Circle and Tether may not be competitors of the same species, as the stablecoin value realization hierarchical model suggests.

Original author | Nathan (@proofofnathan)

Compiled | Odaily Planet Daily (@OdailyChina)

Translator | Dingdang (@XiaMiPP)

*Editor's note: Since the announcement of Circle's listing, an invisible line in the stablecoin market has been officially drawn: USDC and USDT, which have begun to take two different development paths. **With compliance and transparency as the core, USDC is gradually embedded in the U.S. financial system and has become a "permissioned dollar" for serving institutional users and fintech scenarios. Relying on its extensive on-chain liquidity and deep market foundation, USDT continues to play a key role in global trading, payment, and asset hedging scenarios. *

This difference essentially reflects the varying priorities of "value realization" of stablecoins in different markets. For some users, compliance and programmability are crucial; for others, liquidity, accessibility, and permissionless usage experience take precedence. Therefore, we need a new cognitive model to understand how different types of users realize value through stablecoins. This is precisely what the "hierarchical system of stablecoin value realization" aims to explore.

While everyone earns differently from stablecoins, at the end of the day, they all come from four core value propositions: low cost, high speed, permissionless, and programmability. **

The original author Nathan explained in his other article "The What and Why of Programmable Money" that programmable money is money that can have behavioral logic set like code. It is a stablecoin and the fuel for smart contracts. It can specify: when, for what reason, and in what way to transfer funds. And all of this no longer relies on banks, no longer relies on trust, but only on the code itself.

These four value propositions correspond to four core use cases: storage, payment, transfer, earnings.

The Hierarchy of Value Realisation is a new cognitive model used to explain the value points that different types of users prioritize in stablecoins.

This article will focus on two types of user groups: "those who need stablecoins" and "those who do not need stablecoins as much", namely: users in emerging markets and users in Western markets.

Two Major User Groups of Stablecoins

In simple terms, in emerging markets, stablecoins are building a new financial infrastructure; whereas in Western markets, stablecoins are more of a supplement, being integrated into existing financial technology (Fintech) and traditional financial systems (TradFi).

This rule applies widely to both emerging stablecoin projects and established players.

Based on this, we can outline different "value realization levels" for the two types of users.

I. Value Realization Hierarchy for Users in Western Markets

Western markets mainly correspond to the "Global North" countries: politically stable, developed financial systems, most people have bank accounts, and savings can earn interest.

In these markets, "programmability" is the core driving force behind the innovation of stablecoins. This is similar to the explosive development of the internet, the iPhone, or smart contracts: programmability brings new financial innovations, and financial innovation is precisely what the Western world loves and excels at.

Secondly, it is "speed". The settlement speed of cross-border or local payments has long been a significant challenge in the Fintech field, as settlement delays can consume liquidity and incur opportunity costs, ranking second in Western markets.

"Cost" ranks third. Although reducing transfer costs is a major highlight of stablecoins, transaction fees in Western markets are not high to begin with, far from the outrageous $115 fee for remittances of up to $200 in emerging markets.

The importance of "permissionless" in the Western market is minimal. This is because the vast majority of people have already opened bank accounts and can easily use cash or transfer payments, so there is naturally no need to rely on stablecoins for financial services.

Therefore, Circle and USDC have a greater advantage in Western markets. As a company that is essentially oriented towards fintech, Circle emphasizes programmability, low cost, and efficiency, all of which align with the usage preferences of Western users. Nowadays, more and more Western companies are choosing to develop their stablecoin solutions based on USDC.

In addition, 'Yield' has gradually become an extra point of concern for Western users. Since they are used to earning interest from bank deposits, they question why holding stablecoins cannot yield similar returns.

This is completely different in emerging markets, where users are more focused on the currency stability provided by stablecoins, especially the ability to obtain US dollars, rather than returns.

According to the authors: In fact, yield has never been a decisive factor in the success of stablecoins in these markets. As industry analysts have pointed out, USDT is the most liquid stablecoin in the world precisely because it does not need to distribute treasury bond yields to users, and can dominate with strong accessibility and a deep liquidity base. For many users in high-inflation or capital-constrained regions,* avoiding the risk of local currency depreciation is far more relevant than an interest rate of 3% per annum. They are more concerned about whether I can safely convert my assets into US dollars, whether I can transfer them out at any time, and whether I can use them locally. ***

Therefore, in these areas that truly have "product-market fit", the liquidity of stablecoins is far more important than their yield potential. Liquidity tends to concentrate, ultimately forming the network effects of leading stablecoins. This is also why stablecoins like USDT can still achieve widespread adoption globally, even in the absence of a yield mechanism.

II. Value Realization Levels for Emerging Market Users

Compared to the West, emerging markets (i.e., the "Global South") have relatively weak financial fundamentals, with high inflation in local currencies and low penetration of banking services.

The emergence of stablecoins has allowed users in these regions to freely access, transfer, and use stable currencies like the US dollar for the first time, which was unimaginable in the past.

Therefore, for users in emerging markets, "permissionless" is the most core and transformative value proposition. Regardless of whether they have a bank account, users can directly access the dollar system, thereby unlocking financial freedom.

Secondly, there is the "low cost" aspect. In emerging markets, cross-border remittance fees remain high. For instance, when a father sends money home to support his family, the fees can consume a large portion of the transferred amount. Stablecoins significantly reduce these remittance costs.

The third is "speed." Current cross-border payment systems are inefficient, often taking days or even weeks for funds to arrive. Stablecoins can enable transfers in seconds, addressing the life and economic challenges caused by delays in funds.

Finally, there is "programmability". While this value proposition also has far-reaching implications for emerging markets (e.g., unlocking services such as insurance, lending, contract payments, etc.), the perceived value in the short term is slightly lower than the first three.

Overall, Tether's USDT shines in emerging markets. Tether provides critical financial services to millions of unbanked individuals through the freely usable, widely accepted, and highly liquid USDT. Its success is precisely based on the realization of these fundamental value points.

Summary Thoughts

• Circle is adapted for the Western market, as it better meets the needs of fintech companies;
• Tether serves a broader user base, especially those who truly rely on stablecoins.

In other words, Circle wins in "tool attributes," while Tether wins in "survival necessities."

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