Plasma - The Chain Solving Stablecoin Payments: What You Need to Know
Payments Infrastructure, $USDT Backing, & More
The two narratives that have grown in mindshare the most over the past months are RWAs and stablecoins. These two sectors have a lot of overlap, with tokenized treasuries being one of the majority growth stories of this cycle. But even non-yield-bearing stablecoins have seen tremendous growth…
Stablecoins are surging narrative-wise, but conversations around stablecoins mostly exclude one of their most obvious use cases: payments. Market participants have seemingly skipped right to the top, considering the U.S. Treasury’s thoughts on stablecoins and how institutions might adopt the asset. Nation state and institutional adoption of stablecoins dominates the sectors mindshare, with much less thought going toward the original core premise of money, a tool for individuals to buy and sell goods and services.
In today's edition, we’ll discuss Plasma, a chain made specifically to facilitate stablecoin payments and build upon the previous shortcomings from existing chains in facilitating payments use.
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Background on Plasma
Plasma describes itself as a purpose-built blockchain, made to handle stablecoin payment use cases. One of the questions market participants are asking themselves is how to get exposure to the growing stablecoin narrative. Plasma might be an answer to this question in the future, though no native token exists yet.
Plasma uses a unique architecture to achieve it’s stablecoin goals, operating as a Bitcoin sidechain, using Bitcoin’s settlement layer to maximize security. For consensus, PlasmaBFT is leveraged, enabling high performance. Plasma is also EVM-compatible, leveraging the large Ethereum tooling access and developer ecosystem.
For purpose-built blockchains like Plasma, establishing a moat should be done by embedding features or core integrations within the chain that cannot easily be implemented on other general-purpose chains after the fact. Another way purpose-built blockchains can establish an inherent moat is simply by having pre-existing distribution, ideally large clients ready to deploy on the chain from day one, warranting its launch. Some examples include Soneium, Sony’s own L2, or even Ethena’s Converge chain.
The way in which Plasma goes about solving initial demand for a payments-focused chain is with its 0-fee $USDT transfers, as well the ability to pay fees for more advanced transactions in custom gas tokens. The team is also actively research solutions to implement private transactions while still maintaining compliance. This is significant, as privacy coins have often been the target of regulators. Plasma’s architecture and core features are conducive to stablecoin use cases, but where the chain looks to separate itself is in it’s partnerships, mostly with CeFi and TradFi providers.
Last month, Plasma announced a $24M raise led by Framework Ventures and Bitfinex, with participation from Peter Thiel and even the CEO of Tether, Paolo Ardoino. From this cap table, it’s made obvious that Plasma is connected with the right people and entities to minimize friction and add integrations that other chains might not be able to. Bitfinex was involved with the initial creation of USDT; it can be reasonably assumed that there will be deep $USDT liquidity on the Plasma chain.
In the past, chains introducing native $USDC or $USDT served as a catalyst for further growth. Today this opportunity is saturated, but direct relationships with the teams behind the largest stablecoin can be a massive tailwind for Plasma. Plasma actually uses $USDT0, Tether’s solution to Circle natively issuing $USDC on more chains. $USDT0 effectively represents $USDT that is minted on Ethereum and locked up, allowing Tether to have a direct presence on many more chains than it is natively issued without worrying about bridging and wrappers as much.
Overall, Plasma’s launch reflects increasing institutional demand to fund stablecoin infrastructure. Plasma’s adoption will be informative to the adoption of stablecoins as an actual means of payment. It allows for more data to be collected about these retail individuals whose use of crypto is much more ordinary and casual compared to the average onchain user.
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