The more stablecoins I see, the more conviction I get behind my original thesis of "if you don't participate in all/most, don't participate in any" - bar very high conviction in a specific version of the future. The idea here is simple; stablecoins are exceptionally risky business. Besides the fact that the architectures of stablecoins (not dollar backed coins, like the ones launched by Gemini and Paxos) are very likely to prove fickle and in the end faulty - Preston Byrne lays down some great arguments here, and that the value capture mechanisms that connect the stablecoin with the governance token (which is what the investor would hold) are oftentimes murky, the stablecoin market is highly competitive with very low barriers to entry. Since early-May, when the first conversation around stablecoins was had with me on board, the number of stablecoins launched or to-be-launched has more than doubled (check the stablecoinindex.com from Multicoin's Miles Snider for a comprehensive list of those projects). Effectively then, with every new project launched - or even announced, the future value of all others, bar the winner perhaps, is eroded. And I believe that this will be a winner takes most market.
Let's take the current de-facto market leader, Tether, for example. Many alternative models have come to challenge for Tether's market share in the year past, yet none are succeeding thus far. What is truly astounding here, is that Tether hasn't been trying very hard to keep their image polished, with a fully recognized audit still pending and many scathing op-eds and even outright accusations about their model being thrown left and right. Then again, when you totally dominate a market (as evidenced by the charts below), why would you care? What I suspect Tether really has going for it, is first mover advantage and with that, "eyeballs".
What the dot com era taught the world - drawing a parallel to yesterday's analogy of the current market state being similar to the post dot com bubble era - was that attention can be converted into revenue and thus claiming attention real estate first in an emerging industry/market, can really make or break your business. You could very well argue, that Tether's monopoly is one implosion away from deconstruction. Nevertheless, as time passes, we cannot discount the fact that the first mover amasses more resources, gets smarter, and prepares for the next stage of evolution. Without perfect information about what happens behind closed doors, we cannot discount how the Tether camp is evolving in structuring the dollar backed coin's offering in response to emerging competition.
However, for the sake of the example, let's examine some scenarios in which Tether is dethroned and who might take its place. Without having extensively scrutinized the subject, there are two scenarios that jump most prominently to mind; (i) Tether implodes after a reveal that only 10% of its value is backed by actual dollars locked up in a vault and (ii) a wall of institutional money (tens of billions) enters the market and flocks to the most transparent and regulated stablecoin, in which case Tether's market cap remaining at $2-$3B will deem it sidelined as a market follower. In both cases, it is highly likely that after a brief period of reshuffling, there will be a new stablecoin king that will devour over 95% of the market, with the main reason being attention and the second most important being interoperability between exchanges and other services, where a holder can move their stablecoin to store or spend. I suspect both of those reasons power the dollar as the global reserve currency and gold as the most widely accepted store of value. Probably the same reasons why in traditional markets, we don't deal with USD #1, USD #2 all the way down to USD #99; rather just USD.
With that in mind, if I were to make a prediction on who would claim the top spot in case either of the two scenarios above came to pass, I would be inclined to say that it would be the institutionally backed, fully regulated alternative. The reason why is that if we assume that as the market matures, more institutions join the dance, those very institutions would much rather entrust their capital to such a product, rather than an unproven technological solution. As those institutions then would populate the new ecosystem, the rest of the market would follow fairly quickly - due to positive signalling, crowning a new king and leaving the rest in the dust.
In any case, the announcement of Gemini Dollar and Paxos Standard is a positive development and a sign that the crypto market is making decisive steps to maturity.