Circle and Stripe, along with many startups, are developing their own Layer 1 blockchain to increase control and integration strategy within the cryptocurrency ecosystem.
Owning a foundational blockchain allows stablecoin issuers to accelerate payment speed, improve interoperability, and comply with regulations more effectively, minimizing risks associated with external ecosystems.
MAIN CONTENT
Major companies like Circle, Stripe, and startups are developing proprietary blockchains for stablecoins.
Control and strategy are the main reasons for building a separate Layer 1.
Owning a foundational blockchain helps integrate legal compliance, accelerate payments, and reduce dependency risks.
Why do Circle, Stripe, and many startups choose to build their own blockchain?
Martín Burgherr, Chief Client Officer at crypto bank Sygnum, asserts: Building Layer 1 is the way for businesses to directly control and position their strategy in the cryptocurrency ecosystem.
Mr. Burgherr analyzes that the stablecoin economy heavily depends on payment speed, interoperability, and regulatory compliance. Therefore, owning a proprietary blockchain helps integrate these factors more effectively, from embedding compliance tools to direct forex machinery on the blockchain.
Currently, stablecoin issuers still rely on Ethereum, Tron, or other stablecoins for payments. This brings risks associated with the external fee market, changes in protocol governance, and technical bottlenecks.
Which startups and blockchain projects are developing their own chains for stablecoins and digital assets?
As of the update on August 17, startups Plasma and Stable have also raised funds to develop their own blockchain specifically for USDT. Meanwhile, Securitize collaborates with Ethena to build Converge and Ondo Finance announces plans to launch an internal chain from the beginning of the year.
Moreover, Dinari is developing a Layer 1 network based on Avalanche to support payment and resolve tokenized securities transactions, expanding the potential and applications of specialized blockchain.
"Owning a Layer 1 chain allows companies to directly integrate compliance tools and ensure stable transaction fees, which is a crucial factor in the economics of stablecoins."
Martin Burgherr, Chief Client Officer, Sygnum, 2024
What are the benefits of owning a proprietary blockchain for stablecoins?
Owning a separate blockchain allows stablecoin issuers to proactively control transactions, from processing speed to costs and regulatory compliance. This creates a competitive advantage compared to relying on other platforms like Ethereum or Tron.
In addition, building a separate Layer 1 helps stabilize transaction costs and minimize risks from governance decisions of third-party blockchains, contributing to an enhanced user experience and trust in the DeFi ecosystem.
Frequently Asked Questions
Why do companies need their own blockchain instead of using Ethereum or Tron?
A proprietary blockchain allows for direct control over the payment process, integrating legal compliance and reducing risks associated with technical factors, costs, or governance from third-party platforms.
What type of blockchain are Circle and Stripe developing?
Circle and Stripe are developing their own Layer 1 blockchain to enhance payment performance and integrate compliance mechanisms for stablecoins.
Which startups are prominent in building their own blockchains for stablecoins?
Plasma, Stable, Securitize collaborating with Ethena, Ondo Finance, and Dinari are pioneers in developing specialized blockchains for stablecoins and tokenized assets.
What is the most important benefit of owning a foundational blockchain?
Proactively controlling payment speed, interoperability, transaction costs, and legal compliance, thereby enhancing operational efficiency and reliability.
Does building a separate blockchain help reduce transaction costs?
Yes, by directly controlling transaction fees and avoiding fluctuations from the external fee market of third-party blockchains.
Source: https://tintucbitcoin.com/circle-stripe-phat-trien-blockchain-thanh-toan/
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