Subscribe to Variant
>4.7K subscribers
Subscribe to Variant
>4.7K subscribers
Credit cards are hands down Americans’ preferred payment method. They’re convenient, and when you layer in rewards, consumers can’t get enough. So how could stablecoins possibly replace cards and go mainstream? Our own Daniel Barabander lays out the scenario.
Then, Jake Chervinsky and Jesse Walden share their formula of onchain value -> tokens; offchain value -> equity. They explain how onchain value can extend to offchain infrastructure (e.g., front-ends)—giving founders flexibility to build fullstack and efficiently — from protocols to products, with better-aligned incentives and less ineffective governance.
Enjoy!
Most people think the role of stablecoins in U.S. consumer payments will only ever be a backend settlement tool to make credit cards more efficient. But I think they can replace cards altogether.
They can do that by following the same two-step path Visa used to achieve mainstream adoption: (1) lean into intrinsic advantages to solve real pain points for specific users, and (2) build or participate in an open network that aggregates fragmented usage into a scalable, interoperable system.
Step One: Start with niche use cases by leaning into intrinsic advantages.
Credit cards overcame the bootstrapping problem by focusing first on intrinsic features — convenience, incentives, and increased sales — that didn’t require a fully built network. Stablecoins can do the same by finding early traction in two niches:
(1) Comparative convenience: For consumers in jurisdictions with restricted USD access (e.g., LATAM), stablecoins offer uniquely convenient access to U.S. merchants, enabling previously impossible sales.
(2) Incentive-first use cases: Whitelabeled stablecoins can power rewards programs, with merchants offering discounts and perks funded by yield on the float. Consumers are often willing to tolerate onboarding friction for products they love if the rewards are strong and the value is likely to be reused (e.g., Starbucks Rewards, Taylor Swift fans, or Poshmark users).
Step Two: Aggregate fiefdoms into a full-blown network.
As in the early credit card era, leaning into niche use cases will lead to fragmentation — varied chains, issuers, user experiences, and standards around consumer protection. Over time, these fiefdoms will need to be connected through a neutral, interoperable network: a “Visa for stablecoins.”
Stablecoins won’t dethrone cards by competing head-on. They’ll get there by serving edge cases first, then stringing those edges together. This will aggregate the supply and demand necessary to solve the bootstrapping problem of a new payment method.
From a new consumer’s standpoint, joining the stablecoin world will eventually offer enough value that the one-time onboarding pain becomes worth it. At that point, stablecoins won’t be seen as an alternative to credit cards. They’ll be seen as the inevitable successor.
Read the full post on our blog.
Jake Chervinsky and Jesse Walden
Over the last decade, crypto founders have adopted a model in which value accrues to two separate instruments: tokens and equity. Tokens offer a new tool to grow networks bigger and faster than ever before, but only if they represent something users actually want to own. Unfortunately, regulatory pressure from a hostile SEC largely stopped founders from driving value to tokens, pushing them to focus on equity. It’s time for that to change.
The key innovation unlocked by tokens is self-sovereign ownership of digital property. Tokens uniquely enable holders to own and control their money, data, identity, and the onchain protocols and products they use. To maximize that potential, tokens should capture value that lives onchain — revenue and assets that are transparent, auditable, and directly owned and controlled by tokenholders alone.
Offchain value is different. Since tokenholders cannot directly own or control offchain revenue or assets, those should accrue to equity, not tokens. Founders may wish to share offchain value with tokenholders, but doing so is often inappropriate since companies that control offchain value typically have a fiduciary obligation to keep it for shareholders. If founders want to direct value to tokenholders, then that value must be onchain from the outset.
This basic distinction — tokens for onchain value, equity for offchain value — has been distorted by regulatory pressure since the very beginning of crypto. The old SEC’s overbroad views of securities law misaligned incentives between companies and tokenholders, and forced founders to rely on decentralized governance systems that were poorly suited to manage protocol development. Now, founders have a fresh opportunity to explore what tokens can do.
Read the full post on our blog.
Ideas and perspectives from the team
Daniel Barabander: Control Is a Spectrum
Many crypto founders think control is automatically a bad thing. But when it comes to legal compliance, we all should be asking ourselves two questions: Who has the control? And what exactly are they controlling?
Jesse Walden & Jack Longarzo : Investing in Project Eleven: Securing Crypto’s Post-Quantum Future
Imagine waking up in a decade to find your Bitcoin wallet drained. Not because of a hack, but because the math that once protected it has silently broken down. No alerts. No patch. Just quantum computing, finally here. Alright, stop imagining — because we’re investing in the team that’s protecting crypto’s future.
