USDC at 1 Billion, What's Next

This week on the Money Movement we’ll be talking about USDC at 1 Billion. USDC has become the fastest growing stablecoin in history, seeing over 200% growth over the past six months alone, and has become a de facto standard as a trusted, compliant digital dollar format and protocol on blockchains.

To reflect on all of this, and also to share some really exciting news about the next chapters for USDC, we’re going to be joined by two of the top product executives from Circle and Coinbase who have been responsible for the development, launch and growth of USDC. Joining us will be VP of Product at Circle, Joao Reginatto, and Group Product Manager at Coinbase, Nemil Dalal, with reflections and visions on the history and future of USDC. If you’re in the broader crypto ecosystem, you don’t want to miss this episode, we’re going to have some nice surprises.

If you’re in the broader crypto ecosystem, you don’t want to miss this episode. We’re going to have some nice surprises.

Jeremy Allaire: Hello. I'm Jeremy Allaire, and this is The Money Movement, a show where we explore the issues and ideas driving this brave new world of digital currency and blockchains. Throughout the show here we've talked at length about stablecoins, about digital dollar stablecoins, and we've talked a great deal about their role in the future of the financial system. Obviously, it's a overarching theme that we're exploring here.

Today I think we're going to talk about what is the biggest story in stablecoins in the world right now, which is the incredible rise of USDC, the digital dollar stablecoin, of course, that Circle and Coinbase through the CENTRE Consortium launched back in late 2018, less than two years ago. On the show today we're going to talk about it, talk about its history, talk about its rise, and we're excited to also announce USDC Version 2, which we're going to talk about a little bit later in the show.

Today was actually another major milestone. The episode title when we came up with this was USDC at 1 Billion. USDC has been growing in terms of net new in circulation at like 100 million per week recently, and just last night crossed 1.4 billion USDC in circulation. This is part of a very big year since the January pandemic outbreak in China, since late January, and then as that started to play out around the world, there's been rising interest in crypto. There's been tremendous rising interest in stablecoins and in particular in USDC, which has seen a 3x increase, growing faster than any other stablecoin in the short history of these digital currencies.

USDC at 1 Billion, an incredible rise, and clearly the start of something much, much bigger is happening here. Today, to reflect on all of this and also to share, I think, some really exciting news about the next chapters for USDC, I'm excited to be joined by two of the top product executives from Circle and Coinbase, who've also been responsible for the development, launch, and growth of USDC. Joining us are VP of product at Circle, Joao Reginatto, and group product manager for crypto at Coinbase, Nemil Dalal. Welcome, guys.

Nemil Dalal: Thanks, Jeremy.

Joao Reginatto: Thanks [crosstalk] Jeremy.

Jeremy: You guys, this is awesome.

Joao: It is awesome. Still, so much work to do, though.

Jeremy: Yes, there is. Obviously have had a pleasure of working closely with both of you and with the broader teams at Circle and Coinbase as we've brought all this forward and seen this growth. Today's really cool, I was mentioning at an all-hands at our company earlier that it's amazing that two years in we've never touched the smart contract. It didn't get upgraded for two years and look at what it's done in that time, and so anytime you touch these things, it's a big deal, especially when there's 1.4 billion of value locked in them.

Nemil: I was talking to our team at Coinbase about this, the thing we were reflecting on was if this were a bank moving $1.4 billion would be such a huge deal, and just to see there was a lot of work that went in, but also just how relatively easy it is in crypto versus other forms, which is really powerful.

Jeremy: Yes, totally. These private key security and all the protocols and procedures around them are pretty intense. Cool. I want to actually start a little bit here, just with some of the initial history. You both played, I think, critical roles in the first phases of growth of USDC, and I think as a result, you both bring really great perspective. I want to start out a little bit with that earlier history. I'm going to actually pop something up on the screen and show this if I can figure out the right-- Let's see here.

This is actually just very early days, so October 2017, about a year before actually this actually launched. Of course, this is the sensationalized headline from CoinDesk, but the idea of CENTRE and the idea of an open interoperable protocol for digital dollars and other fiat was something we were really excited about, and that had grown out of all the early work that we had done in payments. I think the next piece here-- this is just, again, a little fun snapshot-- every project starts with a white paper and there was the original CENTRE white paper, and then we modified it obviously, as we got together and launched this together.

