March 19, 2025
Settlement Rails
(1) I think the winners will be purpose-built L1/L2 focused on payments. I don’t think monolithic chains can serve as long-term payments settlement networks, as ultimately, blockspace will be shared between multiple applications, resulting in fees that would be too high to service micropayments.
(2) I don’t think this will be a winner-take-all category. But I think there will be a small number of winners that carve out specific niches.
(3) For crypto-native: a player like a Relay.link is well-positioned. They have a very product-first approach and high product velocity, and have emerged as the leading cross-chain intents player. Due to its design decisions, the product has extremely low fees and fast settlement times. The playbook is probably something like: own crypto<>crypto payments, and then move downstream into crypto<>fiat. These guys want high # of transactions. I don’t think players that service the high $ volume market (e.g. Stargate) are really able to capture value.
(4) Other players are starting with crypto<>fiat. 1Money is a player that comes to mind. Before founding 1Money, Brian Shroder was the CEO of Binance.US. They are likely taking a regulatory-first approach to building the product, and will carve out their niche with appropriate licenses in different jurisdictions. This is how Bridge built its moat; they focused on acquiring licenses in many different jurisdictions for on/offramping.
(5) Then there are players that already have distribution, that will then build their own L1 to settle on as a way to further capture economics. IMO it makes sense for the PayPals / Robinhoods of the world to launch their own stablecoins (which they are already doing), take the full economics on the float, and then settle on their own L1 to capture additional fees. Plasma is another good example; it’s a new L1 with fundraise led by Bifinex and USDT0, likely meant to replace Tron as the primary settlement layer for Tether.
Stablecoin Issuers
(1) It’s hard to see anyone upending the custodial stablecoin duopoly. USDC dominates US, USDT dominates ex-US. The only other player that has cracked market share in stablecoins is Ethena, and it is fundamentally a different product that caters to a different end customer base (arguably crypto-natives. We’ll see if their institutional play pans out)
(2) In lieu of 0->1 product innovations, I don’t see any new stablecoin being successful without built in distribution. What right does Agora, Ondo, Mountain, etc. have to win in the crowded yield-bearing stablecoin category?
(3) Circle and Tether will continue to expand native issuance on largecap chains, and will let unofficial “bridged” versions guide the roadmap for native expansion.
(4) One interesting trend is stablecoins becoming a “modular” piece of the tech stack, and provides another source of revenue for Foundation teams. I think a good example is HONEY by Berachain, which they’ve made the native stablecoin in the ecosystem. HONEY is collateralized by PYUSD and USDC. The Berachain Foundation makes yield on the float, which currently stands at ~550M.
(5) I think players that offer white-glove stablecoins will be able to capitalize on this trend as every L1 will want to own their own stablecoin. I think players like MZero and Brale are well-positioned and making interesting plays in this category.
Resources
1. https://x.com/HadickM/status/1866101987021836289
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