Author: "WEB3 MINT TO BE", Mint Ventures

Host: Alex, Research Partner at Mint Ventures

Guest: Mindao, Founder of dForce

Recording Date: 2025.5.21

Statement: The content discussed in this podcast does not represent the views of the institutions of the guests, and the projects mentioned do not constitute any investment advice.

Hello everyone, welcome to WEB3 Mint To Be initiated by Mint Ventures. Here, we continuously question and deeply think, clarifying facts, exploring realities, and seeking consensus in the WEB3 world. We aim to clarify the logic behind hot topics, provide insights that penetrate the events themselves, and introduce diverse perspectives.

Alex: In this episode, we have invited our old friend, Teacher Mindao. Teacher Mindao has previously discussed many topics with us, including the on-chain of US stocks and DeFi. This time, we will talk about a recent policy hot topic, which is stablecoins, possibly one of the most widely adopted products in the blockchain field. Let's first have Teacher Mindao greet us.

Mindao: Hello everyone, I am Mindao. I am very happy to be here today to share some insights about stablecoins.

Differences in Stablecoins in This Cycle

Alex: Alright, let's get into today's main topic. We know that stablecoins have crossed many cycles, and in each cycle, the core business metrics and scale have reached new highs. In your view, what are some particularly noteworthy differences in the development of stablecoins in this cycle compared to the previous one, aside from the regulatory policies that we will discuss later?

Mindao: We know that during the DeFi summer of 2021 and 2022, there were actually many types of stablecoins, especially on-chain stablecoins, like TERA, and many algorithmic stablecoins that were completely based on-chain. However, after the collapse of TERA in 2022, we saw a significant structural differentiation in the supply side of the stablecoin sector. The dominant ones are still fiat-backed stablecoins. We saw that the minting volume of stablecoins actually dropped from around 180 billion USD in 2022 to about 130 to 140 billion after the entire Luna collapse, and then it gradually stabilized and started to rebound. Recently, I saw data indicating it has reached about 250 billion USD. So, while the total value locked (TVL) in DeFi has not yet reached new highs, we see that the minting volume of stablecoins has already surpassed previous levels. The driving force behind this minting of stablecoins is not the native on-chain stablecoins, such as algorithmic or over-collateralized types. The only highlight in this cycle might be Ethena's USDE. We just mentioned that USDT and USDC are fiat payment types, while Ethena can be considered a wealth management type, which is a yield-bearing and wealth management stablecoin based on native crypto assets. Strictly speaking, it cannot be called a stablecoin because, for example, when I participate in Ethena's mining, most of the risk I bear is its price volatility risk, as it cannot achieve a one-to-one redemption. Its entire redemption mechanism is not linked to the USD stablecoin but is based on its exchange's pricing arbitrage positions. Of course, it has recently transformed, and I saw that about several billion USD has been invested in T-Bill assets. But purely from the perspective of the previous cycle, we see a clear differentiation in stablecoins, with payment types being very obvious and still dominated by fiat. Although DAI is considered the oldest decentralized stablecoin, its entire minting volume has basically remained at around 5 to 6 billion USD, without further breakthroughs. I think one relatively certain thing after the DeFi summer is that many narratives around stablecoins, at least at this stage, seem to be debunked, such as algorithmic types. With the clarity of regulations, I believe many of these types of stablecoins may gradually be eliminated. We can also see that many new stablecoins emerging in the market are driven by channels, such as PayPal's. USDT and USDC are theoretically also channel-driven stablecoins, both backed by exchange backgrounds. USDT was previously backed by Bitfinex, and USDC is backed by Circle. However, even with the support of these two major exchanges, it has been very challenging for them to develop. Binance has also supported several stablecoins, and despite having such good resources, they have not succeeded. So I believe each cycle has its own timing. From this timing perspective, I think in the future, there will be more channel-driven stablecoins launched, especially from compliant channels.

The Most Impactful Regulatory Policies

Alex: Understood. You just mentioned a significant change regarding timing. In the past year, the legislation around stablecoins, especially in the U.S., has progressed quite rapidly. For instance, just yesterday, the U.S. Senate further advanced a bill called Genius in a procedural vote, which will subsequently enter full chamber discussions and formal voting in the Senate. In your view, what legislative or regulatory policies might have the most significant impact on the industry? How do they influence the current and future stablecoin sector?