I think this idea is still this idea that we're all pursuing, which is an open, connected global system that makes it as easy to share value as we can information on the internet. I think in particular this idea that we could eliminate artificial economic borders, we could enable a more inclusive global financial system that connects everyone in the world. That idea of a open, shared, inclusive, more evenly distributed global economic system is I think a big part of what inspired working on this. I think the coming together of Circle and Coinbase to launch CENTRE Consortium and then really put this out into the market a year later; I think was born out of that shared set of ideas.

They're not unique to just Circle and Coinbase. I think these are ideas that bring a lot of people into crypto. I'd love to hear when you think about that early phase how that mission, vision aligns. Obviously, we'll fast forward to where we are today in that, but maybe, Nemil, you could start with just what brought you to this and when you think about Coinbase more broadly getting behind a model like this.

Nemil: Yes. I used to laugh that for almost every known crypto there's an origin story of what got them excited, especially in the early years when it was less mainstream. I think for me, I'd worked in financial services, spent about a year in microfinance and microcredit and mobile payments around the world, in East Timor, in Seattle, The Gates Foundation, and in India working on a mobile payments microfinance pilot.

I think there was something about the open programmability that was just so exciting about early crypto. You saw that with Bitcoin, and then you saw that even more when Ethereum launched smart contracts. I think for me, at least on a personal level, that was a core motivating factor. I think at Coinbase there was just always excitement around stablecoins. I think the big things there were that they were global and they were portable. I think the big vision we talk about at Coinbase is just creating an open financial system. We saw the power of this stability with global access, and that was just really, really powerful.

Then number two is we're founded by engineers and a core part of our perspectives have been about programmability. There's general excitement around programmable money and the ability to build applications on top. Just like the internet is a series of different blocks, we saw the same different opportunity with Ethereum, with cryptocurrencies in general, and then especially the power of stablecoins to unlock more value there.

Jeremy: Yes, it makes a lot of sense. Joao, I remember in the early phases of this saying like, "We want to launch this, we want to launch this," I think in three months. Crypto speed is different than a lot of other industries, but it was pretty fast and you were PMing a lot of things at the time, different things, but started PMing this. Do you want to maybe share a little bit about-- Your origin story with this as well, I think is pretty cool.

Joao: Yes. I've been involved in Circle primarily with our former peer-to-peer payments product, Circle Pay, that we had back in the day that has been now retired. Around that date where you mentioned in the early announcement around CENTRE, the Q4 2017, I was still heavily involved with Circle Pay back then, and heavily passionate about this idea of bringing open and global peer-to-peer payments for the world in a way that the user experience was going to be very accessible and it wouldn't include any high friction, any new concepts or cognition required for mainstream end-users, but it would leverage public blockchains and all that infrastructure that we're passionate about in the backend.

Then I think you and Sean eventually-- I know it was part of a lot of conversations-- but eventually, you brought me into your office and you said, "Okay, we need you to PM this new thing that we're thinking about, and it is a stablecoin." Hats off to you guys, at the time, as a PM, you immediately jump on the how. I was thinking, "How are we going to do this? This is hard. How do we even begin?" I think the shared vision and reconciling that with what we always had as a vision as part of Circle, which is to bring all of this infrastructure and to make it available for businesses and consumers so that they can hopefully build a much better financial services infrastructure for the world.

It clicked with me very quickly and I was very happy to jump on that. Also, the ambitions that we had then were very significant. We wanted to get something out in the market as soon as we could. I think in the end we did the right thing, and we had a very, very intensive conversation with the industry about USDC before we touched the first few lines of code. There was a lot of stuff being built already but in terms of the actual shape and the attributes, the quality properties of the solution.

I'm very proud that we had literally hundreds of conversations with folks in the industry and it was-- The feeling that we could have already at that point is that it was going to be very well received and it was going to be something that was going to be foundational, so I'm happy to sit here about two years later and to see that it was actually okay.

Jeremy: Back then, obviously, Circle and Coinbase had this, I think, shared long-term vision for what's possible, an open financial system, programmable money, ubiquitous peer-to-peer given payments. I think if you go back to the fall of 2018 when this launched and launched; I think back then a lot of the attention was on how do you build a better Tether, how do you build something that's more transparent, that's got regulatory frameworks around it, that's trustworthy, verifiable. The whole ecosystem was saying, "Hey, this is needed."

