But apparently, that lesson hasn’t fully landed. Because Iran has also been holding USDT, and Tether just froze $344 million of it.

Two kinds of stablecoins

The stablecoin market is now worth over $320 billion. USDT (Tether) alone commands 59% of that. Add USDC (Circle) and you’re looking at roughly 85% of the entire market in the hands of two centralized issuers.

Most people using these have no idea what “centralized” actually means in practice. Here’s what it means: Tether and Circle have a kill switch. Written directly into the smart contract. They can freeze your tokens in your wallet at any time, on any blockchain where that token exists.

USDT and USDC are not censorship-resistant assets. Circle is a US-regulated company, subject to US financial oversight. Tether is registered in the British Virgin Islands and is not subject to US regulation.

Yet both freeze accounts on US government instruction. That’s worth sitting with for a moment. A company with no legal obligation to comply with US authorities does so anyway. That tells you something about the reach of the system.

The chain matters. So does the asset.

The freeze on Iranian USDT happened on Tron, a centralized blockchain, which compounds the problem: centralized chain plus centralized asset equals zero protection.

But here’s what’s important to understand: even on a genuinely decentralized blockchain like Ethereum, a centralized asset can still be frozen. Decentralization of the network is not enough. You need decentralization at both levels, the chain and the asset you’re holding on it.

Most people in crypto don’t think about this. They assume that being on a decentralized blockchain means their assets are safe from interference. They’re not, if those assets are USDT or USDC.

The selective nature of freezing

On April 23, 2026, Tether froze $344 million in USDT across two Tron wallets, the largest single stablecoin freeze in the company’s history, executed at the request of US authorities under Operation Economic Fury. US officials confirmed the wallets had material links to the Iranian regime, including transactions with Iranian exchanges and addresses connected to the Central Bank of Iran.

This is not a one-off. Tether has now frozen a cumulative $4.4 billion in assets, cooperating with over 340 agencies across 65 countries. Freezing accounts on government instruction is standard practice.

It is also selective practice. Iran, Russia, North Korea, Libya, Venezuela and Cuba have all had assets frozen by foreign governments. Israel, by contrast, despite facing repeated accusations of rights abuses and illegal wars, has had no overseas assets frozen by any country. The common thread is straightforward: it’s about who is and isn’t aligned with US interests.

Tether and USDC operate as instruments of this same system, one by legal obligation, one apparently by choice. If you’re comfortable with that, fine. But you should be clear-eyed about what you’re using.

The decentralized alternatives

There are stablecoins that cannot be frozen at the contract level. Liquity Protocol’s BOLD is a fully decentralized example, backed by ETH and decentralized ETH derivatives.

Curve’s crvUSD and Aave’s GHO are semi-decentralized: they can’t be frozen directly, but their collateral sometimes includes centralized assets like USDC or wBTC (a BTC derivative “wrapped” and put on the Ethereum network by a centralized custodian).

If a government wanted to attack semi-decentralized stablecoins, they’d have to freeze the collateral backing those assets, affecting every single user simultaneously, not just a targeted account. That’s a blunt, costly instrument. Much harder to use selectively.

The real problem with decentralized (and semi-decentralized) stablecoins isn’t the mechanism. It’s accessible liquidity at scale. Market cap and liquidity are not the same thing. Several decentralized stablecoins have billions in supply. But the relevant question is whether you can execute a $50M or $100M transaction with low slippage, on demand.

That depth exists for USDT and USDC. It doesn’t yet exist for the decentralized alternatives, where supply is dispersed across yield strategies, wallets and pools in ways that make large transactions slow and expensive. Until that changes, USDT and USDC will dominate for serious institutional use.

What about Bitcoin?

Some people’s response to all of this is: just use Bitcoin. That’s not a real answer. There are no stablecoins on Bitcoin. People want dollar-denominated stability on-chain for payments, for DeFi, for commerce. Bitcoin doesn’t solve that. What does solve it, over time, is building liquidity and trust in genuinely decentralized stablecoins.

What we’re actually building

If 85% of the stablecoin market can be frozen by two private companies acting on US government instruction, we haven’t built an alternative financial system. We’ve built a faster, cheaper version of the existing one, with the same censorship risks and the same selective enforcement baked in.

Decentralization is meaningless if the assets moving across decentralized networks are themselves centralized.

Iran made a mistake using USDT. But millions of ordinary users are making the same structural choice without even knowing it. Know what type of stablecoin you’re using. Know who controls the kill switch. And if that matters to you, support the protocols that are actually building the alternative.

Why is that a problem? 🤔

Market Breakdown

First, let’s examine the stablecoin market today (May 2025).

Here is a table of the top 5 stablecoins by total value locked (TVL), including market share and classification of their current level of decentralization:

A centralized stablecoin is issued and controlled by a single company or entity. It is typically backed 1:1 by fiat reserves (e.g. US Dollars) or liquid assets. The issuer can freeze accounts, blacklist addresses, or adjust supply. Tether (USDT) and Circle (USDC) dominate, controlling over 90% of the entire stablecoin market.

A semi-decentralized stablecoin is governed by a decentralized protocol (e.g. a DAO) but typically relies on centralized collateral (like USDC) or off-chain infrastructure. Control is shared but not fully trustless. A company or government cannot block or confiscate a semi-decentralized stablecoin, but can attack the underlying collateral. This is not easily done, however.

A decentralized stablecoin is fully governed by smart contracts and/or DAOs, with no reliance on fiat, banks, or centralized actors. Collateral is entirely decentralized and onchain (e.g. ETH), and no single entity can control the system. This is the holy grail for crypto users aligned with cypherpunk values (privacy, freedom, self-sovereignty, censorship-resistant).

