The Core Position and Potential of ETH in the Wave of Stablecoins

The global demand for the US dollar is experiencing explosive growth. While news headlines often focus on "de-dollarization", a more significant trend is emerging: over 4 billion people and millions of businesses are actively seeking to access the US dollar through stablecoins, representing the largest expansion of the dollar's network effect in decades.

This has created unprecedented opportunities for Ethereum. Stablecoins have provided individuals worldwide with access to US dollars, growing 60 times since 2020, 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 unique advantages that can provide the global financial infrastructure for this new digital dollar economy, and ETH will directly benefit from this growth.

Stablecoin: A New Export for Global Demand of the Dollar

There is a huge potential demand for the US dollar from individuals and businesses worldwide.

People around the world want to use US dollars for security:

• Over 4 billion people face huge currency risks stemming from political instability, poor monetary policy, and structural inflation.
• Approximately 21% of the global population lives in countries with an annual inflation rate exceeding 6%, rapidly eroding savings and purchasing power.
• For these groups, holding US dollars means financial security, serving as a store of value, a means for cross-border transactions, and a hedge against local currency fluctuations.

Companies need US dollars to conduct transactions:

• The US dollar remains the dominant currency in global trade, with 88% of global foreign exchange transactions involving the dollar on at least one side.
• Companies in emerging markets rely on USD liquidity for international payments, imports, and supply chains, 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:

• Anyone with internet access can hold and trade dollars without banks or government permission, available globally 24/7.
• Since 2020, the market value of stablecoins has increased by 60 times.
• Focus on emerging markets that were previously excluded from USD-denominated finance. Nigeria has become the world's second-largest cryptocurrency market, while China remains under a ban, with underground cryptocurrency applications still ongoing.

Stablecoins are creating a new group of dollar holders among the world's largest population, with businesses pricing in USDT and households saving in USDC. They are driving a fundamental expansion of the dollar financial services market.

Demand and Opportunities for New Dollar Holders

Stablecoin holders want to make their money work.

Today, millions of people can hold US dollars through stablecoins. But their aspirations go far beyond this. Individuals and businesses naturally wish to use their funds to earn returns, invest, and grow their wealth.

Traditional finance cannot serve this new market:

• The US banking system requires compliance with regulatory requirements, excluding most global participants.
• Cross-border financial services are still expensive, slow, and regionally restricted.
• Traditional finance is built for institutions and high-net-worth individuals, not for global retail.
• Geographic and regulatory barriers have hindered billions of dollars from participating in dollar-denominated financing.

This has created a demand for new financial infrastructure that can serve billions of stablecoin holders globally, enabling them to utilize the new dollar.

Ethereum: The Ideal Platform to Meet Global Stablecoin Demand

The new financial infrastructure providing services for stablecoin holders must simultaneously meet three key requirements:

1. Globally available: It must be applicable anywhere with internet access, from New York to Nigeria, and to rural Nepal.
2. Security for institutions: It is essential to provide the security, reliability, regulatory clarity, and customizability required for institutions to build financial products worth billions of dollars.
3. Resist government intervention: Must not be controlled by any single government.

Ethereum meets all three requirements:

1. Globally accessible: Anyone around the world with an internet connection can use Ethereum 24/7.
2. Regarding institutional security:
   • Security: The most economically secure and decentralized among all programmable blockchains.
   • Reliable: It can maintain 100% uptime for 10 years, regardless of market crashes or geopolitical events.
   • Compliance with regulatory requirements: U.S. regulators classify ETH as a commodity, providing a clear regulatory framework.
   • Customizable: The Ethereum L1+L2 framework achieves customizability.
   • Excellent performance record: Home to the world's largest digital financial economy.
3. Resist government intervention: The government cannot occupy a single control point to control or restrict the network.

Ethereum uniquely meets these requirements with its powerful decentralized features, and its origin story is almost impossible to replicate today.

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 reliable: The supply of ETH is predictable, with a low inflation rate and not under central control.
• Productive: Unlike gold or static dollars, ETH generates returns through staking.
• Utility of Collateral: ETH is already the largest on-chain collateral asset in the Ethereum ecosystem.
• Anti-seizure and anti-censorship: ETH cannot be frozen or seized by the government.
• Programmable and highly liquid: ETH is deeply integrated into the entire on-chain financial system, providing unparalleled 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 yields, secure the network, and support DeFi lending; therefore, as the system evolves, the demand for ETH will naturally increase.

The growth of Ethereum Layer-2 has further stimulated the demand for ETH. By reducing transaction costs, increasing transaction speeds, and enabling new use cases, Layer-2 has opened up more areas where ETH can be used as collateral.

ETH: A Potential Global Store of Value

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

• Like Bitcoin, Ethereum has superior value storage characteristics compared to traditional assets like gold.
• ETH and BTC will not compete with each other, but may share a piece of the traditional SoV assets worth $5 trillion 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 as the best way to participate in the stablecoin economy

The growth of the stablecoin economy has established a powerful flywheel for Ethereum and ETH. As more stablecoins are put into use 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.

The alternatives face significant challenges in replicating this flywheel:

• Traditional finance cannot serve billions of people who are 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 that institutions require, and they also lack the decentralization to resist government intervention.

The result is: Holding ETH may be the simplest and most effective way to access the constantly growing stablecoin economy. For most retail and institutional participants, ETH provides the easiest access to the entire digital dollar ecosystem.