The Future of Stablecoins Through the Lens of Banking History: The Essence and Innovation of Money

From：https://a16zcrypto.com/posts/article/understanding-stablecoins-banking-history/

In recent years, stablecoins have emerged as a new payment tool, attracting millions of users and facilitating trillions of dollars in transactions. However, despite their growing popularity, the definition and public understanding of stablecoins remain unclear. At their core, stablecoins are a store of value and a medium of exchange, typically pegged to the US dollar. Although stablecoins have only been around for five years, their development path—from under-collateralization to over-collateralization, and from centralization to decentralization—provides valuable insights into their technical structure and market potential.

The Essence of Stablecoins: A New Form of Money

While stablecoins appear to disrupt traditional finance, it is important to recognize that the fundamental attributes of money—its role as a measure of value and a medium of exchange—remain unchanged. Stablecoins are simply a new vehicle or representation of money. Therefore, the historical evolution of modern money offers valuable lessons for understanding the future of stablecoins.

The history of the US banking system provides a useful framework for understanding the evolution of stablecoins. From banknotes in the 19th century to the modern fractional reserve banking system, the development of banking reveals how money has matured through credit creation and risk management. Stablecoins are likely to follow a similar path, starting with simple bank deposits and notes, and gradually introducing complex credit mechanisms to expand the money supply.

Three Forms of Stablecoins

Currently, stablecoins can be categorized into three forms: fiat-backed stablecoins, asset-backed stablecoins, and strategy-backed synthetic dollars. These forms correspond to different stages of banking development.

1. Fiat-Backed Stablecoins: These stablecoins resemble 19th-century US banknotes, directly backed by fiat currency. Users can redeem them for dollars through exchanges or authorized agents. Due to their simplicity and security, fiat-backed stablecoins (such as USDC and USDT) dominate the stablecoin market. However, their centralized issuance model also poses the risk of a "bank run," necessitating audits and compliance measures to build user trust.

2. Asset-Backed Stablecoins: These stablecoins are issued through on-chain lending protocols, mimicking how banks create money through credit. For example, MakerDAO issues DAI by over-collateralizing on-chain assets. The advantage of asset-backed stablecoins lies in their transparency and decentralization, allowing users to directly audit collateral without relying on traditional bank executives. As on-chain economic activity grows, asset-backed stablecoins are expected to capture a larger market share in the future.

3. Strategy-Backed Synthetic Dollars: These tokens combine collateral and investment strategies, often used in DeFi yield products. However, they are not suitable as a store of value or medium of exchange due to their higher risk and volatility. While these products are popular among risk-tolerant users, their complexity and centralized nature make them difficult to adopt on a large scale.

The Future of Stablecoins: From Money Issuance to Credit Creation

The development path of stablecoins bears striking similarities to the history of banking. Just as banking evolved from simple money issuance to credit creation, stablecoins may undergo a similar transformation. Currently, fiat-backed stablecoins dominate the market, but as on-chain economies expand, asset-backed stablecoins are expected to become tools for credit creation.

With the increasing tokenization of real-world assets (RWAs) on the blockchain, the primary purpose of these assets may not be circulation but rather serving as collateral to support further credit creation. This trend will further drive the development of asset-backed stablecoins.

Conclusion: The Potential and Challenges of Stablecoins

The era of stablecoins has arrived. Globally, over $160 billion worth of stablecoins are being used for transactions. While stablecoins appear to disrupt traditional finance, their core remains rooted in the fundamental attributes and functions of money. By drawing lessons from banking history, we can better understand the future direction of stablecoins.

Stablecoins are not only the cheapest remittance method but also bring new opportunities to the payment industry. As decentralized lending protocols mature and on-chain economic activity increases, asset-backed stablecoins are expected to capture a larger market share. Meanwhile, strategy-backed synthetic dollars, despite facing regulatory and user experience challenges, offer new yield opportunities for DeFi users.

Ultimately, the innovation of stablecoins, synthetic dollars, and other digital currencies aims to highlight the essence of money through blockchain technology, improve operational efficiency, reduce transaction costs, and strictly control risks. The future of stablecoins lies not only in their adoption as a payment tool but also in their potential to drive global economic development through credit creation.