#OUSDStablecoinLaunch

Here's a breakdown of everything you need to know about the announcement of Open Dollar (OUSD) from my vantage point: - Huge news this week as Circle's own reserve managers, custody partners, and distribution networks... 140+ companies - led by BlackRock, BNY Mellon, Visa, Stripe, PayPal, Franklin Templeton, and Coinbase - collectively launched Open Dollar, a stablecoin specifically built for the institutional financial infrastructure layer, or what they call “enterprise grade payments” and settlements. This isn’t a nascent tech company trying to break into stablecoins. This is an absolutely massive bloc of the global financial system deciding it was time to build an alternative.

On the day that OUSD was launched,Circle's stock dropped a brutal 17.5% - back to just about its IPO price of $62.63 - to $63.01.

The message from the market couldn't be more direct: if your distribution partners, custody banks, and even the companies that manage your reserves are building something to replace your business model - then your business model has been fundamentally disrupted. Here’s the real structural challenge to the USDC model OUSD represents Firstly: The revenue of the USDC business model has always been predicated on Circle capturing 100% of the interest earned from the US Treasury reserves that back the trillions of dollars in USDC currently in circulation (which is about 5.3% on nearly $80B circulating USDC - ~$3.5 billion annually to Circle) rather than flowing those revenues to the ecosystem of partners that help to distribute USDC, use USDC to provide payment solutions or who actually hold USDC.OUSD flips this model: it charges NO minting or redemption fees and 100% of the Treasury interest revenue generated by OUSD will flow directly to the institutions that use and build on the OUSD protocol, who in turn incentivise those who use OUSD. Circle has essentially made its own network of financial infrastructure and payments players incentive incompatible. This is more of a “block them out” from a revenue perspective rather than”competitor”.

This isn’t a theoretical risk for Circle The key difference here between OUSD and when Meta and Amazon considered launching their own stablecoin - a threat that had, by all appearances, spurred many of these same institutions into developing USDC in partnership with Circle - is that those two companies would have been starting from zero.

They would have had to go out and develop their own distribution networks, create relationships with custodians and custody partners, and figure out how to manage reserves from scratch. This coalition, on the other hand, consists of the exact players that have, until now, been instrumental in building, distributing, and managing USDC. BNY Mellon is the primary custodian for USDC; BlackRock manages Circle's BUIDL Reserve Fund; and Coinbase not only generates significant revenue from USDC distribution but is also a key founding partner in Open Dollar.

Those weren’t simply ecosystem participants exploring a backup; those are the pillars of Circle’s business now actively building something designed to take their own revenue. What Circle’s CEO said “The idea of other parties launching their own stablecoins or alternative blockchain payment systems is not new, and in the past we have seen major companies collaborate with and leverage USDC. Network effects, the deep embeddedness of USDC within global payment infrastructure and our brand, have given us an indelible advantage.” and then went onto say something along the lines of… “We are focused on supporting the infrastructure and economic rails needed for a future with open financial systems, and believe Open Dollar, and others like it, contribute positively to that effort and can ultimately reinforce the network effect of existing payments rails like Visa, Mastercard, and other open blockchain initiatives.”

As the leader of an open source development company, I’ve always felt that competition helps innovation in a healthy system but this is clearly not a case of innovation but simply moving from one form of monetary centralisation to another; just as one system is being born other existing powerful interests are collaborating to create and sustain its economic model at the expense of the people.

With 140 institutions including Circle's own reserve manager, custody partner and largest distributor launching OUSD - do you think USDC's network effects and brand trust are strong enough to survive this structural challenge, or has the stablecoin market just fundamentally shifted against Circle's business model?

‍#GateSquare #Stablecoin @Gate_Square