I think while back in 2018 there were early projects that were programmable smart contract-based projects like the early versions of Compound, or other things were just starting to emerge. Really, what I like to think of is the bootstrap use case. You had to have a bootstrap use case. Bootstrap use case was what I call the crypto capital markets. It was like this is for people who trade. This is going to be better because it's actually got real rails. You can get in and out of it, it's trustworthy, and it moves.

I think a lot of that early energy was on how do we get this to be a market or a market infrastructure that could be used in a lot of places, knowing that once you got that in place, then people could depend on it for other things, get the liquidity there, get that there. There was a lot of that in the beginning. In some ways, the MVP was like make this simple for people to have good on and off ramps and get it out into the market. That was part of it.

Nemil: It's almost like I see USDC and stablecoins as a coin market infrastructure. The same way where we think about roads and bridges, how much [unintelligible 00:13:27] enable, let's say the system in America. In the same way, I think stablecoins are really critical in that way. I think, Jeremy, this is the credit to you and to Circle, but I think when you came and talked to Coinbase about this, I think the things that got us very excited from the start was just trust and how critical. At Coinbase, trust is such a critical part of our brand. I think similarly for you that was really important. That I think was very different from other products on the market and so the value to clear auditing, regulated parties, I think that was a critical part for us.

Another really critical part was just the consortium model, and we saw value. The idea was to get more and more parties involved and try to build a standard and so we saw a value to the consortium model drive adoption and build standards. I think the thing that's really interesting at Coinbase and the same thing likely at Circle as well, was that it touched all our products. We had [inaudible 00:14:17] wallet and a Coinbase Wallet to touch that. Coinbase Commerce, if we ever want to make commerce a thing using cryptocurrencies, this is a critical layer for that. It also obviously impacted our trading and our ability to buy and sell cryptocurrencies.

I think that it's such a powerful-- It's the base layer on which anything else is built, in the same way that a dollar or any type of trusted fiat is a base layer for-- A whole economy to be built on.

Jeremy: Totally. The standards as a core protocol is like HTTP of money, the set of ideas, and it's been obviously pretty amazing. We'll talk about use cases I think in a minute, but I'll pop one thing up here which I think is another thing to look at. Pull it over. Okay, here we go. This is where we are today. It's just pretty cool. As of August 27th, 1.4 billion. You can see where we were back then. Actually, the growth from zero to, let's call it, 500 million, that was actually pretty fast. Of any stablecoin project, USDC went from 0 to 500 million faster than any other one, which is cool.

Obviously, you see this incredible rise this year. I zoom in-- oops, wrong way-- just for optics. If we look at 2020, the outbreak in Wuhan where they locked down the city, it was January 23rd. People in the rest of the world didn't quite figure it out until early March. Crypto has seen obviously a really big rise as an asset class, but stablecoins have seen this incredible rise, and USDC has seen this 3x growth. It's really astounding. I think the thing that I'm interested in maybe chatting about for a little while here is what's driving all this growth.

We talk about it in different settings, but maybe first before we do that, just reflect a little bit on the growth itself. Then we can maybe talk about what's driving it, talk about all the different kinds of use cases that are emerging.

Joao: The way I felt in the last two years as we were monitoring growth of USDC is that you can actually-- Looking back is always easier, but now looking back, you could pinpoint phases. I think it's quite broad in terms of how the industry was evolving. If you look at USDC, I think in the first three to six months; we grew pretty rapidly. That's around the $300 million mark, I think. I attribute that just to the product-market fit that we had in the beginning. As you said, we were very pragmatic collectively. We knew that we had this major ambition in how USDC can be a massive piece of infrastructure for the industry.

Right there and then, there was a need for just a regulated and trusted stablecoin for crypto capital markets as you said. We hit product-market fit pretty quickly, so I think that first phase of growth was due to that. Then 2019 was a little bit slower in pace. I think the way that I look into that now, including for Circle, and I'm sure for Coinbase it was similar, is that it was a very strong building year. There was a lot of building happening in 2019. There was a lot of actually adoption and thinking around how USDC can be used in various use cases, but we didn't quite see the reflection of that.

I think now, 2020, we just saw an explosion, and the explosion is coming from multiple angles. I'll let Nemil talk about the DeFi angle, which I think is a very interesting one. A couple of things that we have seen then early on. Obviously, COVID and the entire dramatic change that happened in the world because of that and the fight that a lot of individuals and businesses had to stable assets. It's quite easy to fly to stable digital dollars today in any part of the world, so we saw a lot of demand due to that.