The top two stablecoins are centralized, representing over 90% of the entire stablecoin market cap. When you classify all existing stablecoins by their level of decentralization, it’s clear that centralized stablecoins dominate:

Decentralized stablecoins make up approximately 0.04% of the current market, more or less a rounding error. 😢 Decentralized and semi-decentralized stablecoins combined make up less than 4% of the total market.

Worse, the dominance of centralized stablecoins will likely increase as more institutions embrace crypto. What does this mean for users?

The Problem with Centralized Stablecoins

At its core, crypto is about building a more equitable, inclusive financial system outside the control of centralized entities like governments and large corporations.

Unfortunately, centralized stablecoins are replicating traditional finance on blockchains with all their inherent problems, making crypto more fragile. Major issues include:

Centralization of Control. Centralized stablecoins like USDC and USDT are issued and controlled by centralized companies, easily influenced by governments (similar to banks). Issuers can freeze, blacklist, or confiscate funds at their discretion, often in response to government requests. Banks and other traditional financial institutions typically hold the collateral reserves backing centralized stablecoins. This reintroduces the same trust assumptions crypto was meant to solve.

Regulatory Leverage. Governments can pressure or regulate these issuers, indirectly controlling onchain assets or activity. Both Tether and Circle have blacklisted addresses holding their stablecoins. This sets a precedent for censorship. You can only use their stablecoins with permission, much like money in a bank today.

Lack of Transparency. Collateral backing centralized stablecoin is often opaque. Audits can take time and can be manipulated. Again, we are back to trusting centralized entities and rating agencies to represent their financial health accurately.

With decentralized and semi-decentralized stablecoins, collateral is onchain and fully transparent. You do not have to trust a 3rd party, you can check the chain yourself!

Decentralized and semi-decentralized stablecoins cannot be frozen, and governments have limited or no leverage over decentralized entities (DAOs) that control them.

Why Censorship Resistance Matters

Decentralized and semi-decentralized stablecoins offer meaningful advantages over centralized options, especially for users who value censorship-resistance and trust minimization.

Why is it essential to have a censorship-resistant stablecoin?

‼️ Governments cannot seize decentralized or semi-decentralized stablecoins without your consent.

What does that mean in practice? I wrote about the Nelson family here:

In April 2020, the FBI informed Carl Nelson, Amy's husband and a former real estate transaction manager for Amazon, that he was under investigation for allegedly favoring certain developers in exchange for kickbacks.

Despite no criminal charges being filed against him, the federal government, working closely with Amazon, seized approximately $892,000 from the Nelsons' bank accounts!

The Nelson family had their financial assets frozen by the US government without being convicted of any crime! They had to fight Amazon.com in court without access to their bank accounts. They eventually won their court case, but it ruined them financially.

💡 The government could NOT have seized the Nelson family assets if held onchain with a decentralized or semi-decentralized stablecoin.  

On the other hand, if the Nelson family had their dollars onchain using a centralized stablecoin, the US government could have frozen those assets. The government would have simply petitioned the issuer of the stablecoin, e.g. Circle (USDC) or Tether (USDT), to blacklist the onchain accounts linked to the Nelson family.

Censorship-resistant Stablecoins

Almost all censorship-resistant stablecoins are on the Ethereum blockchain. Over half of all existing stablecoins are on Ethereum:

Tron, the second largest chain for stablecoins, is highly centralized. It’s grown because of its extremely low transaction costs, making it popular in developing regions. But the entire chain is controlled by a minimal number of validators under the Tron Foundation, managed by one person: Justin Sun. Any crypto asset on Tron should be considered centralized and at risk.

🚨 If you value censorship-resistance, use stablecoins on the Ethereum blockchain.

So Ethereum should be your preferred blockchain. But which stablecoins are right for you?

The market cap of decentralized and semi-decentralized stablecoins is relatively low, but users have many interesting options.

DAI (USDS)

More or less the OG of DeFi stablecoins. DAI is a semi-decentralized stablecoin created by the MakerDAO protocol, designed to maintain a soft peg to the U.S. Dollar through overcollateralization with crypto assets like ETH and centralized assets like USDC. DAI’s reliance on USDC and other centralized crypto assets is why it’s considered semi-decentralized and not fully decentralized.

Unlike centralized stablecoins, DAI is governed by a decentralized autonomous organization (DAO), where MKR token holders vote on risk parameters, collateral types, and system upgrades.

In early 2024, the MakerDAO community began a major transformation known as the Endgame Plan, part of which involved the rebranding of DAI to USDS (Sky Money).

LUSD

My favorite decentralized stablecoin! Liquity USD (LUSD) is a decentralized, USD-pegged stablecoin issued by the Liquity Protocol on Ethereum.

LUSD is fully backed by ETH and offers interest-free borrowing with a minimum collateral ratio of 110%. LUSD can be redeemed at face value for ETH at any time, ensuring a price floor and maintaining its peg.

The protocol is non-custodial, immutable, and governance-free, meaning its rules cannot be changed without a hard fork. Users can open a "Trove" by depositing ETH as collateral and borrowing LUSD. The system includes a Stability Pool, where LUSD holders can deposit their tokens to earn rewards and help maintain system stability during liquidations.

crvUSD

crvUSD is Curve Finance’s native stablecoin, launched in May 2023. Curve is a major player in stablecoins.

I would classify crvUSD as semi-decentralized, as much of the collateral backing it is centralized. For example, wBTC is a wrapped (synthetic) version of BTC on Ethereum, maintained by a centralized entity (see below). Most of crvUSD is minted using wBTC.

