From Technical Patch to Global Financial Order Disruptor: A Decade of Evolution of Stablecoins

Introduction: The Millennium Leap of Currency Forms

The history of currency is an eternal pursuit and game of "efficiency" and "trust" by humanity. From the shell money of the Neolithic era establishing value consensus through natural scarcity, to the bronze coins of the Shang and Zhou dynasties embedding power imprints into the form of currency; from the round coins with square holes during the Qin and Han dynasties unifying the currency system, to the paper currency of the Tang and Song dynasties breaking the circulation shackles of metal currency—each transformation in form is a resonance of technological breakthroughs and institutional innovations.

When the Northern Song Dynasty's jiaozi replaced iron coins with paper, breaking the circulation dilemma of "thousand characters of money weighing a hundred jin", it was not only an innovation in materials but also the embryonic form of credit currency: the jiaozi issued jointly by wealthy merchants established a credit anchor point through "a thousand boxes of copper coins in reserve". The monetization of silver during the Ming and Qing dynasties shifted trust from paper contracts to precious metals. After the collapse of the Bretton Woods system in the 20th century, the US dollar reconstructed global hegemony as pure credit currency: the dollar, decoupled from gold, no longer relied on physical precious metals for its value but was instead tied to US Treasury bonds and military hegemony. This "credit hollowing" model completely shifted monetary power from physical anchors to national credit. And when Bitcoin tore apart traditional financial systems with an average daily volatility exceeding 10%, the rise of stablecoins marked a paradigm revolution in trust mechanisms: the "1:1 dollar peg" claimed by certain stablecoins essentially replaced sovereign credit with algorithmic code, compressing trust into mathematical certainty. This new form of "code as credit" is rewriting the logic of monetary power distribution—from the seigniorage privileges of sovereign nations to the consensus monopoly of algorithm developers.

Every transformation of currency forms reshapes the power structure: the era of barter relied on trust, the era of metallic currency was backed by centralized authority, the era of paper currency enforced national credit, until the era of digital currency brought about distributed consensus. When certain stablecoins are denounced as "digital Ponzi schemes" due to reserve controversies, and when international payment systems become cold tools of financial sanctions due to political games, the rise of stablecoins has long transcended the category of "payment tools." It is not only a leap in payment efficiency but also unveils the quiet shift of monetary power from sovereign nations to algorithms and consensus: in this fragile trust of the digital age, code is becoming a harder credit anchor than gold through mathematical certainty. Stablecoins will ultimately push this millennia-old game to its conclusion: when code begins to write the currency constitution, trust is no longer a scarce resource but a programmable, divisible, and gameable digital power.

Chapter 1 Origins and Budding (2014-2017): The "Dollar Substitute" of the Crypto World

In 2008, Satoshi Nakamoto published the "Bitcoin White Paper", proposing a concept for a decentralized digital currency based on blockchain technology. On January 3, 2009, the first Bitcoin block (Genesis Block) was mined, marking the official birth of Bitcoin. In the early days, Bitcoin transactions relied entirely on peer-to-peer (P2P) networks, with users directly exchanging keys through local wallets to complete transfers, but there was a lack of standardized pricing and liquidity.

In July 2010, the world's first Bitcoin exchange was established, allowing users to purchase Bitcoin via bank transfer for the first time. However, the trading efficiency during this phase was extremely low: bank transfers took 3-5 working days to arrive, with fees as high as 5%-10%, and there were currency exchange losses between different countries. For example, if a US user wanted to buy Bitcoin worth $1000, they would first need to wire the money to the exchange's offshore account and wait for bank clearance before receiving the Bitcoin, which could take over a week. This inefficient payment system severely restricted the liquidity of Bitcoin, keeping it long-term within the "small circle" of tech geeks and early enthusiasts. Moreover, due to a lack of regulation and hacking attacks, it declared bankruptcy in February 2014, known as the "Mt. Gox" incident. After 2022, compliant exchanges began to emerge globally, with compliant digital asset exchanges in the US and Hong Kong starting to offer compliant and secure trading services to global customers.

