The next 100 million crypto investors.

Health, Wealth, and Happiness

November 14, 2022

“The struggles we endure today will be the ‘good old days’ we laugh about tomorrow.”

― Aaron Lauritsen

In today's issue: While crypto investors are riding through stormy seas, stablecoins offer islands of safety.

Many stablecoins really are islands locked into their own blockchains. The best stablecoins now offer cross-chain compatibility: buy once, use anywhere.

In this way, cross-chain stablecoins are like island-hopping assets that allow you to easily transfer value between blockchains, even in stormy weather.

In our latest report, we review the best cross-chain stablecoins. Read on.

Must Read

Today's most important story for crypto investors.

FTX Held <$1B in Liquid Assets Against $9B in Liabilities(Financial Times)

Great piece of reporting based on financial insights taken from the FTX bankruptcy filing. It paints a picture of sloppy accounting and major FTX investments in Robinhood (HOOD), as well as a little-known token called Serum (SRM).

The piece also includes details on Sam Bankman-Fried's last-minute efforts to sell these holdings at deep discounts.

Investor takeaway: The age-old principle of diversification would have helped SBF weather the storm (along with better accounting and adequate cash reserves, of course). We can't say it enough: Diversify, diversify, diversify!!

Which Stablecoin Runs on the Most Chains?

by Matthew Du

Summary: Stablecoins address the crypto volatility problem by holding steady value, usually tied to USD. As stablecoins become more tightly integrated into the crypto ecosystem, investors need stablecoins to operate on multiple blockchains. In this report, we examine which stablecoins are capable of operating on multiple chains and why this interoperability is important.

Stablecoins peg their market value to external references. That could be a fiat currency (like the U.S. dollar), a cryptocurrency (like Ethereum), or another reserve asset (like gold). It’s this peg that allows them to maintain stable value.

Most stablecoins start off running on a single blockchain, typically Ethereum. The new generation of stablecoins cross blockchains without having to constantly swap cryptocurrencies. One US Dollar Coin (USDC) on Ethereum, for example, can be bridged over to Algorand, where it retains its dollar value.

It's similar to countries that accept US dollars without requiring visitors to exchange USD into their local currencies: buy once, use anywhere.

Our thesis is the more widely accepted a stablecoin is between blockchains, the more it can become an industry standard. Think about how the US dollar is currently the global reserve currency, making the dollar the "industry standard." The same will happen, we believe, with stablecoins.

By removing the restraints of operating within a single ecosystem, multi-chain stablecoins present benefits to investors:

Increased Efficiency: Multi-chain stablecoins reduce the time and hassle spent swapping a stablecoin on one exchange into a stablecoin on another.

Lower Fees: Multi-chain stablecoins remove transaction fees when swapping between coins, which may also be taxable events. Also, transaction fees may be negligible on blockchains like Algorand (compared to Ethereum).

Regulatory Clarity: By holding a single stablecoin, investors can steer clear of unclear regulation like California’s bill that prohibits trading stablecoins that have yet to prove their reserves within the state.

In short, multi-chain stablecoins make things faster, cheaper, and easier. They're like "universal adapters" to share and store value across blockchains.

Let's look at the top three most popular multi-chain stablecoins by market capitalization. We'll discuss key features and their supported blockchains.

Top 3 Multi-Chain Stablecoins

US Dollar Coin (USDC)

USDC is a fully reserve-backed stablecoin that's 100% supported by cash and short-dated US treasuries through its parent company Circle. Claiming to always be redeemable for USD, the coin’s reserves are held in the custody and management of financial institutions like BlackRock and BNY Mellon.

Ranking as the fifth-largest cryptocurrency as of this writing with a market cap of nearly $44 billion, USDC offers various benefits to investors like easy conversion from fiat to crypto, reliable payment rails, and various yield farming products.

Regarding interoperability, USDC has clear plans to operate on many chains. It was initially available on Ethereum, but soon spread to Algorand, Avalanche, Hedera, Flow, Polygon, Solana, Stellar, and TRON. Most recently, Circle announced USDC would be ported to the Arbitrum One, NEAR, Optimism, and Polkadot networks, with plans to enter the Cosmos ecosystem in early 2023.

Tether (USDT)

Owned by iFinex, a Hong Kong-registered company, Tether is the third-largest cryptocurrency as of this writing, with a market cap of over $68 billion. Similar to USDC, Tether is used primarily by investors to keep a stable store of value, even when transferring between crypto exchanges and traditional financial systems, making it an "on-ramp" and "off-ramp" to crypto.

Presently, USDT works on 16 networks: Algorand, Avalanche, EOS, Ethereum, Kusama, Liquid Network, NEAR, Omni, Polkadot, Polygon, SLP, Solana, Statemine, Statemint, Tezos, and Tron.

Binance USD (BUSD)

BUSD ranks seventh amongst all cryptocurrencies with a market capitalization of just over $21.5 billion.

Compared to USDT and USDC, BUSD is issued on the least number of chains. It's currently supported by Avalanche, BNB Smart Chain, Ethereum, Polygon, and the BNB Beacon Chain, with plans for more integrations still in the works.

A benefit of owning BUSD is it's the default stablecoin on Binance, the world's leading crypto exchange. To incentivize users to hold BUSD, the company offers promotions like zero-fee ETH/BUSD transfers, which could save investors significant gas fees when cashing out ETH.

Why Cross-Chain Stablecoins Matter for Investors

Think of different blockchain networks as separate countries with their own languages and currencies. Having value on one blockchain doesn’t mean you can carry that value into another network. It's like trying to spend your Swiss francs in the U.S. while speaking German.

Here’s how beginners and experienced coin investors alike can benefit from stablecoin interoperability:

For beginning investors: multi-chain stablecoins allow beginner investors to explore different chains and gain firsthand experience on any supported network. They give you opportunities to “play around” with various chains.

This not only introduces more money into the blockchain economy; it also increases usage across chains, helping value flow between ecosystems. It's good for the industry.

For experienced investors: multi-chain stablecoins allow enormous savings when it comes to time and money, as we described above. Instead of selling one stablecoin and buying another (time-consuming, taxable, and expensive), cross-chain stablecoins store value until you're ready to use it on either chain.

Removing the barriers between different blockchains allows experienced investors to take advantage of opportunities across multiple networks like a global currency that works in different countries.

Investor Takeaway

Unless you believe in a winner-takes-all scenario where one blockchain becomes the industry standard, we're likely to have a multi-chain future. Ideally, then, decentralized products will work across several blockchain networks.

We believe the future of DeFi will favor products and protocols that work seamlessly across blockchains. As the IMF highlights in its 2021 paper Blockchain Interoperability, “Rapid change and innovation is taking place in payment technologies, which are enabling faster, cheaper, efficient domestic and cross-border payments. One of the key paradigms will be interoperability between these different channels.”

Multi-chain stablecoins present solutions to the interoperability issues of the existing blockchain environment. Moreover, the stablecoins that are fastest to support different blockchains are likely to achieve network effects that will give them sustainable competitive advantages.

As an investor, multi-chain stablecoins are not investment opportunities in themselves (they hold their value after all), but they permit faster, cheaper, and easier access to different chains, making them powerful parts of an investor's toolkit.

ICYMI