Mindao: I believe the entire regulatory landscape consists of two major markets: the European Union and the United States. In the EU, there is MiCA, which is relatively strict in terms of regulatory framework. On the U.S. side, there was a lot of discussion last year about FIT21, the so-called Financial Innovation Technology 21st Century Act. This has already passed in the House of Representatives and should be reviewed in the Senate this year. The Genius bill you just mentioned was further advanced in the Senate yesterday. The difference between the Genius bill and the previous FIT21 is that Genius mainly focuses on stablecoins, guiding and establishing the entire regulatory framework for U.S. stablecoins, so its emphasis is more on the stablecoin side. Recently, as we know, the RWA sector or this subdivision has been particularly hot. Stablecoins, as the vanguard of RWA, are also the tokenization of dollar deposit certificates and government bonds. I think this has very significant symbolic meaning. One key point is that it clarifies and confirms the identity of the issuing entities, such as financial institutions and non-financial institutions, but if they apply for a license, there is no complete definition of whether tech companies can act as stablecoin issuers. There are restrictions on some large tech companies, but it is unclear whether companies like Facebook or Google can issue stablecoins through their subsidiaries. However, basically, the spirit of the entire legislation encourages compliant financial institutions, and it also includes some non-financial institutions, but not large tech companies to enter this field. Another important point is the layered regulation. At the federal level, those with a scale of over 10 billion USD fall under federal regulation, while the rest are under state regulation. Therefore, I believe the implementation and clarification of regulations will play a significant role in promoting the issuance of stablecoins in the future. Additionally, we refer to the U.S. as a legislative lighthouse country, and many other countries and regions are modeling their frameworks after the U.S. For example, we see that Hong Kong is currently pushing for a so-called stablecoin sandbox, including Hong Kong dollar stablecoins. During my recent meeting in Hong Kong, I also saw many teams working on offshore RMB stablecoins in addition to the Hong Kong dollar stablecoins. So I believe that U.S. legislation is not just domestic but serves as a model for other places, including Hong Kong, Singapore, and Dubai.

USDT Vs. USDC

Alex: Understood. If we observe the market share of stablecoins, we find that during the previous cycle, Tether, or USDT, faced significant challenges to its market share. During the last DeFi Summer, Circle's USDC saw rapid growth in its share. However, entering this cycle, we find that USDT's overall growth rate is much faster than that of its competitors, and its total scale has nearly doubled from the previous peak of around 80 billion to now about 150 to 160 billion. In contrast, USDC's market cap has only grown by less than 20% from its peak in early 2022. Other stablecoins, as you just mentioned, have also not seen significant growth in this cycle. What might be the reasons for this pattern?

Mindao: Yes, this is a very interesting comparison. People have always compared USDC and USDT, saying that both are the biggest beneficiaries of the stablecoin market. However, Circle's recent financial report revealed many aspects of its business model that people might not see, including the fact that USDC's profit margin has been overestimated, as a large portion of the costs are channel costs. Additionally, I think many people view USDT and USDC as equivalent or identical stablecoins, but they are actually quite different. USDT is closer to a shadow dollar, while USDC is what we traditionally refer to as a stablecoin. The difference in their minting volumes over the past few years, I believe, mainly lies in the fact that if we view stablecoins as a river, the water storage capacity downstream depends on how many tributaries there are upstream. The tributaries of USDC, in terms of use and use cases, include wealth management on one hand, and on the other hand, deposits and withdrawals. The ability to deposit and withdraw may be USDC's biggest competitive advantage among stablecoins, as it can convert USDC to USD on a one-to-one basis from exchanges and issuers. However, I believe the market structure of USDT and USDC is completely different. For example, in terms of wealth management, there are various exchanges that accept it for wealth management. The usage scenarios for USDT on the trading side are far more numerous than those for USDC. For instance, most perpetual contracts on various exchanges use USDT as collateral; additionally, in the OTC circulation aspect, the volume of USDT may be dozens or even hundreds of times that of USDC in the secondary market. So, if we consider it as a river, USDT has too many tributaries, and its water storage capacity is far greater than that of USDC. Therefore, I think this distinction entirely depends on their respective usage scenarios. USDT is closer to a shadow dollar or underground dollar, aligning more with our definition of money, rather than just being a stablecoin pegged one-to-one with the dollar. Because if you look at USDT, its price is not pegged one-to-one with the dollar most of the time; it often fluctuates with the market. For example, in some offshore markets, there may be a premium or discount. Of course, one advantage of the shadow dollar is that it has a very large number of counterparties, and its acceptance as a general equivalent is far greater than that of USDC, giving it a much larger moat. Another key point is that from Circle's disclosed financial report, we can see that its channel fees to Binance and Coinbase are very high, whereas USDT has completely eliminated the need to pay channel fees; many exchanges actively list it. Therefore, in terms of usage scenarios and utility, I believe USDT is much larger than USDC.

Alex: OK. Given that USDT occupies such a dominant position now, I believe that for USDC and many institutions that will issue their own stablecoins in the future, they all hope to develop towards the current position of USDT. In your view, do you think they have a significant possibility of achieving a scale close to USDT and reaching a similar channel effect? For example, taking USDC as its biggest competitor, do you think it currently has that potential?

