Stablecoins Surge: How Much Room for Growth Does Tether Have?

Author: Sylvia To, CoinDesk; Compiler: Wuzhu, Golden Finance

The market capitalization of stablecoins has grown significantly in the past six months, from $122 billion in October 2023 to $157 billion in April 2024. Among stablecoin providers, Tether (USDT) has a huge market share of more than $100 billion, dominating the stablecoin market with 70%.

Building on this momentum, Tether's first quarter report for 2024 revealed that profits from holding U.S. Treasuries reached a record high of $4.52 billion, generating a net profit of $1 billion. As of April 28, the number of active Tether addresses (non-zero balances) grew to 5.6 million.

This raises the question: how much room does this stablecoin giant have to grow?

We further delve into the decentralization of these wallets using the Herfindahl Index. The index aims to measure the market concentration of Tether wallets, calculating the share of the total supply held by different addresses by summing the square of the balance of each address in the network. A high score indicates that the supply is concentrated in the hands of a few, while a low score indicates that the supply is more evenly distributed among many addresses.

Source: Glassnode as of April 30, 2024.

Above, we see the Herfindahl Index scores of different stablecoins: USDT is 0.00708164, USDC is 0.00981202, and DAI is 0.00331652. Among the top three stablecoin providers, DAI has the most even distribution of address supply, followed by USDT and then USDC.

The recent introduction of USDT on the TON network could lower its Herfindahl score and achieve a more even supply distribution. Telegram, which boasts 900 million monthly active users, announced in April that TON would natively support USDT. The move could have a significant impact on the distribution of Tether wallets.

Source: DefiLlama as of May 6, 2024.

When examining the top three blockchain platforms and their stablecoin usage, TRON transactions are dominated by USDT, with a dominance of 98.2%. On TRON, USDT transfers typically range from 95 cents to about $2, but gas fees may vary. Meanwhile, the TON wallet is natively integrated into the Telegram app, allowing users to conduct peer-to-peer USDT transactions within the TON wallet for free. According to reports, a transaction between two USDT users outside the wallet will incur a network fee of 0.0145 TON, equivalent to about $0.09 as of May 6, 2024.

Source: Statistics as of 2023.

The integration of USDT on TON, with its lower fees and faster transaction speeds, may prompt users to switch from TRON to TON for frequent small transactions. This is especially important for the main user countries of Telegram in 2023: India, Russia, the United States, Indonesia, and Brazil.

Most of these countries are major players in the global remittance market. India is one of the largest recipients globally, while Russia sees a large amount of funds coming from its diaspora in Europe and former Soviet states. Indonesia benefits from remittances from Malaysian and Middle Eastern migrant workers. Brazil, on the other hand, is known for remittances from migrants in the United States, Japan, and Europe.

Tether's integration with the TON network, coupled with its large market share and the potential of a distributed wallet system, could support the expansion of USDT among Telegram's user base, thereby increasing its use in key remittance markets.