Stablecoins offer a range of benefits, but these advantages ultimately stem from four core value propositions: low cost, high speed, permissionless access, and programmability. Each of these features caters to distinct user needs and shapes how different markets adopt and use digital dollars.
Nathan, the original author, elaborated on the concept of programmable money in a previous article, The What and Why of Programmable Money. He described it as currency that can be programmed with specific behavioral logic, much like code. It functions both as a stable store of value and as the fuel for smart contracts. This enables automated transactions that execute based on predefined conditions—when, why, and how money moves—all without reliance on traditional banks or trust-based systems, solely through self-executing code.
These four value propositions align with four primary use cases: storing value, making payments, transferring funds, and earning yield. The "Hierarchy of Value Realization" is a useful model for understanding how different types of users prioritize these benefits.
This article explores two major user groups: those who rely heavily on stablecoins and those who use them more casually. These groups often align with users in emerging markets and those in Western economies.
The Two Major User Groups for Stablecoins
In emerging markets, stablecoins are helping to build entirely new financial infrastructures. In contrast, within Western markets, they are more commonly integrated as supplementary tools within existing fintech and traditional financial (TradFi) systems. This distinction holds true for both new stablecoin projects and established players. Based on this, we can outline separate value hierarchies for each group of users.
Value Hierarchy for Western Market Users
Western markets, often referred to as the "Global North," generally feature political stability, established financial systems, widespread bank account ownership, and the ability to earn interest on savings.
In these regions, programmability is the core driver of stablecoin innovation. This mirrors the explosive growth seen with the internet, iPhone, or smart contracts—programmability unlocks new financial innovations, which aligns perfectly with the strengths and interests of the Western world.
Next in importance is speed. The settlement speed for both international and local payments has long been a challenge in the fintech space. Delays in settlement consume liquidity and create opportunity costs, making speed a high priority.
Cost ranks third. While reducing transfer fees is a notable advantage of stablecoins, transaction costs in Western markets are already relatively low. They don't compare to the exorbitant fees sometimes seen in emerging markets, where a $200 remittance can incur $115 in charges.
Permissionless access is the least critical value in Western markets. The vast majority of people already have bank accounts and can easily use cash or digital transfers, so they don't need stablecoins to access basic financial services.
Therefore, Circle and its USDC stablecoin hold a strong position in Western markets. As a company that operates much like a fintech firm, Circle emphasizes programmability, low cost, and efficiency—all of which resonate with Western user preferences. An increasing number of businesses in these regions are choosing to build their stablecoin solutions on USDC.
Additionally, yield has become an extra consideration for Western users. Accustomed to earning interest on bank deposits, they often question why holding stablecoins doesn't offer similar returns. This stands in stark contrast to emerging markets, where users prioritize access to dollar-denominated stability over yield.
It's important to note that yield has never been the decisive factor for stablecoin success in these high-adoption regions. As industry analysis has shown, USDT became the world's most liquid stablecoin precisely because it didn't distribute treasury yields to users. Its dominance is built on superior accessibility and deep liquidity. For many users in high-inflation or capital-restricted regions, avoiding the risk of local currency devaluation is far more critical than a 3% annual yield. Their primary concerns are: Can I safely convert my assets to dollars? Can I transfer them freely? Can I use them locally?
In markets where stablecoins achieve true product-market fit, liquidity is far more important than yield. Liquidity tends to concentrate, leading to powerful network effects that benefit the leading stablecoins. This explains why a stablecoin like USDT, despite offering no yield mechanism, has seen widespread global adoption.
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Value Hierarchy for Emerging Market Users
Compared to Western nations, emerging markets—often referred to as the "Global South"—typically face higher inflation rates and lower banking penetration. The emergence of stablecoins has enabled users in these regions to access, transfer, and use dollar-pegged currencies freely, something that was previously unimaginable.
For these users, permissionless access is the most transformative value proposition. Whether they have a bank account or not, users can directly connect to the dollar system, unlocking unprecedented financial freedom.
The second priority is low cost. International remittance fees in emerging markets are notoriously high. For example, when a father sends money home to support his family, transaction fees can consume a significant portion of the transferred amount. Stablecoins dramatically reduce these costs.
Speed ranks third. Traditional cross-border transfer systems are inefficient, often taking days or even weeks for funds to arrive. Stablecoins enable near-instantaneous transactions, solving the practical and economic problems caused by delayed fund availability.
Finally, there is programmability. While this feature has profound long-term implications for unlocking services like insurance, lending, and automated contracts, its perceived immediate value is currently lower than the other three attributes in these markets.
Tether's USDT has found remarkable success in emerging economies. By offering a freely usable, widely accepted, and highly liquid dollar stablecoin, Tether provides essential financial services to millions of unbanked and underbanked people. Its success is directly built on fulfilling these foundational user needs.
Concluding Thoughts
Circle's USDC is well-suited for Western markets, as it aligns with the demands of fintech companies and users who value programmability and integration. Tether's USDT, however, serves a broader global user base, particularly those who rely on stablecoins for essential financial needs.
In other words, Circle wins on "tool-like utility," while Tether wins on "essential need for financial survival."
Frequently Asked Questions
What is the main difference between USDC and USDT?
USDC often emphasizes regulatory compliance, programmability, and integration with traditional finance, making it popular in Western markets. USDT prioritizes widespread accessibility, liquidity, and permissionless access, which has driven its adoption in emerging economies.
Why is USDT more popular than USDC in some regions?
USDT's first-mover advantage, deep liquidity on global exchanges, and focus on providing dollar access to users in high-inflation countries have made it the preferred choice in many emerging markets. Its design caters to immediate needs like remittances and savings protection.
Can you earn yield on stablecoins like USDC and USDT?
Some platforms and decentralized finance (DeFi) protocols offer yield opportunities for stablecoin holders through lending, staking, or other yield-bearing strategies. However, the stablecoins themselves, when held in a wallet, typically do not generate interest.
Are stablecoins like USDC and USDT safe?
Both are widely considered among the safest stablecoins, but they operate differently. USDC is known for its reserves being held in highly liquid assets and its transparent attestations. USDT maintains its peg through reserves and market liquidity. Users should always conduct their own research.
What does 'permissionless' mean in the context of stablecoins?
Permissionless access means that anyone with an internet connection can acquire, hold, and transfer the stablecoin without needing approval from a bank or other financial institution. This is a key feature for individuals without access to traditional banking services.
How do transaction speeds compare between traditional wire transfers and stablecoins?
Traditional international wire transfers can take several business days to settle. Stablecoin transactions, being native to blockchain networks, can settle in seconds or minutes, depending on the network used and its congestion level.