I think we see an increasing trend in terms of businesses trying to explore more around digital dollar-based payments, whether they are B2B or B2C. We can talk more about that. Then there was this whole explosion in DeFi that I think was very interesting as well, that is composing on that growth.

Nemil: I think from my perspective, having been in crypto for about six years now, there's always these boom and bust phases. Often we can call it bust but really it's about retrenchment, investment, what we term "BUIDL" or building in the crypto ecosystem. I think you see that with the price of Bitcoin went up, then it went down, and during that phase, Ethereum was developed, and then that was launched. Then ICO boom happen, and then the ICO boom deflated. During that period afterwards, it's just a tremendous amount of building. Today we're seeing the growth of DeFi, and then again, some tremendous growth.

I think one observation I just have, and this is maybe growing with a family where my father had worked the labs, you can see the power of exponential growth in these industries. I think for most people, when you compare linear to exponential growth, they don't look that different on a one-year phase, compare Moore's Law to just extend their linear growth. They don't look that different. What happens over 3 or 5 or 10 years is just the tremendous divergence in the outcome. I think that is, at least, the early indicators that we're seeing with crypto and with stablecoins as well. Then I think that there's a number of different things that happened in the last six months. I think one big shift was the flight to safety due to COVID. You saw as the markets were tanking, the traditional markets, as well as the crypto markets, there's a huge flight to safety, and that was, I think, one big bump. I think the hottest thing, and maybe I'll tease it, and then happy to dig in more, Jeremy, is the growth of DeFi. I think the big shift that happened recently was I think the growth of compounds token, which happened in and around June, and then the launch of liquidity mining, which is a form of user acquisition. Happy to discuss that in more detail.

Jeremy: Yes, I think it is. Coming back to what you said earlier, the create a reliable market infrastructure that works in these markets. That sort of check we had achieved that with USDC. It's got tons of growth there. If you believe that stablecoins as market infrastructure are going to underlie lots and lots of other things. It's actually tiny right now as a robust market infrastructure. You can imagine a trillion USDC in circulation at some point.

This spring it was this incredible time where nearly simultaneously clearly the two killer apps of blockchains. People were, "What's a killer app? What's a killer app?" The two killer apps are stablecoins, which had moved to become the majority of transaction volume on blockchains, basically on Ethereum. That was a major thing. Then credit markets. Basically, credit markets that exist on the internet that you can use stablecoins with and so you can lend and borrow in a decentralized way. Then, obviously, the incentive systems behind those credit markets and the participation in them and the governance in them and this really next level of sophistication.

Another Lego brick, if you will, of market infrastructure. When we think about the financial system, you have these layers of market infrastructure. In some ways, we're seeing these layers built up, and DeFi is in some ways another Lego brick. Now people can compose stablecoins and credit markets. There's probably 500 companies working on new payments and savings apps that are just built on open rails, which is pretty amazing. I think it is amazing to see just in the last few months but let's talk about the future a little bit. How big can DeFi get? I'm not asking you to share, say, Coinbase internal forecasts or whatever, because people have different views. I guess how big can these things get?

Nemil: What I'd say from my perspective is prognostication is so hard in the [unintelligible 00:22:53].

Jeremy: Just apply Moore's Law and then they'll tell you how big it'll get [laughs] or more.

Nemil: I think there's a vision in that almost all financial services move on this. This is a TCP/IP with some type of back-end layer to move all financial transactions. To me, the bullish case that I would have for this is that all financial transactions in some way, shape, or form are moving on this. It sounds crazy but I think there's a moment when on the internet there's all these independent things out to the internet and [crosstalk] all that. To me, that's a bullish case. I think that there's a lot of different things we can talk about this in more detail of how we would get there, but that's a bullish case.

Jeremy: Yes. How about you, Joao?

Joao: To me, what's calling my attention, and it's something, again, we talked about for a long time, but you never know when these things are going to happen, it's the programmability aspect. I think a lot of what's happening in DeFi today has to do with that. Obviously, these credit markets and these decentralized money markets started popping up, but all of a sudden end-users have a variety of those to pick from. I think this infrastructure allows just for the comparison between all those to become programmable as well. That's what a lot of people are experimenting with.

