The diffusion path of USD1 stablecoins in DeFi—An analysis of how the three-pole pattern in the stablecoin market is being reshaped

The stablecoin market is undergoing a profound transformation far beyond its scale of growth. In the first quarter of 2026, the total global supply of stablecoins reached a record high of $322 billion, accounting for 75% of all cryptocurrency trading volume. This shift is driven not only by the ongoing competition between USDT and USDC but also by a newly emerged force—USD1 stablecoin issued by World Liberty Financial, which is embedding itself into the DeFi ecosystem through a unique pathway, gradually changing the market landscape.

Since its launch in March 2025, USD1 has rapidly entered the top five stablecoins by market cap, approaching $5.4 billion in value at one point, and recently was adopted by Aster DEX as the exclusive settlement asset for real-world asset perpetual contracts. However, its expansion path has always been accompanied by scrutiny of the driving forces behind its growth.

Key Milestones in USD1’s DeFi Expansion

On April 7, 2026, World Liberty Financial’s stablecoin USD1 reached an exclusive partnership with decentralized exchange Aster DEX. According to the agreement, all perpetual contracts tracking real-world assets on Aster DEX will be settled solely in USD1, replacing the previous dual-settlement mechanism with USDT. The initial markets include gold, silver, crude oil, and Brent crude oil, with trading pairs $XAUUSD1, $XAGUSD1, $CLUSD1 , and $BZUSD1.

From a product design perspective, USD1 trading pairs adopt a maker fee of -0.5 bps and a taker fee of 1 bps, meaning the exchange pays rebates to liquidity providers to incentivize deep market making. Simultaneously, USD1’s first Morpho vault on the Monad network has gone live, offering annual yields of about 9% to 13%, currently with zero fees. The project positions USD1 as an interest-earning asset capable of generating yields and aims to serve as the native settlement currency for future AI agent interactions.

Ecosystem Expansion of Emerging Stablecoins

USD1’s birth and development show an accelerating expansion trend. The following timeline highlights key milestones:

This timeline reveals a key logic: each step of USD1’s advancement is highly synchronized with strategic ecosystem expansion. The bank license application creates a regulatory pathway for transitioning from “on-chain assets” to “regulated financial instruments,” while intensive cooperation with DeFi protocols opens differentiated application scenarios.

Data and Structural Analysis: The Three-Polar Market Map

Overall Market Structure

As of April 2026, the stablecoin market exhibits a clear “two giants plus followers” structure. USDT leads with approximately $189.7 billion in market cap, followed by USDC with about $77.9 billion, together controlling roughly 89% of the market share.

However, attention should be paid to marginal shifts in market share. In Q1 2026, USDT’s supply shrank by about $3 billion, with its market share dropping from 60.7% at the start of the year to approximately 57.85%. This is the first quarterly supply contraction for Tether since the Terra collapse. Meanwhile, USDC’s supply increased by about $200 million, with a total growth of 220% since late 2023.

Thanks to incentive strategies and ecosystem expansion, USD1’s market cap approached $5.4 billion in February 2026, entering the top five stablecoins globally. Different data sources report variations: some indicate USD1’s circulating supply around $4.6 billion, distributed across Ethereum, BNB Chain, and Solana. Based on daily active addresses, USD1 ranks fifth among stablecoin issuers.

WLFI Token Market Performance

As of April 27, 2026, WLFI token is quoted at approximately $0.07368 on Gate, down 2.29% in 24 hours. Its all-time high was $1.10, representing a roughly 93% decline from the peak. The circulating supply is 24.66 billion tokens, with a total supply of 100 billion, giving a current market cap of about $1.81 billion and a fully diluted valuation of approximately $7.37 billion. Over the past year, WLFI’s price has fallen by 67.74%.

The ongoing decline in token price is closely linked to recent governance disputes. In mid-April 2026, World Liberty Financial proposed a lock-up and burn plan involving 4.52B WLFI tokens, with a two-year lock-up and three-year unlock, and about 4.5 billion tokens to be burned at a 10% rate. The proposal aims to ease market concerns over concentrated insider selling but has not yet reversed the price trend.

Structural Role of WLFI Token in the USD1 Ecosystem

WLFI governance tokens play a complex structural role within the USD1 ecosystem. In April 2026, WLFI vaults deposited about 3 billion tokens as collateral into Dolomite’s lending protocol, lending out approximately 50.44 million USD1, resulting in utilization rates exceeding 100% and a negative liquidity gap of about -23,200 tokens. As a result, USD1 deposit interest rates surged to 35.81% APR, with borrowing costs rising to 30%, driven by a single internal entity rather than market demand.

This structure resembles the cycle lending that led to the 2022 FTX collapse. The project team responds that the position remains over-collateralized and far from liquidation. Notably, Dolomite’s co-founder also serves as an advisor to World Liberty Financial, creating a potential conflict of interest.

Differentiated Positioning in the Three-Party Competition

The current stablecoin market competition essentially unfolds along two main axes—regulatory compliance and scene-specific distribution:

USDT maintains dominance through extensive global trading depth and embedded network effects in emerging markets. However, after MiCA’s implementation, several European exchanges have had to adjust their support for USDT, facing increased compliance pressures. To address this, Tether launched a compliant version USAt for the US market in January 2026, operating alongside offshore USDT. USDT acts as the foundational liquidity layer for global trading, but its compliance transformation is ongoing.