What sets crvUSD apart is its innovative Lending-Liquidating AMM Algorithm (LLAMMA), which enables soft, continuous liquidations. Instead of triggering full liquidations when collateral value drops, LLAMMA gradually rebalances the collateral into crvUSD, reducing the risk of sudden losses for borrowers and minimizing bad debt for the protocol.

Governments could not censor crvUSD directly, but could potentially go after the centralized, onchain assets used as collateral to mint crvUSD. This is not easy, however, and would cause significant disruptions across all of DeFi.

Others

There are many other decentralized or semi-decentralized stablecoins. A partial list can be found here:

Conclusion

Stablecoins are fast becoming crypto’s killer use case, with exponential growth. The most popular stablecoins are USDT and USDC, which are highly centralized. As more institutions embrace crypto, the dominance of centralized stablecoins will likely increase.

Centralized stablecoins offer convenience, greater liquidity, and more integrations within DeFi protocols. But users are at the mercy of the stablecoin issuer. Like holding cash in a bank, third parties can freeze or seize centralized stablecoins.

Using decentralized or semi-decentralized stablecoins can dramatically increase the freedom and control you have over your assets onchain. Solid options include LUSD, USDS, and crvUSD. There are many others. Ethereum is the only chain at scale for decentralized and semi-decentralized stablecoins.

All stablecoins are not equal! Understand the benefits and risks when choosing a stablecoin to avoid unpleasant surprises.

• The growth of stablecoins

• Benefits and use cases

• Types of stablecoins

• Why Ethereum dominates

Exponential Growth

A stablecoin is a cryptocurrency designed to maintain a stable value by pegging its price to an external reference, such as a fiat currency (like the US Dollar), a commodity (such as gold), or a basket of assets. The main goal of stablecoins is to reduce the price volatility commonly seen in other cryptocurrencies, making them ideal for everyday transactions.

While stablecoins have existed since 2014, they did not gain popularity until MakerDAO launched DAI, the first stablecoin on the Ethereum blockchain, in 2017. Stablecoin usage took off in 2020 with the rise of DeFi (decentralized finance), allowing investors to trade and book profits in USD. Stablecoin growth has accelerated over the past 18 months, becoming the primary onchain transactional currency.

‼️ Bitcoin is not used in any substantial way as a transactional currency. Stablecoins, mainly on Ethereum, dominate this segment.

Crypto detractors like Nicholas Taleb have noticed, calling Bitcoin a “technological tulip.” And while this is true for Bitcoin, it’s not true for stablecoins.

Unlike Bitcoin, stablecoins do not sit idle in crypto wallets. In 2024, total stablecoin transfer volume reached $27.6 trillion, surpassing the combined payment volume of Visa and Mastercard by almost 8%!

Today, the total market cap of stablecoins is $238 billion, an increase of 83% from January 2024. To put that into perspective, dollar-denominated stablecoins now represent 1% of the M2 money supply.

Tether (USDT) and Circle (USDC), the largest stablecoin issuers, collectively hold over $204 billion in U.S. Treasuries, making them the 14th-largest holder globally. Together, they hold more US Treasuries than entire nations, including Norway and Brazil.

With an improving regulatory environment, growth forecasts remain extremely bullish. According to David Pakman of CoinFund, the total stablecoin market cap could grow to $1 trillion by the end of 2025. Citibank believes stablecoin supply will hit almost $4 trillion by 2030.

Stablecoin issuers could soon surpass offshore banks to become major players in the $13 trillion Eurodollar market.

Benefits and Use Cases

Corporations use stablecoins to save time, reduce costs, and improve settlement efficiency. I wrote about my own experience incorporating stablecoins into my consulting business here.

Stripe began supporting USDC payouts in 2023 and strengthened this initiative with its $1.1 billion acquisition of Bridge in 2024.

Revolut uses USDC and USDT to help businesses pay international suppliers without incurring traditional foreign exchange fees of 1-3%. This translates to $10,000–$30,000 savings on a $1 million transaction.

Remittance providers like MoneyGram are also adopting stablecoins to avoid high banking costs and slow processing times. This is especially critical in regions where transfer fees remain prohibitively high: Southeast Asia, Africa, and Latin America.

Users love stablecoins for their convenience. They are a natural extension of fiat, a user-friendly way to transact onchain. What makes more sense: paying for a cup of coffee with BTC, or using a dollar stablecoin like USDC?

Stablecoin Classification

There are four primary types of stablecoins:

1. Fiat-Backed Stablecoins

Fiat-backed stablecoins are by far the most common. They are pegged to traditional currencies like the U.S. Dollar or Euro and backed by cash and/or cash-equivalent reserves.

Examples include USDT (Tether) and USDC (Circle), which account for 88% of the entire $238 billion stablecoin market today.

Fiat-backed stablecoins are relatively straightforward: you exchange your fiat dollars or Euros for crypto equivalents. They are especially interesting for businesses, offering them a fast, low-cost way to move money across borders.

The major downside of fiat-backed stablecoins is that they are highly centralized. Users must trust issuers like Tether and Circle to remain solvent and redeem their stablecoins for fiat. Those same issuers can blacklist wallets, preventing you from transacting with your stablecoins.

2. RWA Stablecoins

RWA stablecoins are backed by real-world assets (RWA) such as gold, commodities, or financial instruments like U.S. Treasuries.

💡 Fiat-backed stablecoins are a subset of RWA stablecoins, but because of their large market share, we tend to break them out into their own, separate category.

BUIDL, BlackRock’s first tokenized fund issued on a public blockchain, is a popular example of an RWA stablecoin. The fund provides exposure to US dollar yields by holding highly liquid, short-term assets and distributing dividends on-chain.