I as an end-user, I don't need to be shopping around to see where the best deal is today for my USDC, I can just use a service that has leveraged the programmability of all this infrastructure. I think, honestly, that just scratching the surface. I think we only saw the first few use cases of what can be done, but that's, again, only for credit markets. We haven't seen anything around payments. We see some people doing a little bit of that with commerce and how you can now have atomic commerce transactions, which typically have been a huge problem for marketplaces like eBay and so on and so forth.

You have the money coming in on one side, the good coming in on another side and that transaction is not atomic and you have fraud and things like that. With digital goods and marketplaces, what we're seeing is people playing with the programmability of having digital dollars on one side, a digital good on the other side, and that's an atomic transaction. You eliminate fraud; you eliminate a lot of very interesting things. This is just the start, honestly. It's the tip of the iceberg.

Jeremy: We're certainly seeing more and more companies that are really using this in payments and settlement in consumer-facing, business-facing, international-facing, all these different things. We're obviously seeing this growth in DeFi. I suspect as the usability and scalability continues to mature we'll see far, far broader commerce applications. Obviously, we're seeing some really interesting large companies starting to experiment here.

Obviously, one of those origin visions that ties back, and we were showing it earlier, is this idea of a standard, the idea of interoperability, the idea that the digital laws that we might use every day, whether it's a leading crypto wallet or something like a Square Cash or Venmo or Revolut or the equivalent products in other parts of the world, and even tech-forward leaning banks, neobanks, all these companies being able to connect to each other over the internet and being able to have a way to do near real-time irreversible dollar-settled transactions.

It feels like we're getting really a lot closer to that. I think that then touches on this bigger theme, again, ties back to I think the mission behind CENTRE, which is this empowering people, global financial inclusion, creating this more open and inclusive financial system. If you can create standards and anyone can implement them and products and services all around the world, the open access to information and communications that we have.

I know that's a passion for you Nemil and for both of the companies as well. I think a big part of getting there is-- Really, I think two big things. One is much simpler user experiences. The way that someone gets started with sending and receiving something like a stablecoin being much simpler, and then better blockchain infrastructure, basically. Which is, how do we support internet-scale applications and internet-scale usage of things like USDC? I think with those the world can look a lot more interesting.

I guess part of that is trying to solve these problems together. I think one of the things that we're going to talk about here is USDC Version 2, which is pretty exciting. I believe it went live on mainnet at 11:00 this morning. It's live, which is awesome. As noted, this is the first upgrade in two years or over two years, and it's pretty cool. On that concept of how do we make progress against the goal of making this more easy for people to adopt around the world, one of the big innovations and one that I know Coinbase contributed a lot to is gasless sends model. I thought it'd be great to talk a little bit about that part of USDC 2.0. I'll maybe turn it over to you Nemil to frame that.

Nemil: Yes, absolutely. Like you mentioned, Jeremy, we're in some ways in our pre-iPhone moment in crypto. There's still this tremendous amount of usability that we're working on to make this easy and simple to let other people use. I often get the question, "When will there be a world where my grandparents understand crypto?" I think my goal is that there's so much complexity here, the goal is just to abstract it away. None of us think too deeply when we start a car or use an iPhone, what's going on underneath the surface. Lets us just do what we want to do. I think that--

Jeremy: We're not thinking about using Secure Sockets Layer when we buy something on the internet, right?

Nemil: No, [crosstalk].

Jeremy: Early days of the web you do. You're like, "Is it SSL?" It threw a big dialogue in your face and it was like, "Are you accepting this certificate?" [laughs] Simplicity requires things to become invisible.

Nemil: Exactly. The goal here is just making more and more of that invisible. I think, in a lot of ways, the way you move USDC today I liken it to if you wanted to pay someone $20, you'd have to go buy a euro and also spend that to be able to send the $20. That is a use case for anyone who doesn't work in crypto.

Jeremy: It's actually worse than that. It's like you have to go buy energy credits. [laughs]

Nemil: Exactly. I think a core part of changing that user experience is making it easy so that you can just use dollars. The same way you might spend dollars, you don't need any other currencies; you don't need any credits. Same way, is that you can be able to take your USDC and send it out. We work very closely with the Circle team on what's just basically this idea of gasless sends. For a non-technical definition of it, it's very simple, is that you don't need that other currency. What that means is that let's say you have a wallet, either that wallet can on your behalf decide to pay, so you don't have to ask the user to pay.