Mindao: I actually think that USDC may find it quite difficult in this regard, mainly because the competitors that come later are essentially taking USDC's market. For instance, if banks and financial institutions want to issue stablecoins, they have a natural advantage in terms of fiat deposit and withdrawal channels, which I believe USDC cannot compete with at all. For example, PayPal has other deposit and withdrawal channels that are far stronger than USDC in trade or payment channels. So, if stablecoins really become law through the House of Representatives this year, I believe it will open the entry for compliant stablecoins, and the new players entering will be particularly strong in traditional channels. USDC relies on Coinbase and Binance, having a first-mover advantage, but this moat is relatively low. For instance, Facebook, although currently large tech companies may not be allowed to issue directly, what if they do so through partnerships or other means? I have seen recently that they have expressed an intention to possibly restart the Libra project. Including Twitter's X, which also has great ambitions in the payment and stablecoin fields. If they enter, I believe their channels will completely overshadow the ones USDC is currently cooperating with.

The Possibility of Traditional Financial Institutions Entering the Stablecoin Field

Alex: So, do you think these traditional financial institutions, including those with their own channel advantages in the internet space, have ambitions for Tether's on-chain operations, as well as scenarios beyond their existing traditional deposit and withdrawal businesses? What possible pathways or methods do you think they have to enter this field?

Mindao: Yes, for example, JD.com is also preparing to issue a Hong Kong dollar stablecoin, and Alibaba is also making arrangements in this area, using their e-commerce business as a touchpoint. However, I think Tether's current positioning is quite clever. First, it has a network effect, and I mean a real network effect, not like USDC, which is largely subsidized and maintained through high channel costs. Tether has a truly natural network effect, which will continue to strengthen and is not easily replaced by a single channel. For example, if JP Morgan issues a stablecoin, it may be more convenient for interbank deposits and withdrawals. However, in terms of secondary trading or OTC circulation, it may not be able to compete with Tether's current network effect. So from this perspective, I believe Tether has a unique competitive advantage under the current compliance framework. Because the market it occupies is one that other compliant stablecoins cannot easily enter, or that other channels cannot fully cover. Moreover, it is not only used in trade, payment, and OTC; it can basically cover all the scenarios that compliant stablecoins can cover. Aside from the one-to-one exchange channel with banks, which cannot be directly opened in the European and American markets, it has already covered other secondary circulation and payment aspects. Therefore, I think the compliant stablecoins that follow may find it quite challenging to compete with Tether. In fact, Tether has many challengers; when it came out in 2015, people didn't take it seriously. Later, you saw Huobi's stablecoin HUSD, then OKX had a stablecoin, and Binance has already launched a third stablecoin, but none have surpassed it, nor have they even reached the scale of USDC. This shows that the network effect and the channel costs required to push it later are very high.

Alex: Understood. I saw that during the discussions on the Genius bill, a major opponent from the Democratic Party, Elizabeth Warren, mentioned a risk point. She believes that if this bill passes, the market size of stablecoins could grow from the current over 200 billion to several trillion within a few years. Although she is not satisfied with the current bill and believes that the regulatory measures are not strong enough, she has made this prediction. Do you think this prediction is reliable? Is it really possible for the scale to expand tenfold to several trillion in a few years? Additionally, will this new market share of ten trillion likely be more attributed to established players like Tether, or do you think new entrants, including the stablecoins issued by JP Morgan or large internet companies, will capture a larger share?

Mindao: Yes, Elizabeth Warren has always been anti-Crypto, and I think her perspective on this matter is biased and unfair. Let's set aside domestic political issues in the U.S. For example, when this stablecoin bill was being discussed, U.S. lawmakers had previously held another session disclosing the so-called Trump family's involvement in the crypto industry, which I think is heavily politicized. For instance, there is significant opposition to the stablecoin bill because the Trump family has also issued a stablecoin called USD1, so I think there are many political issues involved. But putting politics aside, the entire stablecoin market is about 180 billion USD, primarily invested in U.S. Treasuries, making it one of the top ten holders of U.S. debt. If we see this market continue to grow, the amount of U.S. Treasuries will undoubtedly increase proportionally. Of course, I think ten trillion is a very ambitious target. The general estimate is that it might reach a trillion USD by the end of next year. I believe people may still have a relatively vague understanding of the growth of stablecoins. For example, when we were working on DeFi at the beginning of 2019, the total value locked (TVL) in DeFi was less than 100 million USD, around 60 to 70 million USD. By the peak of the DeFi summer in 2020, it had grown to about 250 billion USD, an increase of two to three thousand times. The minting volume of stablecoins has also increased significantly, from a few billion to over 200 billion today, growing by hundreds of times. Of course, I think achieving such exponential growth purely based on the current two players is quite difficult. However, we have seen that BlackRock's on-chain T-bill volume has recently surged to the scale of several billion USD. Therefore, I believe that if compliant institutions enter, it won't be a slow growth; it could double within six months to a year. So, I think Tether will definitely see significant growth in market share within the compliance framework, but perhaps even larger growth will come from the issuance of stablecoins by other new compliant institutions or tech companies. This proportion will gradually increase. A very large Web2 payment company called Stripe, when its founder spoke, shared that in the past six months, it acquired a stablecoin payment platform or technology integrator called Bridge, and after the acquisition, the data saw dozens or even hundreds of times growth compared to traditional Web2 data. Therefore, I believe that in the future, stablecoins will rapidly replace the existing interbank settlement and payment infrastructure, and this could be fully established within the next two to three years. When you consider how many stablecoins will be needed to support the replacement of this new infrastructure, the volume will undoubtedly be very large. I think we shouldn't understand this purely through the lens of past DeFi cycles or cryptocurrency cycles, because the development of stablecoins has become largely independent of the crypto cycle. This is also why, after the collapse of the DeFi summer, stablecoins still reached new highs; the overall changes in crypto assets themselves have not been significant. Because a large amount of capital is coming in, it doesn't necessarily mean they are looking for arbitrage opportunities within crypto; there may be many opportunities to buy U.S. Treasuries on-chain for yield. Therefore, I think its growth curve is difficult to compare with the growth of DeFi or crypto assets in a simplistic manner. I believe that if it opens up, the growth could be leapfrogging.