Paxos Gold is another example. Each PAXG token is backed by exactly one fine troy ounce of physical gold (London Good Delivery standard). It’s regulated by the New York State Department of Financial Services (NYDFS).

3. Crypto-Backed Stablecoins

Crypto-backed stablecoins are also called overcollateralized stablecoins because users must lock capital to “mint” these assets.

Because these stablecoins typically use volatile assets as collateral (ETH, BTC, etc.), they must be over-collateralized to maintain a 1:1 peg. The process of minting crypto-backed stablecoins resembles the following:

Liquidations help crypto-backed stablecoins keep their peg. If the value of the collateralized asset used to mint the stablecoin falls below a predetermined threshold, the user is liquidated. All or part of their collateral is sold to cover the debt (plus penalties).

Crypto-backed stablecoins like DAI (now USDS), LUSD, crvUSD, and GHO are more decentralized than fiat-backed stablecoins. Their collateral is fully transparent onchain.

Because they are over-collateralized, crypto-backed stablecoins do not scale easily. They often require regular maintenance, so user engagement is key. If you mint a crypto-backed stablecoin, you must closely monitor the health of your collateralized assets to avoid liquidation.

However, you don’t need to mint a crypto-backed stablecoin to use it. You can swap other assets for these tokens and buy them on the secondary market. In that case, you no longer carry liquidation risk. However, you still carry depeg risk for the stablecoin, should the system become unstable.

4. Algorithmic Stablecoins

These stablecoins use automated mechanisms to manage supply and demand to maintain a stable value, without being overcollateralized or backed by physical assets.

While interesting, they have proven risky. The collapse of Terra (UST) in 2022 was a high-profile example. Algorithmic stablecoins were an attempt to avoid the downside of overcollateralization.

🚨 Algorithmic stablecoins are inherently fragile and have a poor track record, especially during stress scenarios. Many have failed or collapsed due to death spirals or insufficient demand.

FRAX was an example of an algorithmic stablecoin, but they have moved to more RWA backing. Ampleforth (AMPL) is another example. Ampleforth aims for a price of $1 (in 2019 USD), adjusted for inflation. AMPL has been very volatile. It has frequently traded well above or below its peg, especially in bull or bear markets.

Ethereum: Stablecoin Market Leader

Ethereum is the market leader for stablecoins with over 50% market share:

Ethereum is the most decentralized smart contract blockchain, making it attractive for businesses. It's also the primary home of DeFi, a major market for stablecoins, and the place where most experimentation takes place. Few decentralized stablecoins exist outside of Ethereum.

Tron, the second-largest blockchain for stablecoins, is highly centralized, allowing it to process transactions quickly and at a fraction of the cost compared to Ethereum. The downside is that you lose the primary advantage of blockchains: decentralization, which ensures credible neutrality and censorship resistance.

Bitcoin’s base layer does not natively support smart contracts or token standards that allow for the direct issuance of stablecoins. However, stablecoins have been implemented on Bitcoin through advanced layers and sidechains that extend its functionality. These secondary layers are more centralized and remain unproven, which is why Bitcoin remains a niche player for stablecoins.

However, I’m always baffled when someone claims crypto has no utility. Jamie Dimon, CEO of JPMorgan, for example:

"I've always been deeply opposed to crypto, bitcoin, etc... The only true use case for it is criminals, drug traffickers, money launderers, [and] tax avoidance... If I was the government, I'd close it down."

I use crypto almost every day. I’m not a drug trafficker or money launderer, and I pay my taxes. 😊 Crypto adds real value to my life:

• I manage my consulting business with crypto: invoice clients, pay suppliers, and more

• I earn interest on my Dollar and Euro deposits using decentralized applications like Aave

• My primary debit card is linked to a Euro crypto account

• I make international money transfers in seconds for pennies

• I pay my corporate taxes with crypto (sadly, the IRS does not yet support crypto)

And perhaps most importantly,

• Thanks to cryptography, I have complete control of my onchain assets

I don’t need a bank’s approval to open an account, earn interest, or move funds. A rogue government cannot seize my assets. None of that would be possible without self-custody, arguably crypto’s greatest utility.

‼️ Self-custody is the foundation for all crypto use cases.

Corporate & Government Overreach

We rely on financial institutions to hold our savings and investments, assuming we have ownership and legal protections. But in emergencies, when you give up control of your assets, you are ultimately at the mercy of the state to “do the right thing.” That is not always the case.

🇨🇾 Cyprus and the Bank Bail-In

In 2013, Cyprus's banking sector was heavily exposed to Greek government bonds. When Greece defaulted on its debt, Cypriot banks suffered massive losses, and many became insolvent overnight. Bank investors gambled and lost.

Unfortunately, instead of bank shareholders or international lenders covering those losses, the government devised an innovative alternative: using customer deposits to save the country’s failing financial system. This became known as the Cyprus bank bail-in, the first of its kind in the EU.

If you had more than €100,000 in a Cypriot bank, the government seized a significant portion of your deposits. In some cases, account holders lost everything above the insured threshold, with no warning and no legal recourse.

🇱🇧 Lebanon’s Dollar Ponzi

Lebanon ran a Ponzi-like financial system for years. Banks offered high interest rates to attract foreign currency deposits, mainly US Dollars. These deposits financed government deficits and kept the Lebanese pound (LBP) closely pegged to the US Dollar.

It worked so long as fresh foreign capital flowed into the country. However, in 2019, massive public debt and government incompetence caused everything to crash. The LBP lost 98% of its value against the Dollar.

