If there is a business: users put their money with you, you invest it to earn a 4-5% return, and you keep all the profits without sharing a penny with the users. You can make hundreds of billions of dollars a year.

How long do you think this business can last? This is not a hypothetical; this is the USDT in your hands.

CZ gave the answer last night: the era of making money while lying down is coming to an end.

| Tether's Business Model

Tether's profit in 2024 reportedly reaches hundreds of billions, which is more profitable than many publicly listed companies.

The business model is like this: you deposit 1 USD to Tether → it issues 1 USDT to you → then it uses your money to buy US government bonds → you hold USDT with no interest, and Tether takes all the profits.

This is the 1.0 model of stablecoins: simple and brutal, winner takes all.

I never thought about "where my interest went" before, until I started paying attention to DeFi and realized this problem.

So many people want to share the cake.

Stablecoin 1.5: started offering yields, but liquidity is an issue

CZ specifically praised Ethena's USDe during an AMA — this is "Stablecoin 1.5."

The biggest change: it started sharing yields with users.

It sounds great, but the problem is — liquidity is poor.

Not all exchanges support USDe; if you want to trade, you might need to convert to USDT first, which causes slippage, cross-chain transfer hassles, and many small exchanges don't support it at all.

This is the awkwardness of 1.5: yields are offered, but liquidity is lacking.

The ideal of Stablecoin 2.0: the trinity

CZ clearly said: "A stablecoin that offers good yields and can be traded on most exchanges sounds simple, but it's very hard to achieve."

Yield + liquidity + compliance — the trinity.

The main difficulty is convincing many exchanges to list the coin, which requires branding, compliance, and technical integration; also, ensuring the sustainability of the yield source without resorting to Ponzi schemes. Compliance has become easier now, but the threshold remains.

But the key point is, the regulatory environment is changing. Previously, regulators would come knocking when stablecoins were created; now, governments are researching "how to regulate stablecoins properly."

The US has the GENIUS Act in progress, and regulators in other countries are "no longer super hostile to stablecoins."

This is a huge signal.

Back in 2018, many said "Bitcoin will be banned by the government." Now, the US is discussing Bitcoin as a strategic reserve.

The same applies to stablecoins: from "you can't do it" to "you can do it, as long as it's compliant," this is a qualitative change.

| Will Tether be eliminated?

No one knows, but I do know one thing: the excess profits brought by monopoly will definitely attract competitors.

Tether earning hundreds of billions a year shows that this market is very lucrative.

CZ's judgment is: network effects will eventually come into play, and users will gradually gravitate toward the most attractive options.

My understanding is: Tether won't suddenly die, but its market share will be gradually taken away.

Because no matter how strong the network effect is, it can't withstand one fact: users are awakening.

| Finally

CZ said: "The market cap of cryptocurrencies can still grow by several orders of magnitude."

If that's true, then the stablecoin market will also grow by several orders of magnitude, meaning more players will enter. How much can Tether hold? How much can 2.0 stablecoins take away?

But one thing is certain: the era of making money while lying down is ending.

Users are starting to ask: "Why isn't my interest from the money I deposit being paid to me?"

Once this question is asked, there's no going back.

The stablecoin war 2.0 has just begun.