Possible Measures by Various Countries Regarding Stablecoins

Alex: Understood. Now, if we look at the bigger picture, the rapid growth of dollar stablecoins and the influx of so many institutions is actually very helpful for the circulation of the dollar globally and for covering more scenarios. On the other hand, many international markets are now questioning the fundamental value of the dollar and U.S. Treasuries. A couple of days ago, it was Moody's that downgraded the rating of either the dollar or U.S. Treasuries. There seems to be a strong comparison between the two. The U.S. has already begun to promote the deployment of dollar stablecoins in global channels. Compared to the dollar, do other countries feel a sense of crisis regarding stablecoins? Or what kind of measures are they taking? Based on your observations, please share your thoughts.

Mindao: I think the sense of crisis is very strong. Including the current U.S. MAGA, the AI and crypto policies, I believe its only hypothetical enemy is China. All discussions about promoting dollar stablecoins or the dollar crypto market are benchmarked against China. For example, if the U.S. does not promote dollar stablecoins, China's Belt and Road Initiative is doing currency swaps, and China is also very actively trying to promote the development of the digital yuan. I believe the U.S. has a very clear understanding of not only the crypto market but also the continuation of the dollar's hegemony. The current U.S. Treasury Secretary has worked at the Soros Fund for many years, so he is the most knowledgeable about the currency market among past Treasury Secretaries. When he was at the Soros Fund, he also speculated against the pound, so his understanding of the currency market is very deep. At the same time, the Secretary of Commerce is also one of the shareholders of Tether. They have a very good understanding of the relationship between business logic, dollar hegemony, and stablecoins. It’s not a superficial understanding of "I know this," but a deep understanding of the mechanism. I think a fitting metaphor here is that dollar stablecoins are a so-called room-temperature superconductor for the dollar. In the traditional world, the dollar has many electronic settlements, SWIFT, and various transfers, but there is a lot of friction due to regulations in various places and different infrastructure systems. When you try to implement it through stablecoins using a ledger, you find that the efficiency is very high. So I think this metaphor is very apt; it is a room-temperature superconductor with very little friction, and it’s not that the threshold is particularly high. Now, as long as you connect, as a payment institution, you don’t need to touch the traditional banking infrastructure at all. Therefore, I believe this will greatly accelerate the hegemony of the dollar. For example, previously, interest rate fluctuations in DeFi were very large. Recently, we see that on-chain interest rates cannot be said to be completely anchored to U.S. Treasuries, but the liquidity of U.S. Treasuries has already been very strong in the entire DeFi and stablecoin interest rate market. This will only get stronger as more underlying protocols integrate T-Bill assets. This will turn into the dollar's interest rate policy. Previously, it was very difficult for the dollar's interest rate policy to achieve global synchronization; each bank might have different rates. However, on-chain, in the stablecoin market, I believe it will make the transmission of interest rates very efficient. In fact, I am not particularly optimistic about the so-called stablecoins of small countries. It’s not that turning a fiat currency into a stablecoin makes that stablecoin stronger, more efficient, or more liquid; the underlying still depends on the economic strength of the country. So in the end, it may just be the currencies of the U.S., China, the EU, and Japan—these few large countries that already have a market position in the foreign exchange market and have underlying economic support—that will enter what I think is a very important competitive market for stablecoins. Because if you don’t enter, you will gradually be dollarized. Dollarization used to happen in politically unstable or economically turbulent small countries. If the dollar stablecoin continues to maintain this high monopoly, I believe it could lead to dollarization in regions like the EU and even in China. The significant difference between this and traditional dollarization is that the friction cost of switching these on-chain assets with the local currency is far lower than that of the traditional foreign exchange market. This will lead to the situation where, if you want to maintain the dollar's monopoly, I believe the EU will also feel that this is a significant challenge to their monetary sovereignty. Therefore, I think this will intensify the competition between major powers in the stablecoin arena.

