Stablecoin Track: The Next Trillion Market Capitalization Growth Point

Blockchain is essentially an extension of payment scenarios. Stablecoins not only play an important role in the cryptocurrency market but are also becoming increasingly significant in global payments and cross-border settlements. Currently, centralized stablecoins still account for over 90% of the market share, with USDT holding an absolute dominant position. Although the issuance of stablecoins has exceeded $150 billion, compared to the $20 trillion M1 reported by the Federal Reserve in 2024, the market capitalization of stablecoins only accounts for 0.75%. The application prospects of stablecoins in the payment field are broad. The launch of the Taproot Assets protocol indicates that stablecoins are expected to be widely used in high-frequency small payment scenarios, becoming a regular payment method.

1. Stablecoin: The Trillion Dollar Track of the Future

The stablecoin market is booming and is expected to become a trillion-dollar market in the future financial sector. Currently, the market capitalization of stablecoins has exceeded 160 billion USD, with a daily trading volume exceeding 100 billion USD. Countries are introducing relevant policies and regulations, and various institutions predict that stablecoins will usher in a new trillion-dollar market, with the main growth coming from global payment applications.

Stablecoins can be divided into two main categories: centralized and decentralized. Currently, centralized stablecoins dominate the market, with USDT and USDC issuing 114.46 billion and 34.15 billion USD respectively. Several large institutions are also entering the stablecoin market.

Although stablecoins play an important role in crypto trading and DeFi, the exploration of their integration with real-world businesses is still in the early stages. In the long run, the most promising application scenario for stablecoins is in the payment sector, especially cross-border payments. As regulations gradually become more standardized, the status of stablecoins in global payments will become increasingly important. In the future, stablecoins are expected to integrate with DeFi, giving rise to PayFi, achieving interoperability, programmability, and composability in payment scenarios, and forming a new financial paradigm and product experience.

2. Taproot Assets Protocol + Lightning Network: Global Payment Network Infrastructure

Currently, stablecoins are mainly circulating on the ETH and TRON networks, but transaction fees and confirmation times still need optimization. In contrast, the Lightning Network has advantages of faster speeds, lower costs, and high scalability.

Introduction to Lightning Network 2.1

The Lightning Network is the first mature layer two scaling solution for Bitcoin, developed independently by multiple teams. Its core is to establish bi-directional payment channels that enable off-chain transactions, interacting with the blockchain only during final settlement.

2.2 The Lightning Network Becomes the Best Infrastructure for Global Payments in Stablecoins

The Lightning Network theoretically has unlimited scalability. It has been operating for 9 years, built on the Bitcoin network, with over 57,000 nodes and a PoW consensus mechanism, ensuring high security. As of now, the Lightning Network capacity exceeds 5,000 Bitcoins, with more than 18,000 nodes and over 50,000 channels globally. By establishing bidirectional payment channels, it has achieved instant low-cost transactions and is widely adopted by global payment providers and merchants.

2.3 Taproot Assets Protocol Improves Lightning Network

The launch of the Taproot Assets protocol addresses the limitation of the Lightning Network, which only supports Bitcoin payments. This protocol allows for the issuance of assets on the Bitcoin network, including stablecoins corresponding to fiat currencies, and is fully compatible with the Lightning Network. This means that a large number of new assets, especially stablecoins, issued on the Bitcoin network will circulate on the Lightning Network in the future, further enhancing its global payment influence.

3. Taproot Assets Protocol Detailed Explanation

3.1 Comparison of UTXO Model and Account Model

The UTXO model is similar to a check system, naturally avoiding the double-spending problem and providing higher security guarantees. The Taproot Assets protocol adopts a one-time seal concept, ensuring that assets move with UTXOs and enhancing transaction security.

3.2 Taproot upgrade enables more complex functions

In 2021, the Taproot protocol upgrade brought simple smart contract functions to the Bitcoin network, such as multi-signature, enhancing security and privacy protection, and providing a solid foundation for institutional and B2B transactions.

3.3 Taproot Assets technical principles

The Taproot Assets protocol adopts a more efficient method of tagging assets on UTXOs, storing only the root hash of the script tree on-chain while keeping the scripts off-chain. This approach reduces the issues of increasing block size and accumulation of invalid data.

3.4 The relationship between Taproot Assets and the Lightning Network

Taproot Assets protocol assets can seamlessly enter the Lightning Network through TA channels. This allows assets issued on the Bitcoin main chain, especially stablecoins, to circulate within the Lightning Network.

3.5 User usage costs and centralized custody issues

Although the Taproot Assets protocol improves efficiency, users still need to store asset data locally, which increases the difficulty of use. Currently, most wallet services on the Lightning Network are custodial solutions, and in the future, a more decentralized approach will be needed to manage large assets.

4. Self-Custody Solutions

Decentralized solutions for the circulation of TA assets on the Lightning Network have emerged in the market. For example, the cloud hosting solution proposed by LnFi and the decentralized browser plugin wallet developed by the BitTap team provide users with a safer and more decentralized way to manage their assets.

5. Summary

Stablecoins are expanding from cryptocurrency trading into the global payments sector. The Lightning Network has become an ideal payment infrastructure thanks to its low fees and fast transactions, while the Taproot Assets protocol further enhances its functionality. Emerging decentralized wallet solutions address centralization issues and improve the global payment system.

Compared to traditional payment systems, the payment infrastructure composed of TA protocol + Lightning Network is comparable in terms of immediacy, ensuring user asset autonomy through trustless design and self-custody solutions, supporting unrestricted conditional transfers, significantly enhancing payment freedom.