As someone who has been working on or around stablecoins, tokenization, and blockchain based payments for over a decade, I absolutely loved to see Stripe’s $1b acquisition of Bridge.xyz, a “crypto company” whose products and services are solely focused on stablecoins.

It’s a clear market signal that stablecoins — digitally native dollars that live on public, permissionless blockchains — are THE killer application for blockchain based financial services, and that upgrading the form factor of the US dollar to something that’s internet-native, programmable, and permissionless will continue to catalyse a paradigm shift in the way we move dollars over the internet.

I have been getting a lot of inbound queries on the acquisition and what it means for OpenTrade (more on that later). More than a few of the less blockchain-initiated have asked me:

“If stablecoins are just digital dollars, how are they any different than Venmo, Cash App, PayPal or Zelle?”

On the surface, this is a fair question. Most stablecoins today are similar to PayPal or Venmo in that they act as a stored value system, where 1 unit of stored value can be created or redeemed for $1, and they are held, sent and received on digital finance apps.

For example, you can send $1 from your bank account to PayPal and you get $1 in a PayPal balance that can be used to pay other PayPal users. PayPal holds those dollars in banks until a user “cashes out” of PayPal, at which time they send $1 to your bank account and decrease your PayPal balance by $1. This is how most USDC and USDT (the two largest dollar stablecoins) works today. You wire $1 from a bank to Circle and you get back 1 USDC, and you send 1 USDC back to Circle and they wire $1 back to your bank account.

But stablecoins are very different in several very important ways… and it’s the power of these key differences that helps us answer the question of why one of the biggest payment companies in the world paid $1 billion dollars for a 2.5 year old startup.

1. Stablecoins can be sent, received, stored, and/or exchanged between anyone with an internet connection. They are permissionless; you do not need an account with Circle or permission from them to send and receive USDC or to build applications that use USDC.

Why it matters: The US dollar is one of the most important cornerstones of global commerce. 80% of global trade is done in dollars. It is the bedrock of the modern financial system. But billions of people have no access to the dollar banking system today. In emerging markets, where many consumers lack access to basic financial services and are subject to hyperinflation, foreign exchange controls, and corrupt banking sectors, the ability to send, spend, save, and receive US dollars is a lifeline and economic game changer. Stablecoins like USDC enables fintechs in emerging markets to provide US dollar based financial services to these billions of people.

2. Stablecoins are fully programmable, meaning you can write complex computer programs that govern, route, and exchange stablecoins automatically. These programs can be written by anyone with an internet connection.

Why it matters: I once built an application that enables me to send US dollar payments to over 120 countries in an afternoon using USDC. With legacy, that may have taken me 6 months, perhaps longer. And the end product would have been a hell of a lot slower and more expensive. This is incredible. In a world run by the internet, our money should be internet-native. Stablecoins, providing the ability to automate and streamline even the most complex payment workflows, enable existing financial services to become faster and cheaper, but more importantly, entirely new services and business models to come to market. If you believe like I do that commerce will become increasingly machine-to-machine (and likely AI to AI) — stablecoins are currently the only medium of exchange compatible with such a future.

3. Stablecoins are (typically) far more transparent about what they do with the dollars backing them. Much has been said (most of it incorrect) about the risk stablecoins pose to financial stability and consumer protection. When compared with the incumbent digital payments we “trust” today like PayPal, Venmo, and CashApp, I believe stablecoins like USDC are far safer and more transparent. What does PayPal, Venmo, and CashApp do with the customer money they hold? No one knows. But with stablecoins like USDC, Circle publishes independent audit reports each month detailing where every cent of USDC reserves are held (e.g. in BlackRock and BNY Mellon).

Why it matters: Stablecoins are, in many ways, a technology enabled reincarnation of a very old concept called “narrow banking” — fully reserved payment institutions that exist solely to offer payment services to the market, as opposed to fractionally reserved commercial banks who take deposits and make risky loans with those deposits in roughly a 10:1 ratio ($10 lent for every $1 deposited). This fractionally reserved model is inherently subject to runs on the bank, because if everyone asks for their money back at the same time, a bank can collapse in a single day (see Silicon Valley Bank). The fully reserved model, with proper oversight and regulation, can offer much safer form of money than the current fractionally reserved model used by commercial banks.

4. Stablecoins are digitally-native bearer instruments. Ownership of a stablecoin is evidenced by physical ownership of a digital private key, just like ownership of cash is evidenced by physical ownership of a banknote.

Why it matters: Because of their cash-like properties, stablecoins can be exchanged without a middleman. This means you cannot be “locked in” to any one service provider, wallet, or ecosystem. You can always take your money and go elsewhere. Taking that to an extreme scenario, you could download your life savings onto a hard drive or print them on piece of paper and take it with you to a new country in search of refuge from a natural disaster, war, or political upheaval. In a more practical sense, it provides consumers and businesses the freedom to move their money across apps, services, and markets. This helps eliminate rent seeking behavior and promotes competition.

5. They are open-source; the code for USDC is viewable (and can be copied) by anyone with an internet connection.

Why it matters: Almost all of the most important technological advancements in the past 50 years have been open-source. The most prominent example is the internet. Open source enables a “hive mind” effect where the pace of innovation is greatly accelerated because everyone is able to contribute to its advancement. It unlocks the ultimate form of competition by eliminating rent seeking behaviour and ensuring the highest number of the best and brightest minds have unbridled access to it. This is pretty much the opposite of how finance works today, where the entire system is designed to seek rent and gate keep, which has led to relatively very low levels of advancement (e.g. 50% of B2B payments in the US are still done via paper checks).

These things, when combined into a single product, make a HUGE difference. The power of these things is why Stripe paid $1b for Bridge.xyz. Don’t believe me yet? Just look at the facts:

From a16z Crypto:

“[Stablecoins] amounted to $8.5 trillion in transaction volume across 1.1 billion transactions in the second quarter of 2024 ended June 30. Stablecoin transaction volumes more than doubled Visa’s $3.9 trillion in transactions over the same period. That stablecoins have entered the same conversation as such well-known and entrenched payment services as Visa, PayPal, ACH, and Fedwire is a remarkable testament to their utility.”

And they are not just a crypto product for the crypto casino.

Mastercard reports that over one third of consumers in Latin America have made a purchase using a stablecoin.

That is ASTOUNDING considering stablecoin activity was negligible in 2020. If just five years, they are on par or exceeding incumbents that have been around for decades.

What does this mean for OpenTrade?

For all of these reasons, OpenTrade is building for this present and this future. We believe (and are being proven correct in this belief everyday) that the next generation of financial services and markets will be built on internet-native, digital dollars (i.e. stablecoins) and our role at OpenTrade is to build critical components for this burgeoning ecosystem; stable, secure, and compliant stablecoin lending and yield products that can be embedded directly in the digital wallets and apps businesses and individuals use to manage their financial lives.

For the same reasons that Stripe just spent a billion on a stablecoin startup, over the past year we have seen our business BOOM and expect to see that continue to accelerate heading into 2025.

Every day, new customers and partners of OpenTrade products are being launched. Whether we’re powering USD and EUR savings products for hundreds of thousands of consumers in Colombia via our partnership with Littio, enabling compliant retail access to the risk free rate through our partnership with WooX, powering institutional yield products for investors in the EU and APAC through our partnerships with Scrypt, Trakx, and Investax, it’s all part of the same mission, the same mega trend, the same future.