This is a really simple example. Often when consumers send money they don't pay a fee. You might. If you send Venmo $2 somewhere, you're not often paying a fee for that. It also means that third parties can charge this fee in USDC. For example, if a third party wanted to charge the fee, they didn't require the user to go get another token, they could directly just pay in USDC. The whole goal here is just cutting down friction and the complexity of this process. I think this is just one step of it. What I like is not just the usability angle but also the fact that this could be a business model for other companies, which then drives more and more parties that might provide these services.

Jeremy: Yes, totally. I was talking to our company about this, again, earlier today in all-hands before and after, and what does this look like. I think it's really core to virality here, which is that there's hundreds of digital wallets that implement these standards that actually support USDC today. If they upgrade to this capability, then it is more like a Venmo experience like, "I want to send you some digital dollars." "Oh, how do I get those?" "Download any of these hundreds of apps from any country in the world and show me your QR code and I'll send you some USDC. Now you can send it to someone else."

If there's a fee, it's paid out of USDC, or maybe there's no fee at all, and I don't have to worry about like, "I need to go buy some Ethereum. What's Ethereum? What's gas? What is all this?" Radically simplifies it. I think we're going to see lots of digital wallets that want to implement this very quickly, I hope, because I think it will help with mainstream use, for sure, in a big way. Joao, maybe you could talk a little bit from a ecosystem perspective if I'm a developer or I build wallets or I'm a custodian or exchange or others, how can they take advantage of this today? What do people need to do?

Joao: Yes. There's a couple of different ways. We intend on also producing more documentation and more, just concrete examples of how developers can take advantage of this. We are happy. I think Nemil and some other folks on the Coinbase team, and we have some folks on the Circle team, always present on the Discord channel for USDC. There's always a lot of developers asking questions about how to implement this or that or the other on top of USDC, so happy to answer questions there.

Essentially, if you go to the USDC GitHub repo, you can have a look at the smart contract infrastructure. You will see that essentially USDC 2.0 as we said, includes this new capability. It's a new set of operations on the smart contract that typically a wallet provider would benefit a lot from. You would have to wire up your infrastructure into those new operations to implement as Nemil said, depending on how you want the UX to be, do you want to subsidize the cost of gas? Do you want to charge your user and take part of the actual USDC amount that is about to be sent, or do you want to charge that on the receiving side because it's a slightly different business model?

The UX is going to vary, but essentially, you're going to communicate with the smart contract in a slightly different way with these new operations that we have. As I said, we're going to work on producing some documentation and examples of how this can be used, but happy to answer questions on the community Discord channel.

Jeremy: Cool. It's awesome. Hopefully, we'll see some stuff shipping really soon. Obviously, we'll update that online. This usability problem is one of the problems, and there's more to that, obviously. There's issues like identity and naming, long addresses, and things like that are complicated. There's decentralized identity and naming models that are being developed. Those I think, ultimately, really complementary to things like USDC for simplifying payments.

One of the other big areas, and we've talked about it at a high level, and I think we'll probably keep it at a pretty high level here today is, if we think about USDC as a protocol, which it is, and as a standard, we want to make sure that standard works broadly, that it can be used on different platforms and infrastructures. Earlier this year, we talked about a multi-chain framework for USDC. I know that there's a lot of work happening around that.

I think one of the things that we'll see is a lot more innovation happening in third-generation blockchains that are coming out and getting to a place where people can have very payment-oriented blockchains, embedded device-oriented blockchains, and enterprise-oriented blockchains. A lot of different use cases that are there, but I'd love to hear both of you guys talk a little bit about the scalability piece of this. If major consumer companies want to start using this as a standard in the next 12 months and are pointing tens if not hundreds of millions of users at these networks, how are we going to have USDC support that?

Nemil: I'm happy to dive in here. I liken a little bit to the days of the modem, where we're still very early in terms of [unintelligible 00:36:00] that are available on this. I think there are some good studies that compare Bitcoin let's say to the Visa network and in terms of what the throughput and scalability of those networks are. To their credit, every blockchain has realized this and is working on some solution. For example, Ethereum is underway on a large project called Ethereum 2.0, whose job is to increase scalability of the network. There's a number of different proof of stake chains that have launched to enable this.

I think, to me, as a principle the goal is that USDC should be available wherever developers and users are over time. Just like the space changes so dramatically so quickly, I think the goal is to continue to do that to enable USDC and Ethereum today, potentially other chains in the future, wherever developers, users are really clamoring for it.

Jeremy: Yes. Joao.