USDC emphasizes compliance as its core strategy. Circle has completed an IPO, obtained conditional approval from OCC to establish a federal trust bank, and acquired an EMI license in France to meet MiCA requirements. Data shows USDC accounts for about 64% of adjusted stablecoin trading volume, surpassing USDT for the first time since 2019. Its transaction characteristics lean toward institutional, programmatic fund flows, with an average transfer size of about $557 and a turnover rate of 90 times. USDC aims to position itself as an institutional compliance interface.

USD1 adopts a clearly differentiated strategy. Instead of competing directly with USDT and USDC for trading volume, it builds exclusive settlement scenarios, connects institutional endorsements and large transaction pipelines, and seeks profit internalization through bank licenses. USD1 aspires to evolve from a product into a platform, but issues like circulation concentration and related-party controversies pose additional risks alongside market share considerations.

Public Discourse and Divergent Interpretations of Growth Models

Public discussion around USD1 exhibits features far more complex than typical crypto projects. The debate is not rooted in disagreements over technical routes or economic models but in different interpretations of its growth pattern.

Supporters’ View

Some industry observers see USD1 as an important innovation in the stablecoin space. They believe its rapid rise demonstrates the effectiveness of differentiated competition—by tying to specific DeFi scenarios rather than directly challenging giants, it opens new growth avenues. The $500 million investment from Abu Dhabi capital is seen as recognition of the emerging stablecoin project. Additionally, legal experts note that foreign capital investing in USD stablecoins objectively increases demand for US Treasuries, which is beneficial for the dollar macro system.

Critics’ View

Critics argue that USD1’s growth is driven by subsidies and related-party advantages. Key points include: early rapid growth heavily relies on high incentives; token holdings are overly concentrated; and the WLFI vault’s cycle lending on Dolomite resembles the FTX model. Some also believe that USD1’s fast expansion features significant non-market elements—an attempt to convert special resources directly into market share rather than pure market competition.

Scrutinizing the Narrative’s Authenticity—Structural Observations in the Expansion

USD1’s growth narrative requires rigorous fact-checking. Three dimensions are examined:

Sustainability of Growth Drivers. The early rapid growth of USD1 largely depended on high incentives. In December 2025, a major exchange launched a USD1 fixed savings product with up to 20% annualized yield; later, WLFI governance proposed incentivization schemes using vault funds. Before incentives, USD1 circulation was about 2.7 billion tokens; after launch, it surged past 3 billion. Whether this subsidy-driven growth can be sustained after incentives taper off remains unverified due to limited data.

Concentration Risk in Holdings. CORE3 risk rating agency rated WLFI as D in April 2026, placing it among the 50 riskiest projects on the platform. Reasons include lack of ongoing on-chain monitoring, absence of structured bug bounty programs, and governance risks from large insider holdings.

Selective Transparency. During the Dolomite lending incident in April 2026, WLFI minted 25 million USD1 tokens and burned 3 million but did not disclose the source or reasons for the burn. Such selective disclosure leaves uncertainty about transparency and information sufficiency.

Industry Impact Analysis: DeFi Settlement Differentiation and New Stablecoin Competition Paradigm

DeFi Settlement Layer Competition

USD1 replacing USDT as the exclusive settlement asset for RWA perpetual contracts on Aster DEX marks a shift from ambiguous market share battles to clear scene-specific dominance. Unlike traditional exchange token listings, this cooperation binds specific asset classes at the protocol level, creating an exclusive settlement layer. The launch of USD1’s Morpho vault further indicates stablecoins are shifting from passive trading tools to active yield-generating assets.

From a macro perspective, three paths are emerging: USD1’s linkage to on-chain commodities, USDC’s focus on institutional compliance, and USDT’s maintenance of global liquidity networks. The competition among these paths will ultimately determine which model defines the next generation of payment infrastructure.

Evolving Regulatory Environment

USD1’s pursuit of a trust bank license is sparking a substantive regulatory race. OCC has conditionally approved trust bank licenses for Circle, Ripple, BitGo, Fidelity, and Paxos by the end of 2025. Holding such licenses allows stablecoin issuers to directly access the Federal Reserve’s payment system, internalizing core profit activities like issuance, custody, and redemption—fundamentally changing the profit model.

In Europe, French officials have expressed that current MiCA rules are insufficient to curb the dominance of US dollar stablecoins, which hold 98% of the global market. France calls for significant restrictions on non-Euro stablecoins’ use within the EU payment system. This means USD1 entering the EU market will face both technical compliance hurdles and increasingly complex regulatory challenges.

Formation of a New Stablecoin Competition Paradigm

USD1’s emergence elevates stablecoin competition from technical feature comparison to a comprehensive game involving ecosystem binding, institutional pathways, and narrative power. It demonstrates how differentiated scene strategies can accelerate adoption of emerging stablecoins and reveals deep rule conflicts when ecosystem expansion and structural risks intersect. The resulting scene segmentation in DeFi and the redefinition of stablecoin competition paradigms will continue to influence the long-term evolution of the crypto industry.

Conclusion

USD1’s expansion in DeFi offers a unique case study for the stablecoin market. It illustrates how new stablecoins seek survival by building exclusive settlement scenarios and differentiated positioning, while also highlighting the critical influence of token design and governance transparency on long-term ecosystem development.

Looking ahead, USD1’s appearance is reshaping the competitive coordinates of the stablecoin track. Regardless of its ultimate trajectory, the pattern of scene segmentation, regulatory race, and paradigm redefinition it sparks will persistently influence the industry’s long-term evolution. For participants observing this market, perhaps what matters most is not whether USD1 can challenge USDT or USDC, but how this tripolar landscape’s formation and evolution will redefine the very rules of the stablecoin game.