Source: Blockworks; Compiled by Wuzhu, Golden Finance
In the book "The Innovator's Dilemma," Clayton Christensen proposed the concept of disruptive innovation—products that initially appear to be cheap imitations but ultimately rewrite the rules of an entire industry.
These products typically start in low-end markets or entirely new markets that are overlooked by existing companies because they either lack sufficient profit or do not seem to have strategic importance.
But this is a very good starting point: "Disruptive technologies are initially favored by the customer segments with the lowest profit margins in the market," Christensen explained.
These customers often desire to adopt a product that initially performs poorly on traditional performance metrics but is cheaper, simpler, and more accessible.
Christensen cited Toyota as an example, where the company's initial target in the U.S. market was the budget-conscious customer segment that was overlooked by the Big Three automakers.
In the words of Christensen, traditional automakers focus on larger, faster, and more feature-rich cars, which "creates a vacuum beneath them," and Toyota filled this vacuum with the slower, smaller, and less equipped Corona. This car was launched in 1965 at a price of just $2,000.
Today, Toyota is the second largest automaker in the United States, with a starting price of $115,850 for its Lexus LX 600 luxury SUV.
Toyota leveraged the Corona to enter the U.S. market, and then steadily climbed up the value chain, which corroborates Christensen's argument: the best way to reach the top is to start from the bottom.
Stablecoins may also follow a similar path.
Christensen's disruptors start in niche markets, while stablecoins begin in emerging markets.
For American citizens with bank deposits, stablecoins are essentially a subpar dollar - they lack the insurance of the Federal Deposit Insurance Corporation (FDIC), have not undergone proper auditing, are not integrated into the ACH or SWIFT systems, and (despite the name) are not always redeemable for 1 dollar.
However, for people outside the United States, they are a more advanced form of the dollar - unlike the 100 dollar bill, you don't need to hide them, they won't be torn or soiled, and you don't have to exchange them face to face with someone.
This has made the US dollar stablecoins very popular in countries like Argentina—it's said that one in five Argentinians uses them daily—although very few people in the US can say what they are.
Of course, Argentina is not the only place where stablecoins are used—stablecoins are popular among DeFi traders, individuals who cannot pass KYC checks, immigrants sending remittances back home, employers paying cross-border freelancers, and savers fleeing their country's hyperinflationary currency.
These stablecoins, as clients of existing banks, do not generate enough profits to attract them, so initially, stablecoins are not as important as the currencies issued by banks.
There was a time when people were so eager for digital dollars that they seemed not to care whether Tether's USDT was fully backed.
Since Circle provided a regulated alternative to USDT, Tether itself also seems to be playing by the rules, and the situation has greatly improved for some stablecoins, which even offer yields.
But is this innovation really disruptive?
The Christensen Institute has a test consisting of six parts to determine whether an innovation is disruptive:
Is its target customer non-consumers or those who are being overserved by existing products from current suppliers in the market?
Yes—DeFi traders and emerging market savers do not need FDIC-backed US bank deposits (a full US bank account would make them "over-serviced"), but they do want digital dollars.
Based on historical performance metrics, is this product inferior to the existing products of current suppliers?
Yes - stablecoins have deviated from the peg of 1 dollar, falling to zero (Luna/UST), the cost of entering and exiting is high, and they may be frozen and unable to be reclaimed.
Is this innovation easier to use, more convenient, or more affordable than the existing products of current suppliers?
Yes—sending stablecoins is easier than sending bank deposits, more convenient for many people, and also more affordable for some.
Does this product have technological drivers that can push it into the high-end market and enable continuous improvement?
Yes - blockchain!
Does this technology combine with innovative business models for its sustainable development?
Maybe? Tether might be the most profitable company in history when calculated per employee, but if U.S. regulators allow stablecoins to pay interest, issuing stablecoins may not bring any profit at all.
Do existing suppliers have the incentive to ignore new innovations and have they not felt threatened from the beginning?
No. Existing suppliers seem to be vigilant about the threats and are aware of the opportunities within.
"Almost always, when low-end disruption occurs, industry leaders actually have the motivation to flee rather than compete with you," Christensen wrote. "This is why low-end disruption is such an important tool for creating new growth businesses: competitors do not want to compete with you; they will walk away."
Stablecoins may be a rare exception: existing providers have not given up on this low-cost innovation, but seem to be competing to chase it.
In recent weeks, payment giants Visa, MasterCard, and Stripe have all announced the launch of new stablecoins; BlackRock's BUIDL fund (which seems to be a yield-bearing stablecoin) is rapidly attracting assets; the CEO of Bank of America stated that they are likely to issue stablecoins once regulators allow it.
This may be because financial executives have all read "The Innovator's Dilemma."
It may also be because stablecoin issuance is very easy.
Christensen defines disruptive innovation as company-driven - startups use low-end footholds to capture mainstream markets before established companies take them seriously.
Stablecoins might be the same: the Circle payment network to Circle could be like Lexus to Toyota.
However, Circle's competitors are not as dull and sluggish as Toyota, so contrary to Christensen's theory, early innovators in stablecoins could very well be "swept away" by the "heavens."
Regardless, the final result may be the same: A recent report from Citigroup predicts that by 2030, the asset management scale of stablecoins could reach $3.7 trillion, mainly due to the adoption by institutional investors.
