It seems like a new blockchain tailored for stablecoins emerges almost daily.
This feeling was particularly strong this past week. Circle, the organization behind USDC, revealed Arc, their proprietary settlement network. Shortly after, Stripe, a major player in payment processing, inadvertently unveiled Tempo, a blockchain venture developed in partnership with Paradigm.
These are just the latest additions to a growing trend. Two startups, Plasma and Stable, both recently secured funding. Their goal is to establish dedicated blockchain networks specifically for USDT, which, with a market capitalization of $160 billion, is the leading stablecoin.
The tokenization sector is also joining the fray.
Securitize is developing Converge alongside Ethena. Earlier this year, Ondo Finance announced plans for its own dedicated chain. More recently, Dinari stated its intention to launch an Avalanche-based layer-1 network designed for clearing and settling tokenized equities.
Stablecoins and tokenized real-world assets are experiencing rapid expansion within the cryptocurrency landscape. Projections indicate they could evolve into asset classes worth trillions of dollars in the near future. Experts suggest that stablecoins are poised to revolutionize international payment systems, while tokenization offers the potential for instruments like bonds, funds, and stocks to be traded continuously with quicker settlement times using blockchain technology.
Read more: Stablecoin Payments Projected to Top $1T Annually by 2030, Market Maker Keyrock Says
The Rationale Behind Building Layer-1 Blockchains
Currently, the majority of these tokens exist and are settled on established public blockchains such as Ethereum, Solana, and Tron. While these decentralized platforms provide issuers with extensive global accessibility and liquidity, they also impose specific limitations on asset issuers.
According to Martin Burgherr, Chief Clients Officer at Sygnum, a crypto bank, “The decision to construct their own layer-1 network revolves around gaining control and establishing a strategic advantage, rather than just the technical aspects.”
Burgherr explains that the economics of stablecoins are influenced by factors like settlement speed, interoperability, and regulatory compliance. Therefore, “owning the base layer” enables companies to directly incorporate compliance measures, integrate foreign exchange capabilities, and ensure predictable transaction costs.
There is also a defensive motivation. Burgherr stated, “Currently, stablecoin issuers depend on platforms like Ethereum or Tron for settlement. This reliance exposes them to external fee structures, governance decisions related to the protocol, and potential technical bottlenecks.”
Morgan Krupetsky, VP of ecosystem growth at Ava Labs, notes that custom-built chains allow firms to issue their own gas tokens, manage transaction expenses, and protect network performance from unrelated activities that might overload the system.
She suggests that blockchains are increasingly functioning as the “middle and back office” for companies, facilitating transactions internally while the user-facing applications may operate across multiple chains.
Krupetsky added, “The concept of a company having ownership and the capacity to customize their entire blockchain infrastructure is gaining traction.”
The financial advantages can be even greater than the technical benefits. Guillaume Poncin, Chief Technology Officer at Alchemy, a web3 development platform, stated, “The potential revenue generated from possessing the settlement layer will significantly surpass the conventional profit margins associated with payment processing.”
He suggests that these new chains provide greater control and the capacity to implement know-your-customer (KYC) protocols and other innovative features at the core protocol level. While L1s offer comprehensive customization, rollups are faster to implement and secure.
Poncin emphasized that compatibility with the Ethereum Virtual Machine (EVM) significantly streamlines integration with other blockchains, accelerating adoption.
Potential Impact on Existing Layer-1 Blockchains
Analysts caution that it’s still too early to accurately predict the effects of these new chains on existing platforms. However, they suggest that some networks may experience the competitive pressures sooner than others.
In a report released on Friday, Coinbase analysts, headed by David Duong, argued that Circle’s Arc and Stripe’s Tempo are geared toward facilitating high-volume, low-cost payments. This targets the strength of Solana. Conversely, they believe that Ethereum, with its substantial base of institutional users, is less likely to face disruption in the immediate future.
Sygnum’s Burgherr emphasizes that it could take years for these new entrants to gain widespread adoption.
He explains that, “New players will require more than just advanced technology. They’ll need to establish trust over many years to shift significant liquidity and high-value payments away from the established rails. Financial institutions prioritize proven security, seamless custody integration, and the ability to withstand real-world challenges.”
“This is why Ethereum remains the institutional equivalent of Fort Knox,” he concludes.