Lebanon imposed capital controls to compensate for shortfalls, froze bank accounts, and forcibly exchanged bank deposits from USD to LBP at highly unfavorable rates (not market rates). As a result, the life savings of many Lebanese were wiped out overnight.

🇺🇸 Civil Asset Forfeiture

In the USA, law enforcement agencies use civil asset forfeiture to seize billions of dollars in assets each year from people merely suspected of a crime.

Much of that money goes back to law enforcement agencies, increasing their budgets. Incentives are perverse.

The Nelson family is a typical case of government agencies conspiring with a large corporation — in this case, Amazon — to weaponize civil asset forfeiture.

In April 2020, the FBI informed Carl Nelson, Amy's husband and a former real estate transaction manager for Amazon, that he was under investigation for allegedly favoring certain developers in exchange for kickbacks.

Despite no criminal charges being filed against him, the federal government, working closely with Amazon, seized approximately $892,000 from the Nelsons' bank accounts!

The Nelsons eventually prevailed in court after a long and costly battle. But it was a pyrrhic victory. As Amy noted:

Amazon still won. They destroyed my family. We lost our home, careers & reputations. The DOJ still holds onto hundreds of thousands of dollars seized from my husband & his businesses.

Stablecoins, not Bitcoin

Crypto was in its infancy in 2013, just as Cyprus banks were imploding. Bitcoin launched in 2009, Ethereum in 2015. Depositors were entirely at the mercy of the banks and the state.

When the Lebanese Pound crashed six years later, crypto was already a viable option. However, most depositors, then and now, are reluctant to hold BTC as a replacement for bank deposits. They want Dollars or Euros. They want asset protection without volatility.

Stablecoins are the ideal solution. You can hold Dollar or Euro stablecoins safely on Ethereum. To earn interest, you can move those assets into decentralized applications like Aave or Morpho. You retain complete control over your money, even when deployed into onchain applications to earn yield.

The US government could not have seized that money if the Nelson family kept at least part of their savings in stablecoins. With crypto self-custody, the legal burden shifts to the government, preventing civil asset forfeiture without due process. While this plays out, you will have access to your stablecoins. You can pay bills, fund your legal defense.

Stablecoins are no longer niche solutions. They are viable alternatives to holding Dollars or Euros in a traditional bank. As of April 2025, their total market cap was over $230 billion. Stablecoins are often used in global financial transactions. In 2024, total stablecoin transaction volume surpassed Visa and Mastercard payment volume.

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How to Self-Custody Crypto

Buying ETH or stablecoins like USDC or USDT and keeping them on an exchange like Coinbase is not self-custody. Coinbase controls your assets. You have replaced one centralized entity — your bank — with another.

Worse, crypto exchanges like Coinbase, Kraken, or Binance often exist in a legal gray area. Many reside in offshore jurisdictions that offer little legal recourse for loss of funds. Traditional banks typically provide some form of depositor insurance.

🚨 Crypto exchanges give users the illusion of greater safety when holding cryptocurrencies, but the opposite is often true.

However, until you learn how to manage your assets onchain safely and securely, I would still recommend reputable, centralized services like Coinbase to secure your crypto. Education is key!

Self-custody Options

There are two excellent ways to self-custody funds onchain, and I use them both:

1. A hardware wallet like Trezor, coupled with a browser wallet like Rabby. Metamask is another browser-based wallet option, but Rabby is much more user-friendly, especially for beginners.

2. A multi-sig smart account using a proven solution like Safe. Safe secures over $100 billion in crypto assets on Ethereum and EVM (Ethereum Virtual Machine) blockchains.

1. Hardware Wallets

Hardware wallets, when used correctly, are extremely safe. However, you must, at a minimum:

• Buy the hardware wallet from a trusted source, ideally the original manufacturer

• Protect your seed phrase

• Use a PIN code

• Understand how hardware wallets work to avoid social engineering scams

• Have extremely good opsec (operational security practices)

This can all be quite intimidating to new users. Mistakes are costly!

It’s better to start slowly with self-custody. Only move a small percentage of your crypto to your hardware wallet. Over time, you can increase the amounts as you gain more confidence.

2. Safe Smart Accounts

More advanced users should consider using a Safe smart account. Safe uses a multi-sig (short for multi-signature) configuration to secure your crypto. In practice, you need multiple wallet accounts to approve (sign) each transaction before it executes onchain.

The diagram above shows a 2/3 multi-sig smart account with three individuals. Two approvals are required to execute each transaction. In the example above, Alice and Bob approved (signed) the transaction, so it executes.

You can set up your own 2/3 multi-sig in which you control all of the wallet accounts, ideally using three different hardware wallets. Each transaction would require approval using two separate hardware wallets.

It sounds complex, but it’s quite straightforward and dramatically improves security. Consider a corporate bank account where two people, e.g., the CEO and CFO, must approve large expenditures. A crypto multi-sig is similar.

With a Safe smart account and a 2/3 configuration, a hacker must simultaneously compromise two of your hardware wallets to access your funds—a very high hurdle.

Digital Property Rights

Onchain self-custody is the foundation for financial freedom. However, Crypto is more than just finance.

Decentralized blockchain applications bring greater freedom, privacy, and censorship resistance to many other areas. Government overreach, after all, is not just limited to finance.

• Identity. Ethereum brings digital property rights to identity management primarily through self-sovereign, cryptographic ownership of onchain identifiers. ENS, for example, maps human-readable names to onchain wallet addresses. It can serve as your onchain passport, email, and website address.

• Content. Onchain solutions like Fileverse allow users to publish, own, and control digital content directly onchain (or anchored to it), without relying on centralized platforms.