Daniel Barabander & Jack Longarzo: Fractal Protocols: Strategies for Defending Against Open Supply in Crypto
Stop us if you’ve heard this one before: a crypto app drafts on an existing protocol to bootstrap, then vertically integrates that supply, then gets blindsided by an app doing the same to them. In this piece, Jack and Daniel tell you how you can defend yourself from irrelevance.
Recent posts from the Variant team
Jack is pretty sure he’s right about decentralized training for LLMs:
Alana stoked controversy with her take on Robinhood’s new crypto products:
Jesse has a deep thread on two trends behind product-tokens—“the democratization of investing” and “‘live player’ founder worship”:
Disclaimer: All information contained herein is for general information purposes only. It does not constitute investment advice or a recommendation or solicitation to buy or sell any investment and should not be used in the evaluation of the merits of making any investment decision. It should not be relied upon for accounting, legal or tax advice or investment recommendations. You should consult your own advisers as to legal, business, tax, and other related matters concerning any investment. None of the opinions or positions provided herein are intended to be treated as legal advice or to create an attorney-client relationship. Certain information contained in here has been obtained from third-party sources, including from portfolio companies of funds managed by Variant. While taken from sources believed to be reliable, Variant has not independently verified such information. Any investments or portfolio companies mentioned, referred to, or described are not representative of all investments in vehicles managed by Variant, and there can be no assurance that the investments will be profitable or that other investments made in the future will have similar characteristics or results. A list of investments made by funds managed by Variant (excluding investments for which the issuer has not provided permission for Variant to disclose publicly as well as unannounced investments in publicly traded digital assets) is available at https://variant.fund/portfolio. Variant makes no representations about the enduring accuracy of the information or its appropriateness for a given situation. This post reflects the current opinions of the authors and is not made on behalf of Variant or its Clients and does not necessarily reflect the opinions of Variant, its General Partners, its affiliates, advisors or individuals associated with Variant. The opinions reflected herein are subject to change without being updated. All liability with respect to actions taken or not taken based on the contents of the information contained herein are hereby expressly disclaimed. The content of this post is provided "as is;" no representations are made that the content is error-free.
Credit cards are hands down Americans’ preferred payment method. They’re convenient, and when you layer in rewards, consumers can’t get enough. So how could stablecoins possibly replace cards and go mainstream? Our own Daniel Barabander lays out the scenario.
Then, Jake Chervinsky and Jesse Walden share their formula of onchain value -> tokens; offchain value -> equity. They explain how onchain value can extend to offchain infrastructure (e.g., front-ends)—giving founders flexibility to build fullstack and efficiently — from protocols to products, with better-aligned incentives and less ineffective governance.
Enjoy!
Most people think the role of stablecoins in U.S. consumer payments will only ever be a backend settlement tool to make credit cards more efficient. But I think they can replace cards altogether.
They can do that by following the same two-step path Visa used to achieve mainstream adoption: (1) lean into intrinsic advantages to solve real pain points for specific users, and (2) build or participate in an open network that aggregates fragmented usage into a scalable, interoperable system.
Step One: Start with niche use cases by leaning into intrinsic advantages.
Credit cards overcame the bootstrapping problem by focusing first on intrinsic features — convenience, incentives, and increased sales — that didn’t require a fully built network. Stablecoins can do the same by finding early traction in two niches:
(1) Comparative convenience: For consumers in jurisdictions with restricted USD access (e.g., LATAM), stablecoins offer uniquely convenient access to U.S. merchants, enabling previously impossible sales.
(2) Incentive-first use cases: Whitelabeled stablecoins can power rewards programs, with merchants offering discounts and perks funded by yield on the float. Consumers are often willing to tolerate onboarding friction for products they love if the rewards are strong and the value is likely to be reused (e.g., Starbucks Rewards, Taylor Swift fans, or Poshmark users).
Step Two: Aggregate fiefdoms into a full-blown network.
As in the early credit card era, leaning into niche use cases will lead to fragmentation — varied chains, issuers, user experiences, and standards around consumer protection. Over time, these fiefdoms will need to be connected through a neutral, interoperable network: a “Visa for stablecoins.”
Stablecoins won’t dethrone cards by competing head-on. They’ll get there by serving edge cases first, then stringing those edges together. This will aggregate the supply and demand necessary to solve the bootstrapping problem of a new payment method.
From a new consumer’s standpoint, joining the stablecoin world will eventually offer enough value that the one-time onboarding pain becomes worth it. At that point, stablecoins won’t be seen as an alternative to credit cards. They’ll be seen as the inevitable successor.
Read the full post on our blog.