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Stablecoins are disruptive. Who will be the disruptor?
Source: Blockworks; Compiled by Wuzhu, Golden Finance
In the book "The Innovator's Dilemma," Clayton Christensen proposed the concept of disruptive innovation—products that initially appear to be cheap imitations but ultimately rewrite the rules of an entire industry.
These products typically start in low-end markets or entirely new markets that are overlooked by existing companies because they either lack sufficient profit or do not seem to have strategic importance.
But this is a very good starting point: "Disruptive technologies are initially favored by the customer segments with the lowest profit margins in the market," Christensen explained.
These customers often desire to adopt a product that initially performs poorly on traditional performance metrics but is cheaper, simpler, and more accessible.
Christensen cited Toyota as an example, where the company's initial target in the U.S. market was the budget-conscious customer segment that was overlooked by the Big Three automakers.
In the words of Christensen, traditional automakers focus on larger, faster, and more feature-rich cars, which "creates a vacuum beneath them," and Toyota filled this vacuum with the slower, smaller, and less equipped Corona. This car was launched in 1965 at a price of just $2,000.
Today, Toyota is the second largest automaker in the United States, with a starting price of $115,850 for its Lexus LX 600 luxury SUV.
Toyota leveraged the Corona to enter the U.S. market, and then steadily climbed up the value chain, which corroborates Christensen's argument: the best way to reach the top is to start from the bottom.
Stablecoins may also follow a similar path.
Christensen's disruptors start in niche markets, while stablecoins begin in emerging markets.
For American citizens with bank deposits, stablecoins are essentially a subpar dollar - they lack the insurance of the Federal Deposit Insurance Corporation (FDIC), have not undergone proper auditing, are not integrated into the ACH or SWIFT systems, and (despite the name) are not always redeemable for 1 dollar.
However, for people outside the United States, they are a more advanced form of the dollar - unlike the 100 dollar bill, you don't need to hide them, they won't be torn or soiled, and you don't have to exchange them face to face with someone.
This has made the US dollar stablecoins very popular in countries like Argentina—it's said that one in five Argentinians uses them daily—although very few people in the US can say what they are.
Of course, Argentina is not the only place where stablecoins are used—stablecoins are popular among DeFi traders, individuals who cannot pass KYC checks, immigrants sending remittances back home, employers paying cross-border freelancers, and savers fleeing their country's hyperinflationary currency.
These stablecoins, as clients of existing banks, do not generate enough profits to attract them, so initially, stablecoins are not as important as the currencies issued by banks.
There was a time when people were so eager for digital dollars that they seemed not to care whether Tether's USDT was fully backed.
Since Circle provided a regulated alternative to USDT, Tether itself also seems to be playing by the rules, and the situation has greatly improved for some stablecoins, which even offer yields.
But is this innovation really disruptive?
The Christensen Institute has a test consisting of six parts to determine whether an innovation is disruptive:
Is its target customer non-consumers or those who are being overserved by existing products from current suppliers in the market?
Yes—DeFi traders and emerging market savers do not need FDIC-backed US bank deposits (a full US bank account would make them "over-serviced"), but they do want digital dollars.
Based on historical performance metrics, is this product inferior to the existing products of current suppliers?
Yes - stablecoins have deviated from the peg of 1 dollar, falling to zero (Luna/UST), the cost of entering and exiting is high, and they may be frozen and unable to be reclaimed.
Is this innovation easier to use, more convenient, or more affordable than the existing products of current suppliers?
Yes—sending stablecoins is easier than sending bank deposits, more convenient for many people, and also more affordable for some.
Does this product have technological drivers that can push it into the high-end market and enable continuous improvement?
Yes - blockchain!
Does this technology combine with innovative business models for its sustainable development?
Maybe? Tether might be the most profitable company in history when calculated per employee, but if U.S. regulators allow stablecoins to pay interest, issuing stablecoins may not bring any profit at all.
Do existing suppliers have the incentive to ignore new innovations and have they not felt threatened from the beginning?
No. Existing suppliers seem to be vigilant about the threats and are aware of the opportunities within.
"Almost always, when low-end disruption occurs, industry leaders actually have the motivation to flee rather than compete with you," Christensen wrote. "This is why low-end disruption is such an important tool for creating new growth businesses: competitors do not want to compete with you; they will walk away."
Stablecoins may be a rare exception: existing providers have not given up on this low-cost innovation, but seem to be competing to chase it.
In recent weeks, payment giants Visa, MasterCard, and Stripe have all announced the launch of new stablecoins; BlackRock's BUIDL fund (which seems to be a yield-bearing stablecoin) is rapidly attracting assets; the CEO of Bank of America stated that they are likely to issue stablecoins once regulators allow it.
This may be because financial executives have all read "The Innovator's Dilemma."
It may also be because stablecoin issuance is very easy.
Christensen defines disruptive innovation as company-driven - startups use low-end footholds to capture mainstream markets before established companies take them seriously.
Stablecoins might be the same: the Circle payment network to Circle could be like Lexus to Toyota.
However, Circle's competitors are not as dull and sluggish as Toyota, so contrary to Christensen's theory, early innovators in stablecoins could very well be "swept away" by the "heavens."
Regardless, the final result may be the same: A recent report from Citigroup predicts that by 2030, the asset management scale of stablecoins could reach $3.7 trillion, mainly due to the adoption by institutional investors.