• Communications. Messaging platforms like XMPT enable wallet-to-wallet encrypted communication. Social media platforms like Lens and Farcaster connect users while avoiding government or corporate censorship and control.

Your Financial Firewall

Crypto self-custody can safeguard your life savings during a banking crisis. It can prevent government authorities from seizing your funds without due process. It ensures corporations can’t prioritize their profits over your life savings.

Investing in crypto does not just mean Bitcoin. Stablecoins allow you to hold crypto Dollars or Euros with far less volatility.

But sovereignty comes with responsibility. Self-custody isn’t plug-and-play. It requires knowledge, patience, and practice.

Crypto has real use cases: decentralized finance, identity management, content creation, communications, and more. It starts with proper self-custody, the foundation for everything onchain.

This confusion is understandable. The name cryptocurrency implies that every token is trying to be a currency — a replacement for the dollar or Euro. But that’s not actually true.

In fact, most crypto tokens are not trying to be money at all!

Yes, some tokens — like Bitcoin — are explicitly designed to be digital money. But that’s the exception, not the rule. Many tokens play entirely different roles: they power infrastructure, govern applications, or simply reflect community memes. To understand why we have so many cryptocurrencies, we must look beyond Bitcoin and examine how crypto tokens are used in practice.

How to Classify Crypto Tokens

In 2017, investor John Pfeffer proposed a useful classification of crypto tokens in An (Institutional) Investor’s Take on Cryptoassets. He identified three primary categories:

1. Network backbone / Virtual Machine (e.g., Ethereum)

2. Distributed applications (Dapps)

3. Money, further divided into:
   a. Payments
   b. Monetary store of value

To his list, I’ll add a fourth category that has become increasingly important:

4. Memecoins

Note: this classification applies to fungible tokens. Non-fungible tokens, or NFTs, emerged later with the ERC-721 standard on Ethereum and will be covered in a future article.

Let’s go through each category — and see why money is just one piece of the puzzle.

1. Network Backbone / Virtual Machine

This category is foundational but often overlooked or misunderstood. Ethereum is the flagship virtual machine, but other examples include Solana, Near Protocol, and Cosmos.

These blockchains are not currencies — they are programmable platforms. They serve as general-purpose infrastructure, enabling users to deploy smart contracts and build decentralized applications.

Think of Ethereum as an operating system, a decentralized world computer. It’s not an “app” — it’s the platform all apps run on.

For example, over the past five years, decentralized finance (DeFi) has grown into a global industry with over 90 billion USD in onchain assets, mostly on Ethereum. Thousands of applications that power DeFi share Ethereum’s composability, interoperability, global access, trustless execution, transparency, and more.

Ethereum’s token ETH plays a critical role in powering the Ethereum Virtual Machine (EVM):

• Users pay “gas” in ETH to execute transactions.

• Validators stake ETH to secure the network.

• The token aligns incentives and prevents spam or abuse.

The SOL token plays a similar role on Solana, the ATOM token on Cosmos, etc.

Bitcoin, by contrast, lacks the ability to run smart contracts and has limited programmability, which is why DeFi barely exists on that network today.

2. Distributed Applications (Dapps)

If base-layer chains are the operating system, dapps are the apps. They’re what most users interact with onchain: lending platforms, decentralized exchanges, prediction markets, games, and more.

A few well-known examples of apps on Ethereum or EVM chains include:

• Aave. The most popular borrow/lend platform, with over 17 billion USD in deposits. Aave is a replacement for your traditional bank. Want to earn interest on your dollar stablecoins or use ETH as collateral for a dollar-denominated loan? You can do it in seconds, permissionlessly, on Aave.

• CowSwap. My go-to application to buy or sell crypto. No need to trust a centralized exchange and pay high fees. Just connect your wallet and trade.

• Polymarket. Polymarket is a decentralized prediction market platform built on the Polygon blockchain (EVM compatible, using the same runtime environment as Ethereum). It enables users to trade on the outcomes of real-world events, including politics, sports, economics, etc.

A dapp will often have its own native token, primarily used for:

• Governance (e.g., voting on proposals)

• Incentives (e.g., staking for yield)

• Access (e.g., fee discounts or better loan terms)

• Rewards (e.g., earned income paid to token holders)

For example, I stake my AAVE tokens in their safety module to earn additional yield, paid in AAVE. I help secure the application by assuming risk: up to 30% of my staked AAVE tokens can be used to cover shortfalls in an emergency.

Native tokens are not currencies in the traditional sense. They're utility tokens or governance tokens — more like stock options or voting shares than digital cash. Value accrues based on perceived value, often linked to future cash flows (dividends, airdrops), similar to equity in traditional finance.

Decentralized communities (DAOs) coordinate and secure a dapp’s open-source software with native tokens. Native tokens help align community interests, fund development, and keep systems running—not replace your local currency.

3. Money

Now we come to the one category where tokens are trying to be money.

Pfeffer rightly distinguished between two types of money within the crypto space:

• Payments – e.g., using crypto to buy coffee or send remittances.

• Monetary store of value – holding crypto as a long-term investment.

Bitcoin is the clear standout in this category. BTC aims to be both a payment platform and a store of value, but it has only partially succeeded.

• ✅ It’s widely held as a store of value (digital gold), especially by early adopters and institutions.

• ❌ But it has largely failed as a payment system: slow, expensive, and volatile.

Instead, stablecoins have emerged as the dominant tool for payments in crypto.
Stablecoins are tokens typically pegged to fiat currencies (e.g., USDC, USDT), and they now settle trillions in onchain volume. Most stablecoins exist on Ethereum, not Bitcoin.

