What kind of profit can the stablecoin "1:1 printing rights" actually bring?

1. Stablecoin: The "private printing press" of the digital age

Over the past year, "stablecoin" has been one of the hottest terms in the capital market. A stablecoin is a digital currency that is pegged to fiat currency, theoretically equivalent to fiat currency at a 1:1 ratio, and it requires real assets to support it.

So the question arises: if large cross-border e-commerce companies issue stablecoins to save on transaction costs and save millions each year, that seems reasonable. But in reality, it is often blockchain platforms and digital service providers that issue stablecoins. So how much profit can this "1:1 printing power" really bring?

Don't underestimate this business. The global stablecoin market landscape is already clear: USDT accounts for 60% of the market share, while USDC accounts for 25%. Among them, USDT's issuer Tether has truly astonished everyone: its employees' average salary ranks second in the world; Bloomberg also revealed that it is considering selling 3% of its shares for $15-20 billion, corresponding to a valuation as high as $500 billion, comparable to OpenAI and SpaceX.

Tether, what justifies its value?

The "printing logic" of stablecoins

The traditional banking profit model is to absorb deposits and then lend them out to earn interest spreads; stablecoin issuers collect US dollars and mint tokens on the blockchain. The money held is the source of profit.

• Circle (USDC issuer): Operates with a conservative style, primarily investing in low-risk assets such as U.S. Treasury bonds and cash after receiving funds, to ensure a 1:1 exchange with the U.S. dollar.
• Tether (USDT issuer): A more aggressive model, currently holding 100 billion dollars in reserves, earning over 4 billion dollars a year just from interest. The net profit for 2024 is expected to reach 13.7 billion dollars, with a profit margin as high as 99%.

Tether's asset portfolio includes not only cash and US Treasury bonds but also Bitcoin, equity investments, and spans areas such as payment infrastructure, renewable energy, artificial intelligence, and tokenization. To some extent, Tether has become less of a pure stablecoin company and more like a top investment bank and asset management giant.

Three, the "stablecoin war" of DeFi protocols

Once the "money printing model" is found to be so profitable, it naturally attracts countless imitators. Many DeFi protocols have joined the stablecoin war:

MakerDAO's DAI: One of the earliest successful decentralized stablecoins

• Innovation: First to include U.S. Treasury bonds in reserves, once holding over $1 billion in short-term Treasury bonds.
• Income distribution: Excess income enters the surplus buffer, which is then used for the repurchase and destruction of MKR governance tokens. MKR is no longer just a "governance voting right," but is directly tied to cash flow, becoming a "equity-type token" with real value.

Frax: A small and focused "fine printing machine"

Frax's overall scale is not large, with circulation remaining below 500 million dollars for a long time, but it is designed extremely cleverly.

Income distribution:

• A portion is used to burn FRAX coins to maintain scarcity;
• A portion is allocated to stakers to enhance user stickiness;

The remaining part is invested in the sFRAX treasury, which tracks the Federal Reserve interest rates, effectively providing users with a product that "follows U.S. Treasury yields."

Although its scale is far less than Tether, Frax can still generate tens of millions of dollars in revenue each year, making it a representative of "small scale high efficiency."

Aave's GHO: An Extension of DeFi Lending

The well-known lending protocol Aave launched its own stablecoin GHO in 2023.

Mode: When users borrow GHO, the interest paid goes directly to Aave DAO, rather than to external institutions.

Income distribution:

• Approximately 20 million dollars in interest income per year;
• Half of it is allocated to AAVE token stakers, while the other half remains in the DAO treasury for community governance and development.

Currently, the scale of GHO is approximately 350 million USD, but its logic lies in: deeply integrating stablecoin with lending business to form a "vertical ecological closed loop."

It can be said that "the Eight Immortals cross the sea, each demonstrating their own abilities"; every stablecoin protocol is trying to create its own private printing press.

4. Concerns: Is it really stable?

Although stablecoins reduce the cost of cross-border transactions and improve efficiency, there are also many hidden risks behind them:

• Pegged assets are not absolutely stable: Tether's reserves include Bitcoin, and once there is a sharp fluctuation, the stablecoin may "de-peg".
• The income distribution process is not transparent: Many protocols claim that the income will be used for token buybacks or rewards, but the actual operational process is a "black box."
• Hedging strategies carry risks: Using futures for hedging does not theoretically guarantee 100% safety.

Compared to national credit endorsements, the "credibility" of private stablecoins is always limited.

Five, why does Tether have 500 billion dollars?

Given the numerous risks, why is Tether still valued at 500 billion dollars?

The answer lies in: stablecoins have become the infrastructure of the digital age.

It is not only a payment and settlement tool, but also can be embedded in scenarios such as lending, trading, and RWA (Real World Asset tokenization), providing new channels for global capital circulation. The high valuation of Tether actually reflects the market's huge expectations for the future of RWA.

Of course, the implementation of compliance regulations is still a key factor in determining how far stablecoins can go in the future.

Stablecoins may seem like just a cornerstone of the cryptocurrency market, but they are actually a new form of "currency issuance rights" in the financial system. Whether it's Tether's $500 billion valuation or the flourishing of DeFi protocols, they remind us that the monetary landscape in the digital age is being quietly rewritten.