Alex: Understood. Given the current situation, I believe all countries should see the trend of the dollar. Therefore, accelerating the practice of their own national currency stablecoins should also be a high-probability event, right? Can we understand it this way?

Mindao: Yes, in fact, everyone has figured out how to do the stablecoin business. Essentially, the underlying logic of stablecoins is still to help sell government bonds. Think about it, what do we stablecoin holders ultimately do? We become the final purchasing power of U.S. Treasuries. Whether it’s Tether or USDC, or buying on our chain, it will ultimately convert into the purchasing power of U.S. Treasuries. In this way, you are effectively lowering the financing cost of the dollar. So ultimately, whether it’s U.S. consumers, financial institutions, or the government, they may be the biggest beneficiaries. For example, the promotion of the renminbi stablecoin will definitely lower the financing cost of the renminbi. I think everyone has understood this. It’s not just about maintaining a monopoly position in the clearing and settlement of a certain currency; it’s actually about pricing power, capital circulation, and funding costs, which are completely interconnected.

Centralized Stablecoins vs. Decentralized Stablecoins

Alex: We have seen many algorithmic stablecoins you just mentioned in the last round, including many decentralized stablecoins. However, the stablecoin projects that have emerged in this round, such as Ethena and PayPal's PYUSD, are actually more typically associated with centralized institutions. So, does this mean that institutionalized, centralized stablecoins are actually more suitable for stablecoin products? Or, given the current situation, can we basically conclude that the exploration of decentralized stablecoins is very difficult to succeed?

Mindao: In DeFi, stablecoins have been around since around 2014 or 2015, starting with Bitshare. At that time, there were already proposals for renminbi stablecoins and dollar stablecoins. By 2015, MakerDAO emerged as the first large-scale decentralized stablecoin. I have also been involved in the stablecoin space since 2019, mainly focusing on decentralized stablecoins. Looking at the entire landscape, I believe the positioning and narrative of decentralized stablecoins have changed significantly. Many of them have been disproven. For example, earlier decentralized stablecoins emphasized trading mediums and payments as very important application scenarios. Without this, the logic of decentralized stablecoins is hard to establish. However, we see that in this cycle, the stablecoins that have emerged mainly focus on wealth management returns. For instance, Ethena had the fastest minting volume when it was primarily based on arbitrage returns. At that time, we saw mining returns were in the teens, and with additional incentives like points and Pendle's PT, it could reach returns of 20-30%. At that time, sUSDE had very high returns. However, we saw that towards the end of the last cycle, its underlying returns had already fallen below T-bill returns. Therefore, I think the decentralized stablecoin space may end up with one or two existing competitors, but its appeal is quite different from fiat stablecoins. For example, DAI still has many holders because its biggest point is that it has no blacklist function on-chain. However, DAI cleverly solves several problems: one is that most of its underlying returns come from government bonds; on the other hand, it has a reserve on-chain with USDC that can be exchanged one-to-one. Of course, this reserve has a volume, and when that volume is low, it will sell government bonds and convert them into on-chain reserves. So there was a saying that all decentralized stablecoins, no matter how they are designed, ultimately become a wrapper for USDC, referring to DAI's model. Although it is, in a sense, a token wrapped around USDC, because it has no blacklist function and has anti-censorship characteristics, along with some collateralization options that differ from traditional fiat currencies in terms of economic models or monetary policy, this gives it a certain possibility and necessity for existence in the crypto world. You can see that in the past few years, its entire minting volume has remained relatively stable without much change. In the future, I think the decentralized stablecoin space may split into two categories: payment-related, which I believe will be very difficult to achieve, and it seems that this model cannot emerge like USDC. The other two categories will find specific scenarios. For example, the wealth management type I just mentioned can gather various sources of returns. For instance, Ethena is no longer a single arbitrage strategy; it also has T-bill returns, so it is a mixed-return product. DAI is similar; it also incorporates many Ethena strategies. Therefore, from DAI's perspective, it is also a mixed strategy. However, it is hard to imagine a centralized stablecoin doing this. For example, the recent GENIUS Act in the U.S. explicitly prohibits interest-bearing stablecoins. Therefore, wealth management-type decentralized stablecoins have opportunities, especially since they can combine and assemble strategies very well. This is much more flexible than traditional fiat stablecoins. I think starting from the wealth management side is a very good point. Another aspect is as an internal accounting system for DeFi protocols. For example, we also have an sUSX, which is our internal lending protocol, serving as an accounting voucher between different lending protocols. For instance, Aave has a token called GHO, which is not strictly a stablecoin, but serves as an accounting system for liquidity between protocols. The benefit here is that I can use this stablecoin to manage liquidity across different chains, somewhat like a dollarized equivalent for internal accounting between banks. I believe this aspect has a necessary existence in protocol design. Of course, Curve's crvUSD also hopes to make it a unified liquidity allocation point within the entire Curve DEX pool, which can improve capital efficiency. Therefore, I think decentralized stablecoins may gradually shift from "competing with fiat currencies" to being specific scenario-based, such as wealth management types and equivalence between protocols. In this way, the entire positioning and market will be difficult to compare with fiat currencies in the future.