Stablecoins have become the killer use case of crypto, although few outside of crypto are aware of their growing popularity. In 2024, the annual stablecoin transfer volume surpassed the combined volume of Visa and Mastercard by over 7.68%. Total stablecoin supply reached 1% of the total U.S. dollar supply!

Note: I manage my own business onchain, primarily with stablecoins like EURe (a EUR-denominated stablecoin) and USDC. You can read more about the applications I use to invoice clients and manage accounting here.

👉 Stablecoins on public blockchains, primarily on Ethereum, are the future of global payments, not BTC.

There are now hundreds of stablecoins, although just two—USDT (Tether) and USDC—account for 88% of the total stablecoin market cap (April 2025).

If Ethereum is so dominant as a payments platform — and as a world computer supporting thousands of decentralized apps — is the ETH token also a store of value, similar to BTC? 🤔

That will likely depend on the ultimate utility of ETH. BTC’s value comes from its first-mover advantage, its perceived rarity, and the religious fervor of its holders. Case in point:

Ethereum will need to prove, over time, that it can power a future global financial system and confirm its status as the most reliable, most used, smart contract platform for decentralized applications.

4. Memecoins

Memecoins are a class of crypto tokens that derive their value not from utility or infrastructure, but from internet culture, viral humor, and speculation. Think of Dogecoin, PEPE, TRUMP, or my personal favorite, Pudge Penguins (PENGU) — coins with little or no intrinsic value but enormous followings.

They often begin as jokes, but memecoins can grow into surprisingly valuable assets purely because enough people decide they want to own them. Most, of course, are totally worthless. In a way, they’re a reflection of market psychology: value created through collective belief, FOMO, and meme propagation.

When crypto detractors dismiss crypto as a joke, memecoins are often used as evidence to prove their point. But despite their lack of fundamentals, memecoins can serve several indirect purposes:

• They act as onboarding ramps for new users to crypto.

• They showcase the power of decentralized communities.

• And sometimes, they raise serious questions about what gives money value in the first place.

Solana has emerged as the primary blockchain for memecoins, one of the few segments in which Ethereum is not the market leader.

Pump.Fun, a memecoin launchpad on Solana, created over 51,000 new crypto tokens in a single day in November 2024! That same month, Pump.Fun generated 93 million USD in revenue, before dropping by 95% as users’ interest and attention waned.

While they’re often dismissed as unserious, memecoins remind us that financial systems have always relied on social consensus. In crypto, that consensus just moves faster.

Mapping Crypto Tokens by Function

If we put it all together, we have the following categorization:

Virtual machines like Ethereum form the decentralized network backbone of crypto, on top of which developers are building new financial primitives. Dapps like Aave (banking) and CowSwap (trading) run on those virtual machines. Money can be used for both payments (primarily stablecoins) and long-term value storage. And finally, we have memecoins, the monetization of culture, the celebration of (virtual) uselessness.

Rethinking Crypto Tokens

Crypto often feels overwhelming from the outside — like a chaotic sea of coins all competing to be the next global currency. But that perception misses the point:

👉 Most crypto tokens are not trying to be money!

They’re not all chasing Bitcoin’s dream. Instead, as we have shown, they serve a variety of roles: powering decentralized infrastructure, governing applications, representing memes, or simulating dollars onchain.

Tokens are a primitive — a flexible, composable building block that can represent value, rules, identity, or culture. They are the fuel, equity, and sometimes the product of crypto networks.

Understanding this helps explain why there are so many of them — and why simply asking “What is this token worth?” is less useful than asking “What is this token for?”

The answer is rarely “to replace the dollar as a global currency.”

I use stablecoins: crypto tokens pegged to the US dollar or Euro, running on Ethereum or Ethereum-aligned chains like Base, Gnosis Chain, or Arbitrum.

Stablecoins, what Stripe calls “room-temperature superconductors for financial services,” are fast becoming crypto’s dominant use case.

Faster, cheaper, widely available, and censorship-resistant. What’s not to love?

Practical Crypto for My Business

Which stablecoins do I use in my business? There are hundreds of possible stablecoins, each with slightly different characteristics: some are decentralized, some are yield-bearing, some backed by “Real World Assets” (RWAs) such as US treasuries, etc.

DefiLlama is a great resource to monitor stablecoin usage across all major blockchains:

For my EU-based business, I primarily use the following:

• EURe, a MiCA-compliant, EUR-denominated stablecoin from Monerium. I invoice in Euros, and most of my business expenses are paid in EUR. I needed a widely accepted stablecoin linked to the Euro. EURe was the perfect choice.

• USDC from Circle, USD-based, the second largest stablecoin by market cap, and the most used in decentralized finance (DeFi) applications onchain.

• USDT from Tether. Much maligned, very centralized, but by far the market leader, so highly liquid. Tether is often preferred by freelancers, especially those based outside of the USA.

• crvUSD. A more decentralized, dollar-based stablecoin, created by Curve. Curve is a swap/lend platform and a major enabler of stablecoins across Ethereum DeFi.

I use stablecoins to do just about everything for my business. I only move to fiat when forced. Primary use cases include:

• Invoicing clients. More and more clients pay in crypto. Accepting stablecoins is especially beneficial for freelancers. You simply replace your bank account details on your invoice with your wallet account address. You will never again have to wait “3-5 business days” for payments to reach your bank or pay onerous fees just to accept an “international wire.” And you never have to ask if the funds were sent, as it’s all onchain.

• Paying suppliers. When you manage a small business, you often work with freelancers. Stablecoin transfer fees are pennies, regardless of whether you are sending 500 USD or 5 billion USD. Transaction times are measured in seconds.

