Keynote: Stablecoin Wars: The Rise of the Networks - Joao Reginatto, Chief Strategy Officer, M0

All right. Um I am chief strategy officer at M Zero. As as it was said, I I spent um eight years at Circle before working at at M Zero um leading the build out of USC, leading all the stable coin product teams for Circle. So I have been in this sector of our industry for a good little while and um I will try to convince you guys that we are on to the next phase of what have been deemed the stable coin wars. you know, there has been uh fierce competition in the sector for the last 10 years.

And um I'm going to try to make an argument for why we're going to enter a new phase of the wars that I'm calling the the rise of the networks. Big um Star Wars nerds, obviously. There we are. Um all right. So, first let's start with a little journey down history lane.

Um I I have been in this sector, as I said, for close to a decade now. Some of these things are vanilla for me, but I wanted to walk you guys through a little bit of the history of stable coin so that you realize why I'm I'm making this statement that I think we're going to go through another phase of the war and and what does it mean going forward. Um the early stable coin wars were, you know, the the some of the products that you guys certainly know and use today. Um and some that you might have forgotten. Um but obviously part the generation of you know that that phase of the the sector you know tether uh tether's USDT circles USC uh die which you know fell a little bit behind kind of changed in terms of the nature of the product.

There were other products that were competing back in the day or at least attempting to compete USDP from Paxos. Uh does anyone remember GUSD from Gemini? It was was a big deal back in the day. Um these were as I like to call them um branded generalpurpose monolithic and vertically integrated products. Important to call them products.

Uh they were designed and thought of as products. I I know because I thought of one of those. Um so how how did they compete and continue to compete typically to date? They compete on brand um you know ab ability to deliver liquidity to all the use cases that incorporate them uh distribution and then kind of boring things that honestly nobody has has been talking about too much if you guys think about it but it used to be a big deal right reserve mechanism pack mechanism those things have been fixed have been addressed there's no more innovation in that space uh despite what you know marketing materials might say there's actually very thin technology on these products super super thin I'm I'm an engineer by training. Um, USDT is like less than 3,000 lines of code.

Um, very little programmability. Again, we call these programmable dollars sometimes. Well, [gasps] there's only one entity in the world that can program each one of these and it's the company that issues them. So, it's not it is programmable, but we can do better than that level of programmability. Then what happened again in terms of history lane.

Then what happened uh after that was uh this phase of stable coins as a service and um Paxos was certainly the company that kind of mostly pioneered um that phase of the sector. There were other companies back then that went bust actually but prime trust used to be one of those. A lot of engineers engaged in building their own stable coins um back in the time or at least attempting to. Most of those uh didn't go um much further but these were these were like very very simplistic approaches to what we think the market was telling um in this the the customers in this market was telling the the service providers of the sector. Uh this approach, this emerging approach of stable coin as a service though was basically a copy and paste of the same style of product that had been built, you know, oh what if we copy and paste it and you know and just give it another name and sell it as a service to another customer and then just keep doing that again and again.

Sort of inefficient. It had lots of problems. The Binance dollar B USD issued by Poxus was the most successful one out of those. Actually extremely successful as far as size goes, but unfortunately it went down to zero as you can see on the picture. it was shut down for specific reasons I'm not going to get into.

The PayPal dollar is still out there. It's very large. It's probably the most successful um product out of this era of stable coin as a service still. But actually, I don't know if you guys have ever heard this phrase like for folks like me who have a product background, uh you always hear of this c this this phrase uh you know is the are you are you building what the customer is asking, but is the customer asking for a faster horse? Because good product people listen to the customer and then say no or in in the sense that you know they listen to the customer and they try to extract the needs from what the customer is asking not just blindly building what the customer is asking because if the customer was asking for a faster horse is the original story that you know the car would never have been invented.

Customers don't know what's possible. So they might be giving you a direction for what they they want but you as a technology as a builder you need to uh provide for them like an answer in terms of what's possible. My belief is that stable coins as a service that second era was building a faster horse. Like customers were asking for that can I have my own stable coin please? That's not really what they need.

What they need is a platform. Um and I do this thing you know the the clapping. I don't know if this is a good emoji, but like everybody stop what you're doing and think about this. Stable coins are platforms. They're not products.

Some of them are products, but this is in the past. We're now studying history here. Stable coins are a platform going forward. And I'll prove to you guys why. Um the you might know some of these screenshots, right?