By 2014, the market value of Bitcoin had surpassed $10 billion, but the shackles of traditional bank transfers had not been lifted. While users waited for their Bitcoin to arrive, certain stablecoins emerged with the promise of "1:1 pegged to the US dollar"—like a sharp scalpel, cutting through the barriers between fiat and cryptocurrency, becoming the first "fiat currency substitute" in the crypto world. Some stablecoins were launched in 2014, initially named "Realcoin," founded by several creators in Santa Monica, and issued the first tokens through the Omni Layer protocol of the Bitcoin blockchain. In November of the same year, it was renamed, claiming that for every dollar issued, an equivalent dollar asset would be reserved, aiming to provide a medium for cryptocurrency trading with price stability. Its parent company also operated a cryptocurrency exchange, which sparked controversy. Early academic research questioned the correlation between the issuance of certain stablecoins and Bitcoin price manipulation, but subsequent studies denied a direct causal relationship, viewing it as a normal market reaction to liquidity news. After years of development, certain stablecoins have expanded to multiple blockchains and support various fiat-pegged versions, with a total circulation exceeding $150 billion as of June 2025, yet their reserve transparency and compliance continue to face regulatory scrutiny and market skepticism.

Some US dollar stablecoins were launched in September 2018 by a consortium of fintech companies. They were initially pegged 1:1 to the US dollar and issued based on the Ethereum ERC-20 protocol. The original intention was to provide a transparent and compliant fiat-pegged tool for the cryptocurrency market, gradually expanding influence through exchanges and payment networks. In March 2021, a major payment giant announced support for this stablecoin as a settlement currency, marking its formal entry into the mainstream financial payment system. In September of the same year, the stablecoin announced a complete transition of its reserve assets to cash and short-term US Treasury bonds and other highly liquid fiat tools, completely severing the cryptocurrency collateral model and enhancing the credibility of its "full fiat currency reserves." As of January 2022, the stablecoin's circulation reached $45.2 billion, briefly surpassing other stablecoins to become the world's largest stablecoin. After the cryptocurrency exchange crash in 2023, the cash ratio in the stablecoin's reserves increased from 80% in 2022 to 93% in 2024 to boost market confidence. On the technical side, the stablecoin gradually expanded to a multi-chain ecosystem and strengthened compliance through measures such as acquisitions. Although it faced doubts due to a brief decoupling event in 2023, its close cooperation with regulatory agencies has still made it a representative of institutional-grade stablecoins, continuously promoting the integration of the crypto economy with traditional finance. The issuing company's stock was listed on June 5, 2025, and has increased sixfold in ten days.

By 2017, certain stablecoins quickly captured 90% of trading pairs on exchanges thanks to their seamless integration of traditional finance and the crypto ecosystem, with market capitalization skyrocketing from millions to 2 billion dollars. It gave rise to a frenzy of cross-platform arbitrage: traders shuttled between different exchanges, utilizing the second-level settlement of stablecoins, allowing for dozens of arbitrage trades in a single day, with efficiency improved by a hundred times compared to traditional cross-border payment systems; it built a liquidity bridge: in 2017, the on-chain trading volume of a certain stablecoin exceeded 100 billion dollars, accounting for 40% of Bitcoin's trading volume, even attracting a certain bank to carry out its first cryptocurrency salary payment for an African mining company through stablecoins; it also became "digital gold" for countries with hyperinflation: in Argentina, the black market premium rate for stablecoins once reached 30%, with the public viewing it as a "last line of defense" against the depreciation of the local currency. However, beneath the surface of prosperity, cracks in trust are quietly spreading.