The Impact of the Stablecoin Bill on Leading DeFi Businesses

Alex: I see that there is a saying that as the market size of stablecoins gradually increases, even though, as you just mentioned, many stablecoins may not flow into the crypto scene, there will still be some TVL flowing into our industry, which may enhance the TVL of projects like Pendle and Aave. Therefore, some voices believe that once the stablecoin bill is passed, it will be beneficial for some leading DeFi businesses. What do you think of this view? If you agree, which projects do you think are most likely to see significant improvements in their fundamentals?

Mindao: I think it can be viewed from two aspects. I saw that the market reflected this yesterday, with Aave rising by 20% to 30%. However, I believe Aave's increase is not because it has stablecoins. I think it is because, as a DeFi bank, the more stablecoins there are, the better the liquidity, and more fiat stablecoins can come in. In this regard, protocols like Aave or those in the lending market are definitely a positive, as it means more liquidity is coming in. Moreover, when stablecoins come in, they ultimately have to leverage crypto and RWA assets. So I think the ones that benefit more are those protocols that are not directly related to decentralized stablecoins. For example, lending protocols, DEXs, and Uniswap need pools for stablecoins, or there needs to be a swap pool with euros, including RWA assets. However, for native stablecoin protocols, like Ethena, it may face a significant impact. Because first, if Ethena relies solely on basis arbitrage, that business has already been largely consumed by traditional Wall Street financial institutions. They no longer need to go to centralized exchanges or offshore exchanges for arbitrage; now, most Wall Street hedge funds trade directly in ETFs and CME, washing away those profits. There may be hundreds of billions of dollars involved in this. Therefore, I believe that in terms of basis, it will definitely be increasingly squeezed in the long run, eventually aligning with or possibly being lower than government bond yields. Even in a big bull market, the efficiency of traditional funds entering this market is increasing, which will significantly compress the basis. So if you purely rely on arbitrage strategies to scale up, I think it will be very difficult to grow, and it is basically unimaginable to reach the scale of USDC or USDT. Therefore, I think that managing wealth-type stablecoins will face significant challenges. This is also why Ethena has transferred a portion of its assets, about several billion dollars, into T-bills. Whether more will be transferred there may depend on how high the returns from basis arbitrage are. For something like DAI, which is not purely wealth management-oriented, many holders keep DAI without interest, existing on-chain. I think this type of stablecoin can only be considered a neutral to slightly bearish news; it cannot be said to be entirely positive. However, I believe it is a significant positive for bridges, lending protocols, and DEXs. Moreover, with the influx of stablecoins, as we just mentioned, stablecoins are just the vanguard; there are also RWA assets behind them. Recently, I traveled around Hong Kong, and all my friends from traditional financial institutions are particularly enthusiastic about RWA. I don't know why, but it feels a bit like when the NFT market broke out. Every traditional institution person is discussing how to engage with RWA. I believe this is definitely related to the overall clarity of regulation in the U.S. and the development of stablecoins.

Alex: Currently, stablecoins are a business category with a very strong network effect or Matthew effect, with Tether already occupying a significant market share. Now that the regulatory policies in the market are becoming clearer, many institutions want to enter the field. Do you think that, at this market juncture, the status of stablecoins can be classified as a blue ocean for both centralized and decentralized stablecoins?

Mindao: Yes, I think stablecoins are still a blue ocean now, but although this table is still a blue ocean, the players have changed. I believe it is no longer a blue ocean for native crypto teams, but it is still a blue ocean for traditional financial institutions and large Web2 companies. To put it bluntly, no one has really entered yet; PayPal has made an attempt, but it cannot be said to be very successful. However, for these native entrepreneurial teams, I think they may not even be able to get a seat at the table. This is a significant issue, and in the future, it may focus on what I just mentioned, moving from other niche tracks, not purely competing with fiat currencies for payment or trading mediums.

The Chemical Reaction Between DeFi, AI, and Stablecoins

Alex: Okay, let's look at a cross-domain issue. As you just mentioned, the U.S. is keen to innovate and promote two industries: one is crypto, and the other is AI. In this round, we have seen many so-called AI projects emerge, but there are actually not many projects and tracks that have real product demand and market fit. Many people mention a viewpoint or define a new track called Payfi, which they believe has great potential. What do you think about the relationship between the definition of Payfi and stablecoins? Will there be some chemical reactions between AI and stablecoins?