Jake Chervinsky and Jesse Walden
Over the last decade, crypto founders have adopted a model in which value accrues to two separate instruments: tokens and equity. Tokens offer a new tool to grow networks bigger and faster than ever before, but only if they represent something users actually want to own. Unfortunately, regulatory pressure from a hostile SEC largely stopped founders from driving value to tokens, pushing them to focus on equity. It’s time for that to change.
The key innovation unlocked by tokens is self-sovereign ownership of digital property. Tokens uniquely enable holders to own and control their money, data, identity, and the onchain protocols and products they use. To maximize that potential, tokens should capture value that lives onchain — revenue and assets that are transparent, auditable, and directly owned and controlled by tokenholders alone.
Offchain value is different. Since tokenholders cannot directly own or control offchain revenue or assets, those should accrue to equity, not tokens. Founders may wish to share offchain value with tokenholders, but doing so is often inappropriate since companies that control offchain value typically have a fiduciary obligation to keep it for shareholders. If founders want to direct value to tokenholders, then that value must be onchain from the outset.
This basic distinction — tokens for onchain value, equity for offchain value — has been distorted by regulatory pressure since the very beginning of crypto. The old SEC’s overbroad views of securities law misaligned incentives between companies and tokenholders, and forced founders to rely on decentralized governance systems that were poorly suited to manage protocol development. Now, founders have a fresh opportunity to explore what tokens can do.
Read the full post on our blog.
Ideas and perspectives from the team
Daniel Barabander: Control Is a Spectrum
Many crypto founders think control is automatically a bad thing. But when it comes to legal compliance, we all should be asking ourselves two questions: Who has the control? And what exactly are they controlling?
Jesse Walden & Jack Longarzo : Investing in Project Eleven: Securing Crypto’s Post-Quantum Future
Imagine waking up in a decade to find your Bitcoin wallet drained. Not because of a hack, but because the math that once protected it has silently broken down. No alerts. No patch. Just quantum computing, finally here. Alright, stop imagining — because we’re investing in the team that’s protecting crypto’s future.
Daniel Barabander & Jack Longarzo: Fractal Protocols: Strategies for Defending Against Open Supply in Crypto
Stop us if you’ve heard this one before: a crypto app drafts on an existing protocol to bootstrap, then vertically integrates that supply, then gets blindsided by an app doing the same to them. In this piece, Jack and Daniel tell you how you can defend yourself from irrelevance.
Recent posts from the Variant team
Jack is pretty sure he’s right about decentralized training for LLMs:
Alana stoked controversy with her take on Robinhood’s new crypto products:
Jesse has a deep thread on two trends behind product-tokens—“the democratization of investing” and “‘live player’ founder worship”:
Disclaimer: All information contained herein is for general information purposes only. It does not constitute investment advice or a recommendation or solicitation to buy or sell any investment and should not be used in the evaluation of the merits of making any investment decision. It should not be relied upon for accounting, legal or tax advice or investment recommendations. You should consult your own advisers as to legal, business, tax, and other related matters concerning any investment. None of the opinions or positions provided herein are intended to be treated as legal advice or to create an attorney-client relationship. Certain information contained in here has been obtained from third-party sources, including from portfolio companies of funds managed by Variant. While taken from sources believed to be reliable, Variant has not independently verified such information. Any investments or portfolio companies mentioned, referred to, or described are not representative of all investments in vehicles managed by Variant, and there can be no assurance that the investments will be profitable or that other investments made in the future will have similar characteristics or results. A list of investments made by funds managed by Variant (excluding investments for which the issuer has not provided permission for Variant to disclose publicly as well as unannounced investments in publicly traded digital assets) is available at https://variant.fund/portfolio. Variant makes no representations about the enduring accuracy of the information or its appropriateness for a given situation. This post reflects the current opinions of the authors and is not made on behalf of Variant or its Clients and does not necessarily reflect the opinions of Variant, its General Partners, its affiliates, advisors or individuals associated with Variant. The opinions reflected herein are subject to change without being updated. All liability with respect to actions taken or not taken based on the contents of the information contained herein are hereby expressly disclaimed. The content of this post is provided "as is;" no representations are made that the content is error-free.
Share Dialog
Share Dialog
this is new insight into stable coins going mainstream
Discover how stablecoins could potentially dethrone credit cards as the primary payment method in America. In a detailed analysis by Daniel Barabander, the roadmap includes leveraging niche use cases and building interoperable networks to enhance convenience and user incentives. Additionally, insights from Jake Chervinsky and Jesse Walden illuminate the crucial distinctions between tokens and equity in a rapidly evolving crypto landscape. Dive into these transformative ideas by @variant.