• Daily expenses. My onchain account is linked to a Visa debit card through Gnosis Pay. With my Gnosis Pay card, I can pay for software subscriptions, flights, hotels, restaurants, etc. While more of a hybrid solution (crypto + Visa), I have complete control of the onchain funds used with my Visa debit card, so no bank can freeze or block my account.

• Earning yield on cash deposits. Ethereum-based applications like Aave, Fluid, Curve, and Morpho are great ways to earn interest income on your stablecoins. Aave today has over 19 billion USD in crypto deposits, comparable to a large bank!

• Off-ramping to my corporate bank using Monerium. I can send stablecoins (converted fiat) to my business bank account with just a few clicks.

• Tracking Profit/Loss. Financial and tax accounting is crucial, especially when operating onchain. I use rotki, a privacy-enhanced, accounting and analytics tool. Rotki helps track and categorize all of my onchain transactions.

Banks are slower, fees are higher, and of course I’m alway at risk of having company funds frozen.

My corporate bank treats any transaction over a few thousand Euros as criminal until I can “prove” innocence. I often need to show invoices, financial statements, and business contracts to access my own funds!

Banks are not there to help but to monitor and control. Governments have privatized mass surveillance through the banking industry. But now we have other options.

With crypto, I have easy access to global contractors—videographers in Latvia, content writers in Africa, and front-end developers in Vietnam— who are happy to accept stablecoins for their work.

Bitcoin is not for Payments

Bitcoin gets all the hype but has very little practical use. BTC, “digital gold,” has value for wealth preservation, but who uses gold to manage daily business operations?

People looking for practical ways to use crypto often start by researching BTC because that’s what they see everywhere in the media. Bitcoin was the first cryptocurrency and is still the largest by market cap. So it must be the most useful for your business, right?

No. And the data clearly shows how insignificant BTC has become as a practical payment solution. Transactions over the Bitcoin network remain flat or falling. You can buy and hold Bitcoin, but how does that help you manage your growing business?

Stablecoins dominate global crypto payments, dwarfing BTC volume. According to Chainalysis, stablecoins accounted for over two-thirds of the trillions of dollars in cryptocurrency transactions recorded in recent months. A report by Coinbase noted that in 2023, stablecoins settled approximately $10.8 trillion in transactions, with $2.3 trillion attributed to organic activities such as payments and cross-border remittances.

Why are stablecoins exploding while BTC volumes remain flat or falling? Convenience! When I negotiate with clients or suppliers, I do it in USD or EUR. The fact we’ll settle onchain is a secondary issue.

On the other hand, introducing BTC into business discussions adds unnecessary friction. Major issues include:

• Price volatility, especially when there is a large time gap between price negotiations and final payment. Who wants that risk?

• Accounting challenges. My tax accountant is fine with stablecoins. He can process transactions easily (e.g., 1 EURe = 1 EUR). But Bitcoin transfers require complex P/L calculations, which are a mess. This takes extra time and adds admin costs.

• Complex cash forecasting. With stablecoins, you never have to worry about cash in the bank. With BTC, you often need to hedge your positions. Or sell, forcing you to use a centralized exchange, adding additional costs.

• Suppliers just don’t want BTC! They want dollars or Euros. Freelancers are typically familiar with stablecoins; many already have EVM-enabled crypto wallets. Blockchains are just a faster, cheaper way to process payments.

Challenges with Stablecoins

Cheaper, faster, with infinite options. So why aren’t more people, especially small businesses, rushing to use stablecoins? Unfortunately, there are still a number of issues that slow mass adoption, including:

1. Ignorance

2. Poor UX

3. Lack of regulatory clarity

4. The need to self-custody

Most people just don’t understand how prevalent stablecoins have become, especially in developing regions where banks are egregious in charging fees and harassing users.

Neobanks like Wise and Revolut are also an option, but transfer times are not necessarily instantaneous, international wires can be denied or put on hold, and users must KYC, making it a privacy nightmare.

Onboarding into crypto can also be challenging, especially if you are unfamiliar with the infinite number of blockchains, wallets, and onchain applications. With decentralized finance, customer support is non-existent, which can be a problem for new users.

Regulations are also unclear, even contradictory, and vary by region. Governments view stablecoins as a threat to monetary sovereignty. Blockchains hinder the state’s insatiable need to monitor and control its citizens. Fortunately, the massive increase in stablecoin usage is forcing more governments to accept them as a viable payment option, albeit begrudgingly.

When you eliminate the bank, you reduce time, costs, and friction. But you also become responsible for securing your own assets, something that is not trivial, especially for novices. Self-custody is hard, and mistakes can be catastrophic.

Centralized services are ready to help users manage their crypto. Exchanges like Coinbase, Binance, and Kraken, or payment services like Stripe and PayPal, are quite happy to facilitate stablecoin transactions for their users for a hefty fee. Sadly, this just moves control back to large financial institutions. Things change just enough to stay the same…

Stablecoin Market Cap to $1 Trillion in 2026?

As I write this in April 2025, financial markets are reeling from Trump tariffs, but stablecoin adoption remains up only:

I believe we’re 18 months away from stablecoins reaching a total market cap of $1 trillion. More businesses will embrace stablecoins to reduce costs and expand market reach; more consumers will adopt stablecoins for cross-border payments and money transfers. New entrants like BlackRock with their BUIDL fund will accelerate growth.

Stablecoins are crypto’s killer use case, but you won’t find stablecoins on Bitcoin. Ethereum and EVM chains dominate the stablecoin market.

The sooner we move beyond Bitcoin, the faster we’ll embrace practical crypto solutions on Ethereum and other smart-contract-enabled blockchains. And see the real benefits of decentralized finance.