The "1:1 peg" of certain stablecoins has always been shrouded in the mystery of a black box: In 2015, a certain exchange was hacked and 1500 BTC were stolen, and in 2016, another 120,000 BTC were taken. Since both the exchange and the stablecoin are managed and operated by their parent company, it is widely believed that the two are sibling companies; In 2018, a certain stablecoin first disclosed its reserve assets, with cash making up 74%, but in a controversial incident in 2021, the cash ratio plummeted to 2.9%, with the remainder being commercial paper and reverse repos, raising market concerns about solvency. Even more dangerously, the anonymity has turned it into a "golden channel" for the dark web: In 2016, the stablecoin trading volume seized in a certain case reached 42 million USD, accounting for 1.2% of its circulation; In 2017, an investigation by a certain institution showed that at least 12% of off-exchange trades involved money laundering—stablecoins have become the "invisible pipeline" for the flow of criminal funds.

The root of this trust crisis lies in the deep contradiction between "efficiency first" and "trust rigidity": the coded "1:1 commitment" tries to replace sovereign credit with mathematical certainty, but falls into the "trust paradox" due to centralized custody and opaque operations—when users discover that the reserves of certain stablecoins are actually held in an offshore branch of a large bank and can be arbitrarily accessed by the issuer, the proclaimed "rigid redemption" instantly becomes a digital illusion. This foreshadows the ultimate question that stablecoins must answer in the future: how to find a balance between the ideal of decentralization and the realities of financial regulations?

Chapter 2: Barbaric Growth and Trust Crisis (2018-2022): Dark Web, Terrorism, and Algorithm Collapse

When Bitcoin emerged in 2009 with the ideal of decentralization, no one could foresee how it would transform into the "black gold" of the digital age. The anonymity and cross-border liquidity of early cryptocurrencies were originally a utopian experiment against financial censorship, but gradually mutated into a "digital Swiss bank" for criminals. Dark web markets were the first to sense the business opportunity: a certain dark web used Bitcoin to trade drugs and weapons, while a certain anonymous coin became the preferred payment tool for ransomware due to its complete anonymity. By 2018, cryptocurrency crime had formed a complete industrial chain—hacker attacks, money laundering, and kidnapping for ransom formed a closed loop, with annual amounts involved exceeding $100 billion.

Stablecoins have transformed from "payment tools" in the crypto world to vehicles of "dark finance," with the simultaneous arrival of a revolutionary surge in efficiency and the abyss of trust collapse. After 2018, the anonymity and cross-border liquidity of certain stablecoins made them a "golden channel" for criminal activities: In 2019, a country's Ministry of Justice accused a hacker organization of laundering over $100 million through stablecoins, with funds concealed between a country's casinos and a regional cryptocurrency exchange; in 2020, law enforcement in a certain region cracked a case involving a terrorist organization raising $500,000 in cross-border funds using stablecoins, with the funds going through mixers to complete the "washing - transferring - deploying" full process. These events forced an international organization to issue guidelines on virtual assets in 2021, requiring virtual asset providers to implement KYC and AML reviews, but the lag in regulation instead gave rise to more complex evasion tactics—criminal gangs exploited loopholes in virtual asset service provider licenses to achieve fund concealment through a "stablecoin-mixer-privacy coin" three-step process.

The rise and fall of algorithmic stablecoins have pushed the trust crisis to its peak. In May 2022, an algorithmic stablecoin from a certain ecosystem became unpegged due to a liquidity crisis, and its collapse mechanism can be described as a "perfect storm": it attracted users to stake native tokens to mint stablecoins through high-yield staking (annualized 20%). When market panic triggered a sell-off, the algorithm forcibly burned native tokens to maintain the peg, but excessive selling pressure led to an infinite issuance of native tokens. The collapse of the stablecoin resulted in a market cap of approximately $18.7 billion going to zero, causing several institutions to blow up and the decentralized finance market's market cap to shrink by 30% in a single week. This disaster exposed the fatal flaw of algorithmic stablecoins – their value stability relies entirely on the fragile balance of market confidence and code logic. When the panic index breaks the critical point, the mathematical model instantaneously devolves into a "death countdown timer."

The trust crisis of centralized stablecoins stems from the "opaque operations" of financial infrastructure. In 2021, when a certain stablecoin disclosed its reserve assets, insufficient cash reserves raised doubts in the market about its solvency; during a bank collapse event in 2023, a certain stablecoin was due to $5.3 billion in reserves.