred.

Ironic that Hive already provides some of what Allaire is referring to.

Non-Competitive Environment

We are ingrained in thinking about competition. In a world of scarcity, one wins most often at the expense of someone else. Where there is finite, things needs to be divided up. That means when one gains, another suffers decrease.

Naturally, we take bring this mindset into cryptocurrency. The challenge with this is the digital realm is not finite. At the core, the processing capability of these entire medium will double over the next few years. At the same time, the speed of our communication systems only gets faster. Finally, the entire world gets less expensive to operate, on a per unit basis, from what was available in the previous decade.

Data is another area that going counter to the "traditional model". The rate of growth of data generation is enormous.

Big data growth statistics reveal that data creation will be over 180 zettabytes by 2025. That will be about 118.8 zettabytes more than in 2020.

So it is predicted we are going from around 62 zettabytes to 180 in the next 5 years. If correct, that is almost a tripling of the data that will be created.

Of course, what we do with all this data is also important.

Big data stats show that the creation, capturing, copying, and consumption of data went up by a whopping 5000% between 2010 and 2020. To be more precise, data usage increased from 1.2 trillion gigabytes to almost 60 trillion gigabytes.

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This all defies the scarcity model. With data increasing at such a rate, you would think it becomes less valuable. Yet, as we know, the value of data keeps skyrocketing. It is why almost every institution is out there garnering, processing, and mapping out whatever they can. Somehow, the more abundance we create in this area, the greater the value.

The Internet now came to money.

With stablecoins, we are not going to see just one or two winners. Here we are going to see many different projects excelling. It is all going to depend upon what the users require.

In other words, there are going to be many ways money is programmed. Algorithmic stablecoins are going to become very popular as people experiment with alternatives in this realm. This will allow for collateralization in ways we never saw before.

It is likely the total stablecoin market far surpasses that of the present M2 money supply. A great deal of that number is bank instruments that are used within the confines of that system. None of that is available to the average person.

In the world of cryptocurrency, anyone can operate like a bank. Hence, financial instruments can be developed between individuals or businesses much in the same was as banks operate. The transferring and storing of value is going to become more important as the number of transactions keep increasing.

Here is where we see the golden opportunity. The stablecoin market is one that offers enormous potential. Hence, those entities that are involved in it are going to far very well.

If Allaire is correct, we are going to see the number of financial transactions 1,000X over the next couple decades. Hopefully, this gives us a radically different viewpoint of the potential of this industry.

Here is the full-interview with the CEO of Circle:


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Hope to see Stablecoins as a means of conversion between the Fiat and Crypto on a larger scale in the coming future.

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I think it is safe to say that is going to happen.

We are going to see expansion in this area just like we do with other aspects of the industry.

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I only use stable coins, when I want to convert to cash or I want to buy a new crypto

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We just hope for a better improvement in the blockchain in the nearest future.

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In other words, there are going to be many ways money is programmed. Algorithmic stablecoins are going to become very popular as people experiment with alternatives in this realm. This will allow for collateralization in ways we never saw before.

Algorithmic stablecoins are something that people are definitely going to be exploring more and the world decouples itself from the dollar. RAI is a great example of one that I could see getting a lot of attention.

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USDC saved my butt not too long ago and I am a little sad I didn't know about it back in May. I could have saved about $500 in fees if I had known. You brought up a really good point that I hadn't though of until just now. What happens when that first institutional investor puts money into DeFi? It is going to be nuts. I am actually a little surprised it hasn't happened yet. Even a company like Apple that has significant cash on hand could test the waters with little impact to their bottom line. I would think it has to be something like that or some kind of fund that gives you very warning you are investing in a highly volatile area.

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It is actually not even at that level.

Think of it more this way: what happens when a local business takes their prudent reserve and puts it into a DeFi project earning 8%; say a local plumbing company with $500K.

That is the level that could really bring in billions since there are many companies and non-profits who have reserves set aside that are just sitting in low yield/fixed income accounts.

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I feel like they would be less likely to take that leap versus a larger company with more reserves. Then again, the fact that they started their own business shows that they are open to risk, and they likely don't have a board to answer to.

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The difference is smaller companies need the yield a great deal more. Larger corporations can enter into areas that the average investor cannot.

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So what does "total addressable market" mean? The potential of what it could grow to?

I have been working on a system to turn any extra dollars I have into stablecoins through peer to peer transactions, and then stake for a good yearly APR.

Tokemak USDC reactor is currently at an 11% APR, which would typically beat yearly dollar inflation. I think USDC is probably the most reliable stablecoin for now, although I do like DAI. FRAX is also interesting, but I have migrated completely away from USDT.

Will HBD ever be truly pegged to the dollar? If you have an article you can point me to for the future of HBD, I would appreciate it.

Thanks for the informative read.

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Yes TAM is what a new technology/solution can address.

We need to tighten the peg, it is still too loose. There is a lot of things that need to be done. The future of HBD is still a bit cloudy. It is algorithmic based which seems to be a big more aligned with what is needed in the future.

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If I remember correctly, SBD came around before dollar pegged cryptos did. So the tech probably wasn't quite there yet.

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Currently stable coins refer to the USD. Do you think that will always be the case? I know we talked about how HBD is based on the dollar before so I wonder if Circle and other companies would change it if anything did happen to the dolla.r

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Some are backed by the dollar. HBD is not backed by the USD but HIVE. The $1 is just a unit of measure.

There will be others that are based upon other things, perhaps a basket of crypto.

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This stable coin, does it mean that they don't sell or move. They always stable on the price

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I least had the idea of stable coins explained as you have in the above article I think I now know what's all about

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Stable coins will be massive and what drew me in on Coti as that is what they do. They provide merchant solutions and stables is one of them. I think investing in projects that are linked in with stables is going to be the next to explode as others will see the potential.

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Not to oversimplify, but I am simply amazed at the flow of free information. When I was in school just to do some research you had to go to the local library and hope they have the resources you need to complete your project.
Now you just grab your phone, type or speak your question into a search engine, and boom millions of pages of information at your fingertips.

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Without a doubt.

You got an abundance of information at your fingertips, all for free.

Now the Internet came to money. We are going to see abundance and the destruction of many existing entities.

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When you speak of "the destruction of many existing entities" are you talking of individual corporations or entire industries?

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