The Financial Power Struggle in Blockchain Has Begun
Stablecoins have become the backbone of the crypto industry. Centralized stablecoins like Tether (USDT) and USD Coin (USDC) dominate liquidity in exchanges. They also play a major role in decentralized finance (DeFi). This gives their issuers immense financial power. However, this dominance is now being actively challenged by Layer 1 blockchains.
Major Layer 1 networks such as Cardano, Solana, Ripple, and Tron are launching their own stablecoins. These stablecoins serve not just as financial tools. They are also strategic assets to establish economic sovereignty. This marks a paradigm shift:
- Blockchains are no longer just technological infrastructure.
- They are evolving into full-scale financial ecosystems, much like nations issuing their own currencies.
The real question is: Why are Layer 1 blockchains so eager to launch their own stablecoins?
- Is this just an expansion of DeFi, or is there a deeper financial power struggle at play?
- How does this impact the future of stablecoins and crypto finance?
Let’s break it down.
The Business Model of Tether (USDT): A Financial Powerhouse
We need to understand why Layer 1 blockchains are moving into stablecoins. First, we must examine why Tether (USDT) is so profitable. Its dominance is also seen as a major opportunity for disruption.
How Tether Generates Billions Without Paying Holders
- USDT holders receive no interest on their assets.
- Meanwhile, Tether Holdings invests its reserves in U.S. Treasuries and other assets, earning billions in passive income from interest.
- The more USDT issued, the greater Tether’s financial power.
Tether’s business model is essentially that of a private central bank—controlling liquidity without any obligation to reward holders.
Why Layer 1 Blockchains Want Their Own “Tether”
- If a blockchain can issue its own stablecoin, it can capture similar financial benefits. This prevents external stablecoins like USDT and USDC from dominating.
- Beyond profits, it allows blockchains to control liquidity within their ecosystems and establish their own monetary policies.
In short, Tether has created a financial empire. They act like a central bank without actually being one. Layer 1 blockchains want the same power within their own networks.
Why Are Layer 1 Blockchains Issuing Their Own Stablecoins?
1. Establishing Financial Sovereignty in Blockchain
Much like central banks issue national currencies, Layer 1 blockchains are seeking economic independence by launching their own stablecoins.
✅ The goal?
- Reduce reliance on third-party stablecoins like USDT & USDC
- Ensure liquidity remains within their ecosystems
- Expand financial control over DeFi, NFT, and payment applications
📌 Example: Cardano’s Djed is an overcollateralized stablecoin designed to function as a stable financial instrument within Cardano’s DeFi ecosystem.
2. The Layer 1 Stablecoin Power Struggle
The biggest misconception is that Layer 1 blockchains are launching stablecoins simply as “DeFi tools.” The reality? They are competing for long-term dominance.
✅ Whoever controls the most widely adopted stablecoin will hold immense power over the Layer 1 economy.
✅ Early winners will solidify their status as the “financial backbone” of Web3.
✅ Late adopters may struggle to stay relevant as liquidity moves elsewhere.
📌 Example: Tron (TRX) already processes billions in USDT transactions. However, it launched USDD to internalize more financial value. The goal was to achieve this before another Layer 1 took control.
The competition is not just about launching a stablecoin—it’s about who dominates stablecoin liquidity first.
3. Controlling Network Liquidity & Capturing Revenue
- Most blockchain ecosystems depend on external stablecoins for liquidity.
- This means that every time a transaction is made, Tether or Circle (USDC) benefits financially—not the blockchain itself.
By issuing their own stablecoins, Layer 1s can capture this lost revenue, generating:
✅ Transaction fees
✅ Interest-bearing reserves (like Tether does with U.S. Treasuries)
✅ Greater control over on-chain economic activity
📌 Example: Solana’s UXD & USH were designed to support DeFi transactions without relying on external stablecoins.
4. Reducing Regulatory Risks
- Centralized stablecoins like USDT and USDC are under increasing regulatory scrutiny.
- If regulators ever restrict or ban these stablecoins, blockchains relying on them could suffer massive liquidity crises.
✅ Solution? Issue a blockchain-native stablecoin to ensure economic resilience.
📌 Example: Ripple’s upcoming stablecoin could be designed to align with institutional finance while still supporting decentralized applications.
Bitcoin vs. Layer 1 Stablecoin Competition
Bitcoin as the “United States of Crypto”
Bitcoin is the most dominant financial asset in crypto, much like the U.S. dollar in global markets.
✅ It is the world’s reserve currency for crypto.
✅ It does not issue stablecoins, but its growing financial ecosystem could rival them.
✅ With solutions like Lightning Network and Wrapped BTC, Bitcoin is becoming more integrated into DeFi.
📌 Key insight: Bitcoin doesn’t need stablecoins—it is becoming its own decentralized financial system.
Will Bitcoin Challenge Layer 1 Stablecoins?
- Some believe Bitcoin will never issue a stablecoin and will remain a neutral reserve asset.
- Others argue that wrapped BTC, Lightning Network payments, and DeFi integrations could individually enhance Bitcoin’s capabilities. These innovations may enable Bitcoin to function like a stable reserve in the long term.
🔍 The big question:
Can Layer 1 stablecoins establish enough dominance before Bitcoin’s financial ecosystem evolves further?
The Future of Blockchain Stablecoins: Challenges & Risks
While Layer 1 stablecoins offer clear advantages, their long-term success is not guaranteed.
1. Can They Maintain Peg Stability?
- If a stablecoin loses its peg, it could trigger a liquidity collapse within its ecosystem.
- Terra’s UST collapse is a clear warning that stablecoins must be designed for long-term stability.
2. Are They Truly Decentralized?
- Many Layer 1 stablecoins still rely on centralized reserve management, making them vulnerable to regulatory intervention.
3. Will Competition Fragment the Market?
- If too many blockchains launch competing stablecoins, it could lead to fragmentation rather than unification.
🔍 The biggest challenge: Only a few Layer 1 stablecoins will survive long-term.
Final Thoughts: Will Layer 1 Blockchains Become the Central Banks of Crypto?
✅ Layer 1 blockchains are no longer just infrastructure—they are competing to become financial powerhouses.
✅ Tether’s model shows how powerful stablecoins can be, and Layer 1s want the same financial control.
✅ Bitcoin remains dominant, but its evolving financial ecosystem could challenge Layer 1 stablecoins.
✅ Not all stablecoins will succeed—only the most stable, widely adopted ones will survive.
The stablecoin wars have only just begun.
The question isn’t whether Layer 1 blockchains will become financial superpowers—but which ones will.
Now, it’s a race to see who will control the future of crypto finance.