Joao: Yes, I completely agree with that. If I can share a bit of an anecdote, Nemil and I, we shared a business trip a few months ago and we were in DC talking to this very important entity over there. I think they asked the question right, Nemil? "Why did you choose Ethereum in the first place and would you choose Ethereum again if you were to design USDC today?" Our answer was very easily yes to both. The reason why we chose Ethereum was clearly because of the developer attraction and where the developer eyeballs and the end-user eyeballs were at the time.

Even today, if we were to build USDC again, that would probably be, as we call sometimes, the canonical chain of choice. The way that we see USDC is also as a standard, as almost like a protocol layer. We have to be open to bringing USDC to new places where interesting thing is happening, especially as different public blockchain infrastructures develop with particular specialties, whether it is scaling or use case, or whatever it is. If that brings orthogonal growth and use cases for the kinds of things that we are passionate about, I think it's natural that we would gravitate and look into supporting USDC on those infrastructures as well.

Jeremy: It seems like, for sure, the next year there's intensifying work on the infrastructure layer coming from a lot of different places and digital dollar standards are going to be in focus for everyone. Everyone wants to have a digital dollar standard that works on the internet. It's pretty awesome. I'm excited about what I think we'll see coming there. Lots of other things we talk about, obviously, around broader adoption of this within the financial industry, how do people fully embrace things like compliance with travel rule, reputation, and risk.

As we talked about the beginning phases of programmable money, maybe we just talk for a minute about that, which is we have the example of DeFi. What are some other either real-world or conceptual examples of smart contracts that are already demonstrating the programmability of stablecoins?

Nemil: From my end, I think I'm just tremendously excited about all these different use cases. I think that decentralized exchanges are a really interesting category, a lot of innovation going on. You see for Uniswap, XREX. There are a number of different exchanges out there. I think that's one really interesting category. I think another really interesting category is other forms of financial services. For example, insurance, options, some types of derivatives. dydX is a derivatives platform using smart contracts. I think that options is companies like Open who provided that.

I think insurance is another really interesting product category, that there is a world where that could be a smart contract rather than just real-world institutions.

Jeremy: Yes. Joao.

Nemil: Joao, I'm sure you have lots of ideas as well.

Joao: Yes, so many. [laughs] Yes, there are so many. I'm really interested in what's going on in commerce. I think there's some people exploring as I said, especially with a couple of digital goods marketplaces, this idea of atomic commerce transaction where you have digital dollars coming in on the one side and an output of digital goods on the other side and the amount of infrastructure and operations that you scrape off of the surface of earth when you implement things in that way. It's really incredible how these marketplaces are going to look like and how different they're going to be once you achieve that.

The other thing that I think is interesting, it's a primitive that I think is being exercised again and again and again, and it has a lot of pitfalls from a security point of view, but I think we are maturing really fast, is this idea that you can lock digital dollars in the form of USDC and then conceive how you can generate auto-tokenized assets behind that.

That can be simple things like an in-game currency that you tokenize based on USDC that's being locked in some place, just because perhaps you want to brand an in-game currency in a particular way, but you want it to be interoperable and just as valuable as dollars are, but also how you can lock that USDC to generate other forms of derivative digital assets. I think a compound built with cUSDC, it's really interesting in the mechanism. I think a lot of other people are exploring that for a number of different use cases. I'm very interested in that primitive as well.

Jeremy: The connection of the real world and tokenization is obviously one people get excited about. Last week we had Securitize on and they had a tokenized equity example that pays dividends. It's an equity that pays dividends, and the dividends are being paid in USDC because the equity itself is reflected in a smart contract, so when the dividends come you can automate them out and anyone who is a token holder is receiving USDC, which is really, really cool as well. I think we'll see going deeper down the stack of financial contracts basically that are written that way.

Obviously, there's a lot more we could cover there. I want to get some of the closing thoughts and reflections, but we obviously have talked a lot about where it is today, a little bit about where it's going. What does this look like in three years and maybe the-- I always like to ask people the question. We'll keep it simple. What's the USDC in circulation at the end of 2021? What does this look like in three years and then prognostication on USDC in circulation at the end of 2021? I'll start with you Joao.

Joao: Okay. I was hoping Nemil [unintelligible 00:43:07].

Jeremy: [laughs]

Joao: Okay. How does this look like in three years? I think one of the things that we have been working a lot, at least on the Circle side, is how do we support this transition phase where a lot of businesses especially are beginning to understand the quality attributes of digital dollars and the benefits of those but they still just have a tremendous amount of legacy business processes and funds flows that they need to continue to work with, whether it is to their end-users or to their business partners.

