Author: RWA Knowledge Circle
I. Stablecoins: The "Private Mint" of the Digital Age
Over the past year, "stablecoins" have been one of the hottest terms in the capital markets. A stablecoin is a digital currency pegged to fiat currency, theoretically equivalent to fiat currency at a 1:1 ratio, and it must be backed by real assets.
So the question arises: if a large cross-border e-commerce company issues a stablecoin to save transaction costs and save millions each year, that seems reasonable. But in reality, the entities that actually issue stablecoins are often blockchain platforms and digital service providers. So how much profit can this "1:1 minting power" really bring?
Don't underestimate this business. The global stablecoin market landscape is already clear: USDT holds a 60% market share, while USDC holds 25%. Among them, Tether, the issuer of USDT, has shocked many: its average employee compensation ranks second globally; Bloomberg has also revealed that it is considering selling 3% of its shares for $15-20 billion, corresponding to a valuation as high as $500 billion, comparable to OpenAI and SpaceX.
Why is Tether worth this price?
II. The "Minting Logic" of Stablecoins
The traditional banking profit model is to absorb deposits and then lend them out to earn interest spreads; stablecoin issuers, on the other hand, collect dollars and mint tokens on the blockchain. The money they hold is the source of profit.
- Circle (USDC issuer): Operates conservatively, primarily investing in U.S. Treasury bonds and cash after receiving funds to ensure a 1:1 exchange with the dollar.
- Tether (USDT issuer): Has a more aggressive model, currently holding $100 billion in reserves, earning over $4 billion a year just from interest. In 2024, net profit is expected to reach $13.7 billion, with a profit margin as high as 99%.
Tether's asset portfolio includes not only cash and U.S. Treasuries but also Bitcoin, equity investments, and spans areas such as payment infrastructure, renewable energy, artificial intelligence, and tokenization. To some extent, Tether is no longer just a stablecoin company; it resembles a top investment bank and asset management giant.
III. The "Stablecoin War" of DeFi Protocols
Once the "minting model" was discovered to be so profitable, countless imitators naturally emerged. Many DeFi protocols have joined the stablecoin battle:
MakerDAO's DAI: One of the earliest successful decentralized stablecoins
- Innovation: First to include U.S. Treasury bonds in its reserves, at one point holding over $1 billion in short-term Treasuries.
- Revenue distribution: Excess income enters a surplus buffer, which is then used for repurchasing and burning MKR governance tokens. MKR is no longer just a "governance voting right" but is directly linked to cash flow, becoming a "equity-like token" with real value.
Frax: A small yet focused "refined mint"
Frax's overall scale is not large, with circulation long maintained below $500 million, but its design is extremely sophisticated.
Revenue distribution:
- A portion is used to burn FRAX tokens to maintain scarcity;
- A portion is allocated to stakers to enhance user stickiness;
The remaining portion is invested in the sFRAX treasury, which tracks Federal Reserve interest rates, effectively providing users with a product that "follows U.S. Treasury yields."
Although its scale is far less than Tether's, Frax can still generate tens of millions of dollars in revenue each year, representing a model of "small scale, high efficiency."
Aave's GHO: An extension of DeFi lending
The well-known lending protocol Aave launched its own stablecoin GHO in 2023.
Model: When users borrow GHO, the interest paid goes directly to Aave DAO, rather than to external institutions.
Revenue distribution:
- Approximately $20 million in interest income per year;
- Half of this is distributed to AAVE token stakers, while the other half remains in the DAO treasury for community governance and development.
Currently, GHO's scale is about $350 million, but its logic lies in deeply integrating stablecoins with lending operations to form a "vertical ecological closed loop."
It can be said that "each shows their skills," with every stablecoin protocol trying to create its own private mint.
IV. Hidden Concerns: Is It Really Stable?
While stablecoins reduce cross-border transaction costs and improve efficiency, they also harbor several hidden risks:
- Pegged assets are not absolutely stable: Tether's reserves include Bitcoin, which, if it experiences severe volatility, could cause the stablecoin to "depeg."
- Revenue distribution processes are opaque: Many protocols claim that income will be used for token buybacks or rewards, but the actual operation process is often a "black box."
- Hedging strategies carry risks: Using futures for hedging does not theoretically guarantee 100% safety.
Compared to state-backed credit, the "creditworthiness" of private stablecoins is always limited.
V. Why is Tether Worth $500 Billion?
Given the numerous risks, why is Tether still valued at $500 billion?
The answer lies in the fact that stablecoins have become the infrastructure of the digital age.
They are not only payment and settlement tools but can also be embedded in lending, trading, RWA (real-world asset tokenization), and other scenarios, providing new channels for global capital circulation. Tether's high valuation actually reflects the market's enormous expectations for the future of RWA.
Of course, the implementation of regulatory compliance remains a key factor in determining how far stablecoins can go in the future.
Stablecoins may seem like just a cornerstone of the digital currency market, but they are, in fact, a new type of "minting power" in the financial system. Whether it is Tether's $500 billion valuation or the flourishing of DeFi protocols, they remind us that the currency landscape of the digital age is being quietly rewritten.
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