Mindao: I think Payfi is a concept created by public chains and project parties to tell a story, somewhat like SocialFi or GameFi. Whether this thing can logically hold up or be implemented is still questionable. Currently, the typical Payfi projects in the market mainly focus on two narratives: one is how to combine wealth management and payment; how can we achieve better returns while making payments? But isn't this perspective essentially the business of stablecoins? If stablecoins penetrate various channels, for example, USDT or USDC in various payment systems, they can also be deposited into various DeFi protocols for interest. How many of these opportunities can Payfi companies capture? There may be some particularly niche asset categories, such as accounts receivable, which might have specific scenarios for solving capital turnover, but I think it may be pushable. However, I find it difficult for this concept to become an independent large category. Of course, the combination of AI and crypto is another matter; it may overlap with Payfi but is not entirely the same. Because we know that the convenience of AI agents in DeFi lies in the need for payment systems to be involved. Traditional payments, in terms of integration, do not have the seamless involvement of stablecoins or native DeFi protocols. Therefore, I am quite optimistic about the future development of AI in automating capital aggregation and investment decision-making. We ourselves are also working on combining AI and DeFi, and I think a significant barrier to the development of traditional DeFi is that all previous DeFi logic had to be written 100% into the contract, making scalability particularly difficult. This is also why, from 2019 to now, the entire foundational protocols of DeFi have not changed much; they are still those few AMMs, DEXs, lending protocols, and stablecoins. Although there have been contract types recently, no player has truly captured market share to the extent that Uniswap has in AMMs or DEXs. The evolution of DeFi has been quite slow over the past few cycles, one of the biggest reasons being that contracts are only 100% written on-chain, and the costs of auditing and other aspects are very high. In the future, I believe that the combination of AI agents and DeFi will bring about significant changes, possibly with only 10% to 20% of the logic on-chain, while the other 80% will be implemented by AI agents. The market has already seen some early use cases slowly emerging. Moreover, as AI's reasoning capabilities become stronger, the differences between what we introduced in traditional trading and the flexibility and scalability of the current LLM are very significant. Therefore, recently, as we look at the combination of DeFi and stablecoins, it is definitely the most core use case, such as AI agents paying for various services. Whether to use traditional payment mediums or stablecoins for payment, stablecoins are certainly a more coherent way. Another interesting point is that everyone is now talking about how AI agents ultimately form a peer-to-peer closed loop. Your income and costs are all on-chain, and at the agent level, it can be completely closed-loop without any human intervention. Under this premise, as agents become increasingly automated, you must integrate a framework that can complete your income aggregation and payment on-chain, which makes the combination of stablecoins and DeFi with agents a very natural thing.

Alex: Understood. You just mentioned the combination of DeFi and AI, which is actually a topic I am quite interested in recently. You mentioned that the development speed of smart contract-based DeFi has been slow because most of the logic needs to be executed in smart contracts on-chain. You also mentioned a point that perhaps in the future, 80% of the logic will be implemented by AI, while 20% will be in on-chain smart contracts. What does this 80% correspond to?

Mindao: Let me give you an example. For instance, we are currently working on a cross-chain yield aggregation product. Traditionally, this is not feasible in DeFi. First, different chains involve information synchronization, making atomic transactions impossible. You can use some cross-chain protocols, like LayerZero, to make some connections, but the complexity of the logic required due to different funding sources and configurations across different chains and protocols is such that no single contract can be written and deployed across different chains to solve it; traditional DeFi cannot achieve this. However, with AI agents, traditional DeFi can focus solely on user-side deposits and withdrawals, as well as on-chain strategies, and from cross-chain to depositing into different protocols, it only handles this part. Essentially, it goes back to what we said: the settlement of crypto must be implemented in on-chain logic to ensure that it is at least verifiable and transparent on the ledger. However, all the logic in between, such as withdrawing from Aave on Ethereum, crossing over to Base to deposit into Morpho, and then leveraging and looping in Morpho, involves a lot of logical changes. I think a significant issue with traditional DeFi lies in its business logic. For example, the iteration of products from Binance or CeFi is measured in days or weeks. When something new comes out, it can be launched immediately; this is the centralized service logic of centralized exchanges like Binance. However, all the logic in DeFi must be completely written on-chain. We see that Uniswap, Aave, and MakerDAO, which are the foundational DeFi protocols, have iteration cycles measured in two to three years. The reason it takes so long is that all DeFi is static logic, while business changes are dynamic. Today, a strategy needs to be revealed, and tomorrow another strategy needs to be disclosed; this is dynamic. Therefore, I believe AI agents are particularly suitable for extending many dynamic logics. In the past, when we developed AI, we had to exhaustively enumerate every rule. But now, many reasoning models do not require exhaustive enumeration of rules and situations. For example, when we talk about cross-chain cost issues, it can understand how gas fees are allocated over several days and how that affects APY, without us needing to redefine a very detailed rule. So I believe that in the future, aside from the on-chain logic related to the inflow and outflow of funds that I just mentioned, most of the logic can be implemented through agents. The biggest difference between this and traditional CeFi, like Binance, is whether human intervention is needed. For example, if Binance does not have a team to optimize and intervene, the business will definitely not run smoothly. Therefore, I think there may be some relatively simple business logics in DeFi that can be optimized and implemented by agents without the need for team intervention. The next step may expand from yield aggregation to lending and swapping; I believe that in the future, these will gradually be realized by agents. In fact, we have seen cycles like Ethena, which is hard to classify as a DeFi project since all the funds are in exchanges and are controlled by the team to run arbitrage strategies. However, I think that in the future, all underlying DeFi protocols will be transformed using AI, gradually replaced by agents. I see this trend as very clear. If a so-called DeFi product emerges in the next cycle, it will not be a DeFi product based entirely on on-chain contract logic in the traditional sense.