What what are these guesses? This is like the cash app, Venmo, PayPal. There there obviously there are obviously similarities between these fintech products, right? They all have dollar balances like ways for you to transact in dollar denominated um ways uh you know different support for like funds coming in, funds coming out for you to transact with within a given ecosystem. Um, traditionally the way that you would build any one of these products was you would find a banking partner, you would find payments processing partners, you would figure out a way to do ledgering to, you know, assign balances [snorts] to accounts and and make sure that you didn't lose track of who who owned what at what point in time.

You would then facilitate this in in the sense of US dollar balance um functionality for your users, facilitate transfers, etc., etc. uh for a while now I think what what actually happened is builders who are exposed to crypto technology they they wanted to build let me just go back they wanted to build these kinds of experiences right and we have been actually it's been taking too long for crypto to get to the point where the user experiences are as good as what we had in fintech but certainly some builders have been looking for that um perhaps they have been looking for it and asking for a faster horse but really that's what they wanted And if you go back again in history, um, and look at, you know, what Binance did with the Binance dollar. Um, this is a screenshot, uh, it's not very popular, uh, but it's from the FTX app, the FTX, uh, retail app back in the day. Um, I'll say something controversial.

It was the best user experience out in the market at that point for a little reason. You see the little I don't know if you can see, there's a dollar balance there. Uh, that dollar balance was purely stable coins. FTX did not have a banking partner. They did not hold dollars for their end users.

Um they held stable coins. You would deposit USC, they would credit this balance. You would deposit UST, they would credit this balance. And then you could withdraw in any one of those formats as well. Uh what what we mean by that is they were using stable coins as a platform.

They were building user experiences and good product experiences at at that uh on top of stable coins. Again, maybe they were interested in building their own stable coin just as Binance was interested in building their own stable coin and maybe they have articulated this to the sector. Uh what they actually wanted was to have access to stable coins as a platform. Um so what what what does this mean when you actually think of building and allowing [snorts] uh you know good product developers to build on top of stable coins as a platform? um you realize that the existing products from the first era of the sector that I mentioned uh in the beginning uh they were not for obvious they were obviously not designed for this.

They were designed to be a dollar denominated token that you could hold on a wallet and transact. They were not designed to be platforms. And you know uh there are two I I joke with my team that there are two ways to build a platform. One is to design and build it. The other way is to build a product that fails and then pivot to become a platform.

There's a lot of those out in the market, but usually they don't work. Like you don't build an Amazon Web Services of the world by not designing it to be a platform, right? [snorts] Um, so my my opinion is that there's going to be a lot of attempts to build products on top of USC, on top of USCT and so on and so forth. They will invariably fail because um, you know, that's not the best platform for you to build. They they do have, you know, advantages.

They offer you a lot of liquidity, a lot of interoperability because by the way if it's the same asset is by definition interoperable. Um but there's no real programmability right you can you cannot extend in the sense that you extend platform uh platforms and build your own features based on that you cannot extend USC you cannot extend UST it's just not doable I mean you can but you're not you don't actually own a lot of that implementation and most importantly this is again something that people get confused you don't get access to the yield everybody talks about the yield oh but I would like the yield for the deposit base that I have of those assets again this This is talking about a faster horse. What builders of products actually want is monetization. They want if they acquire a thousand customers and if they get $100,000 of deposits from those a thousand customers, they should be allowed to monetize their business. And if they're holding USC or USCT or anything else that belongs to somebody else, they can't monetize.

Some other entity is monetizing the business for them. again it can only work for so long until everybody kind of you know uh pick pick their arms and decide to to fight a war. Um so again the claim that I have is that stable coins as a service was the faster horse and I think now the industry is recognizing what we actually need and what we actually should uh work towards which is um this idea of custom stable coins as platforms for building fintex. Um [snorts] so this is what I call the rise of these uh called stable coin networks. So what are these stable coin networks?

These are models that are beginning to emerge uh now. First of all they have they have been designed or at least they have been uh a lot more considered as a platform you know and and not as a product which gives them like certain features that we wouldn't have seen before. Um a lot of people are getting confused. cuz I see this daily on Twitter, on LinkedIn, right? Like, oh my god, there's five more stable coins and people are so stupid.

