The Wave of Stablecoins: ETH as the Cornerstone of the Digital Dollar Economy

The global demand for the US dollar is experiencing explosive growth. Although "de-dollarization" has become a hot topic, a more significant trend is emerging: over 4 billion people and millions of businesses are actively seeking to obtain US dollars through stablecoins, representing the largest expansion of the dollar's network effect in decades.

This has created unprecedented opportunities for Ethereum. Since 2020, stablecoins have increased the channels for individuals worldwide to access US dollars by 60 times, exceeding $200 billion. These new dollar holders not only need digital cash, but also require yields, investment opportunities, and financial services. Due to regulatory and infrastructure limitations, traditional finance struggles to serve this vast new market.

Ethereum has a unique advantage in providing global financial infrastructure for this emerging digital dollar economy, and ETH will directly benefit from this growth.

Stablecoin: The Catalyst for Global Demand for US Dollars

The potential demand for US dollars is enormous among individuals and businesses worldwide.

In regions with political instability, poor monetary policies, and structural inflation, over 4 billion people face significant currency risks. It is estimated that 21% of the global population lives in countries with an annual inflation rate exceeding 6%, which rapidly erodes savings and purchasing power. For these individuals, holding US dollars signifies financial security, serving as a means of value storage, a tool for cross-border transactions, and a way to hedge against local currency fluctuations.

Businesses also need US dollars for transactions. The US dollar remains the dominant currency in global trade, with 88% of foreign exchange transactions involving the dollar on at least one side. Companies in emerging markets rely on dollar liquidity for international payments, imports, and supply chain management, while local banks and foreign exchange markets in these markets are often limited or unstable. Small and medium-sized enterprises and freelancers increasingly need digital dollars to receive payments and avoid currency mismatch risks.

For the first time in history, anyone in the world can hold US dollars through stablecoins. As long as you can access the internet, you can hold and trade US dollars without a bank account and without government permission, available globally around the clock. Therefore, since 2020, the market value of stablecoins has grown 60 times. The peak adoption is mainly concentrated in emerging markets that were previously excluded from dollar-denominated finance.

Stablecoins are creating a new class of dollar holders among the largest population groups globally. Businesses are starting to price in stablecoins, and households are saving in stablecoins. This is driving a fundamental expansion of the dollar financial services market.

Demand and Opportunities for New Dollar Holders

Today, millions of people can hold US dollars through stablecoins. But their aspirations go far beyond that. Individuals and businesses naturally wish to use their funds for earning yields, investing, and growing wealth.

However, traditional finance finds it difficult to serve this emerging market:

• The US banking system requires compliance with strict regulatory requirements, excluding most global participants.
• Cross-border financial services are still expensive, slow, and geographically limited.
• Traditional finance primarily serves institutions and high-net-worth individuals, rather than targeting global retail customers.
• Geographic and regulatory barriers hinder billions of dollars from participating in dollar-denominated financing.

This has created a demand for new financial infrastructure to serve billions of stablecoin holders worldwide, allowing them to fully utilize the newly acquired dollars.

Ethereum: The Ideal Infrastructure for the Global Stablecoin Economy

The new financial infrastructure serving stablecoin holders must meet three key requirements:

1. Globally available - must be applicable anywhere with internet access.
2. Security for institutions - Must provide the security, reliability, regulatory clarity, and customizability needed for institutions to build large-scale financial products.
3. Resist government intervention - must not be under the control of any single government.

Ethereum meets all these requirements:

• Globally accessible: Anyone in the world with an internet connection can use Ethereum 24/7.
• For institutional security:
  • The most economically secure and decentralized among all programmable blockchains.
  • Has the most mature security infrastructure, including a large number of open-source developers, verified contracts, security auditors, and tools.
  • 100% uptime maintained for 10 years, regardless of market crashes or geopolitical events.
  • U.S. regulators have classified ETH as a commodity, providing a clear regulatory framework.
• The L1+L2 framework enables customization, allowing institutions to optimize for specific use cases and meet regulatory requirements.
  • Owns the world's largest digital financial economy, including stablecoins with a market value of over $140 billion, DeFi protocol investments exceeding $60 billion, and tokenized real-world assets worth over $7 billion.
• Resist government intervention: The government cannot occupy a single control point to control or restrict the network.

The powerful decentralized features of Ethereum uniquely meet these requirements. This level of decentralization stems from its origins and culture, including:

• Over 1 million validators spread across more than 100 countries
• Multiple independent development teams ensure flexibility and a maximum open-source developer ecosystem
• Due to the community-funded launch and the origin of proof of work, asset ownership is widespread.

There are no other alternatives that can meet all these requirements at the same time.

ETH: The Reserve Asset of the New Digital Dollar Economy

As billions of dollars flow through stablecoins on Ethereum, participants need a secure, permissionless, and efficient asset to support lending, staking, and yield generation. ETH has a unique advantage in this regard:

• Scarce and trustworthy: The supply of ETH is predictable, with a low inflation rate and not subject to central control.
• Productivity: ETH generates income through staking, similar to the income generated from holding real estate or government bonds.
• Collateral Utility: ETH is already the largest on-chain collateral asset in the Ethereum ecosystem, supporting lending protocols worth $19 billion.
• Anti-seizure and anti-censorship: ETH cannot be frozen or seized by the government, making it more resilient than centrally issued assets.
• Programmable and highly liquid: ETH is deeply integrated into the entire on-chain financial system, providing unmatched liquidity for large transactions.

As more and more users hold stablecoins and require financial services, they need a reserve asset to support these activities. ETH can earn returns, secure the network, and support DeFi lending. Therefore, as the system develops, the demand for ETH will naturally increase.

In short: more adoption of stablecoins → more on-chain activities → more demand for ETH as collateral → institutions and users hold more ETH.

The growth of Ethereum Layer-2 has further stimulated demand for ETH. By reducing transaction costs, accelerating transaction speeds, and enabling new use cases, Layer-2 has opened up more areas where ETH can be used as collateral. This expands the reach of ETH and reinforces its position as a reserve asset in the digital dollar economy.

ETH as a global value storage method

The increasing demand for ETH has also allowed it to capture a significant share of the traditional value storage market.

• ETH has superior value storage characteristics compared to traditional assets like gold.
• ETH and BTC may share a piece of the $50 trillion traditional SoV assets (gold, government bonds, stocks, real estate) in the coming years.
• In addition to having the SoV properties of Bitcoin, ETH also provides returns for holders.
• Yield generation is a significant advantage, as investors generally favor income-generating assets.

Conclusion: ETH is the best way to participate in the stablecoin economy.

The growth of the stablecoin economy has created a strong flywheel effect for Ethereum and ETH. As more stablecoins are used on Ethereum, the demand for ETH has also increased. Higher ETH value and a more secure network attract more institutions and services, further promoting the adoption of stablecoins.

Alternative solutions face significant challenges in replicating this flywheel:

• Traditional finance cannot serve the billions of people excluded due to geographical and regulatory barriers.
• Government-controlled systems are still subject to political influence and jurisdictional limitations.
• Bitcoin lacks the programmability of complex financial services.
• Other blockchains lack the security, reliability, and customizability required by institutions, and also lack the decentralization to resist governmental intervention.

Therefore, holding ETH may be the simplest and most effective way to access the growing stablecoin economy. For most retail and institutional participants, ETH provides the easiest access to the entire digital dollar ecosystem.