Alex: Understood. For next-generation DeFi products that incorporate AI modules, if AI accounts for 80% of the execution logic, how should the verifiability of this AI module or the determinacy of its output results be ensured?

Mindao: Yes, I think this is currently the biggest issue. The hallucinations in AI models are still quite evident. For example, with the same request, if I provide you with funds, data, and APIs, and ask for a strategy, most AI models will give you different strategies if you ask the same question ten times. There are definitely some issues that need to be resolved here. However, I feel that compared to three months ago when I tested these models, the progress has been very rapid, and the reduction in hallucinations has been significant. You will find that its strategies still align with our cross-validation, although its consistency remains problematic; it is hard to ensure that 100 requests yield the same result every time. But at least I think it is close enough, and it can solve arithmetic problems clearly. One way to address this issue is to refine the workflow of the agent, breaking down each task further to reduce the frequency of hallucinations. I believe that as reasoning models improve, this issue will not require excessive concern. Perhaps in a year, including Grok's recent version 3.5, if it truly bases its reasoning on first principles or physical principles, many hallucination issues may gradually be resolved. In the future, a large prompt could yield very high-quality results. The benefit of this issue lies in the enhancement of foundational models. We see that many projects in DeFi are also slowly developing MCPs. Once MCPs are established, they essentially break down workflows. I believe that more specialized MCPs will emerge in the future. For example, if you ask me for a strategy, this MCP is specifically designed to run lending arbitrage strategies, and I can provide you with an executable strategy that has been validated in various ways. So I think an interesting point moving forward is that previously, we talked about modularity or composability in DeFi; you could use AAVE's code or Uniswap's code to create another AMM. In the future, from the perspective of AI and DeFi development, many specialized MCPs may emerge. MCPs themselves are modules, and when combining different MCPs, many new functionalities can be realized. I believe modularity is developing very rapidly at the MCP level. Of course, this will raise new security issues, such as whether the AI environment has been poisoned, leading to various risks. However, I think these are minor issues compared to scalability. The security of DeFi has also evolved over the years. Therefore, I believe that AI may actually make many DeFi security issues easier to resolve. For example, many traditional financial institutions are reluctant to enter DeFi, largely because we spend millions of dollars on audits, but we cannot ensure that there are no risks; we can never guarantee that. However, traditional financial institutions do not face this issue; they cannot say that all the money in their bank has been stolen. In DeFi, when a hacking incident occurs, all assets in the protocol are penetrated, and most of the time, the entire pool is drained. However, if many of the future DeFi logics are controlled by AI, at the agent level, there are many ways to incorporate traditional Web2 risk control methods, such as withdrawal limits, which can be integrated into the logic through agents. Therefore, it may be easier to refine the security gray areas, which traditional DeFi cannot do too finely due to gas fee issues and other new bugs and security problems.

Alex: Understood. One last small question, also extending from what you discussed. You mentioned earlier that a lot of code needs to go to auditing firms. Based on your observations, with the advancement of AI, is the security expenditure for a DeFi project increasing or decreasing? Has there been a noticeable decline in its security costs over the past year or two?

Mindao: I think we need to look at several factors to determine if costs are decreasing. One major issue in DeFi is that all audits struggle to cover all possibilities; it’s not just about code audits but also formal verification, which is also difficult to exhaustively cover all security boundary logics. This is why, in traditional DeFi, people are reluctant to create overly complex products; when complexity increases, logical vulnerabilities or various edge cases emerge. I believe that the security audit costs and security boundaries of a DeFi product with AI are much more controllable than those of a traditional DeFi product. I don’t have specific numbers because this is still very early, but my feeling is that DeFi AI products can implement more logic without needing to spend as much on audits. The capabilities and the logic of what they can do are quite different.

Alex: Understood. Today, we discussed a lot, starting from stablecoins and extending to the relationship between stablecoins and DeFi, as well as the intersections of DeFi and AI, including AI and stablecoins. Thank you very much, Mindao, for joining our program today and sharing so many insights and perspectives. Thank you.

Mindao: Alright, thank you.

免责声明：本文章仅代表作者个人观点，不代表本平台的立场和观点。本文章仅供信息分享，不构成对任何人的任何投资建议。用户与作者之间的任何争议，与本平台无关。如网页中刊载的文章或图片涉及侵权，请提供相关的权利证明和身份证明发送邮件到support@aicoin.com，本平台相关工作人员将会进行核查。