I don't know about that. Maybe you should consider your opinion a little a little bit. I don't think people are that stupid. Maybe they're exploring something that actually has a lot of value. The use of custom stable coin issuance, it's actually a mechanism to instantiate this functionality and then get access to monetization.

So, stable coins are actually two things if you think about it, right? They are a really brilliant um kind of innovation. They have the value representation. So they represent you know the dollar which is a really useful thing and they have behavior. Um as I said before the way that these products have been constructed in the past it was like as is usually the case with software right you build a big monolith first and everything is mixed and you don't you don't have a way to kind of utilize bits of it.

But everybody's interested in the value part of stable coins. Everybody wants to be able to represent that inside their product. Not everybody's interested in the particular behaviors of these stable coins as they are today. Is everybody interested in the blacklisting function as it works of Tether today? Some people are, some people might not be.

Does everybody want to contain the transfers in the way that Circle wants transfers of USC to be contained? Maybe not. Maybe I want to build a closed loop systems. Maybe I actually have different compliance requirements. But you cannot customize any one of these behav these behaviors.

This is just this is pardon my French. This is just like you know we we can do better than that. We can break down this technology and rebuild it again in the sense that we can offer the value component to to builders and offer the ability for them to customize behavior um in the same way that they customize behavior for any other platform of software that they use. Um this this is looking like custom stable coin issuance today. But it will quickly flip into the this this clear idea that these are actually uh platforms being used.

Some of the examples of what I'm calling these networks are obviously what we do at M0ero. I think uh bridge which was acquired as by stripe um has a play in this space. Uh Athena is entering the space, Anchorage and a few uh smaller ones. So what does this mean in practice? This means that [clears throat] that now you have an entity providing this infrastructure you know and and part of that infrastructure uh that is provisioned is the issuance of these assets and then you have multiple assets multiple of these stable coin products within a particular ecosystem and they are bespoke to a particular use case right so in the case of M0 examples are we have built the MetaMask dollar for MetaMask uh we have built you know USDA for for that team and so on and so forth each one of these things is a instantiation of the platform.

It has very particular behaviors. It allows these developers to monetize their use case and they and the most important thing is they they become interoperable within that ecosystem. Uh because that's really important. I I wouldn't advocate for a thousand stable coins to exist if they were all completely uh segregated and fragmenting liquidity. But if they become uh interoperable within a particular ecosystem, then that's very interesting because these ecosystems are actually separated out.

they're not the same company building them and yet you have the ability to move funds from one ecosystem to the other without dropping anything u behind. [snorts] So, [clears throat] so you know the the reality that we are right now is looking like something like this, right? The I think the problem though and this is why I I I think we're going to enter um some sort of a new era of um uh you know stable coin wars associated with these networks is that while while you might look at each one of these networks um independently like that as they grow and they're growing very fast if you think about the the number of products that each one of these four networks just as the examples that I've said they already issued like close to 20 um use cases uh what what Well, what will actually happen in practice is more like this, right? So, these networks, these use cases will sort of overlap. Um, I want to have like maybe an exchange use case that overlaps with another wallet use case that is part of the same family, but you know, but these two stable coins are issued by different networks.

That's obviously going to be a problem u because interoperability is going to be one of some of the the main turf where this next phase of wars are going to be fought on. But I think what will happen and then I'll close. Um my guess for for the near future is that this is actually what builders need, we are entering the phase now of actually transforming stable coins or at least the core of that technology into a platform that builders need to be able to build this better fintech. Just things that end users are going to use and they don't even know that they're touching stable coin infrastructure in the back end. Um but the as I said part of the turf is going to be interoperability.

So trading is not good interop. I think this is just something that we know as an industry and we should should not accept it. Uh you know imagine if actual dollars on banks were traded one for the other for them to be able to to interoperate that that would be horrible. We have central banks, we have cleaning houses, we have tech for interoperability. We should have tech for digital dollar interoperability as well.

And I think my my also my other uh take is that uh people will realize the difference between open and closed platform models right there's a as a builder when you build on top of a platform depending on what it gives your business it becomes extremely strategic for your business and you know you might not want to build on Microsoft you might prefer Amazon for different reasons right um there are closed platforms you know that force you to kind of be in their vertical um silo and there are open platforms that allow allow like different parts of the stack to be plugged in by many service providers. This is particularly the model that we believe in at M0. We think that's going to be another super super important element for people to consider when picking the substrate for them to build on. And um with that said, I thank you guys for the time.