How do you transition, whether it is consumer-to-business or business-to-consumer and B2B payments, or how do you allow things to live in a hybrid way between the current world of fiat and the world of digital dollars such as USDC? I think in three years, I would think we would have made a lot of progress in terms of transitioning businesses over to something that is a lot more native on infrastructure such as USDC in such a way that they are accepting and making a lot more payment volumes in this new infrastructure and don't have to convert between this and the old world sort of speak.

I'm never a big fan of analogies, but in a way, I always try to think about this and what happened with digital photography. When this emerged, digital photography was a poor version of normal photography and so what a lot of people would do is they would utilize that new form factor but they would inherently go back to the previous one. They would print their digital photos and keep them in that way. As you started having more and more utilities, then basically today you can do so many different things with digital photos. Nobody even thinks about going back to an analog version of that.

I think that's what's going to happen in three years to USDC. There's going to be so much momentum and so much traction with use cases that are native in USDC, whether it is payment settlement and B2B payments and all these forms of-- and credit markets as well especially. I think we're going to see significant more amount of business just being done on USDC and not going back into fiat. A prognosis, did you say for the end of 2021?

Jeremy: 2021.

Joao: I would--

Jeremy: You can take that weekly run rate right now and just extrapolate [crosstalk].

Joao: I think easily we've got to be able to do a 10x by the end of 2021, so I would expect something like 15 to 20 billion at least in terms of size.

Jeremy: I like that. All right. Nemil?

Nemil: I agree with Joao. I think one big vision to me for USDC is that we move tech-savvy companies let's say in Silicon Valley in the digital finance stack to a USDC or crypto intermediate finance stack. I think that's one clear-cut opportunity I very much agree with you Joao. I think the other things that I find very interesting, Coinbase has invested and grown a lot in terms of commerce and has been opening up in more and more geographies. I think the opportunity to do worldwide remittances or commerce is another really critical use case that'll be on the retail end.

The third one is that we've seen DeFi. In a lot of ways DeFi they're mapping what we see in the current world. I call it Finance 1.5. They take things we've seen, a bank, an exchange, and map it into a primitive. I think the quote that I love is from a friend of mine is basically, "Lean into weirdness." To me, the Finance 2.0 things are things that don't look normal in the current world. I'll give you a really simple example, is that most financial exchanges minimizing slippage is the goal. That's because there's a set number of assets in the New York Stock Exchange, but if you have t-shirts, if you have other forms of--

Jeremy: Tokenize everything.

Nemil: Ideally, the exchange is totally different, so this mapping of what we have today and just putting that on the blockchain is not going to work anymore. I think what I'm tremendously excited about is that I don't know what's going to come from that, but I sense there's something really interesting that's going to reflect the fact of how the usage of crypto is going to be different from traditional financial markets.

Then in terms of prediction, probably in the same order, I would say between 10 and 15 billion is the growth that I would see. I think the one thing I'd say in the space is that it just takes one or two things hitting. We've seen this growth in just the last six months, really. There's was one or two instances. The same way is I think that's a vision. On that though, one project heading in the right way and suddenly you could bring many, many people online.

Jeremy: Absolutely. Yes, I can think of even a few projects that I'm aware are cooking that themselves could contribute a billion or two themselves. It will be interesting. Super awesome. Really, really excited and so pleased to have both of you guys reflect on the growth and success of USDC and now USDC Version 2. Look forward to continued collaboration.

Nemil: Thanks so [crosstalk] much.

Joao: Thanks for having us.

Jeremy: Absolutely. Obviously really exciting times in stablecoin land with USDC. A lot to reflect on there. We'll be I think trying to share a lot of the thoughts and quotes and clips and other things out of this because I think it's a great moment in time.

Next week we're going to continue on some of these things, but we're going to explore something a little bit different, which is, what is the relationship potentially between digital dollar stablecoins and central bank digital currencies? Will they coexist? How might that take place? We're going to be announcing the lineup for that soon, but it should be a tremendous show with several individuals who are very close to these discussions. Until next time, stay well, stay safe, and stay informed. Thank you.

[music]

[00:49:36] [END OF AUDIO]

Joao Reginatto
Head of Product, Circle
Nemil Dalal
Group Product Manager, Coinbase

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