Plasma: Everything, Everywhere, All at Once

Key Takeaways

• Stablecoin is one of the few sectors in the blockchain industry that have achieved product-market fit, and they are currently being adopted and used actively across the globe. At this opportune moment, one project that has captured the attention of the crypto community is Plasma Network, a blockchain purpose-built for stablecoins.
  

• Plasma is designing its network from the ground up to optimize for stablecoins. With its purpose-built blockchain architecture, Plasma delivers a user experience tailored to stablecoin use cases, offering features like the PlasmaBFT consensus, high scalability through the Reth client, custom gas mechanics, zero-fee USDT transfers, and confidential transactions.
  

• Although it has only been public for about six months, Plasma is actively building a stablecoin-focused ecosystem by collaborating not only with major stablecoin projects such as Ethena and USDT0, but also with fintech firms like Yellow Card.

Everything about stablecoins — issuance, legislation, and regulation — is undergoing major changes, everywhere in the world, all at once. At this optimal moment, a network purpose-built for stablecoins has emerged, and that network is Plasma.

1. A Perfect Moment for Stablecoins

1.1 Stablecoins: One of the Few Blockchain Services to Find PMF

Since the emergence of Bitcoin in 2008, countless blockchain networks have launched, each promoting different core values such as decentralization, security, scalability, censorship resistance, and transparency. On top of these networks, numerous services have been built, including DeFi, gaming, social, and DePIN, aiming to deliver value and user experiences unique to the blockchain.

But has blockchain perhaps been too ahead of its time? In day-to-day life, blockchain-based services are rarely used. Even as someone actively researching blockchain, I rarely use blockchain applications outside of investment purposes. This is because blockchain’s core strengths like censorship resistance and decentralization are still distant from the needs and values of modern life.

Even though decentralization which is arguably blockchain’s greatest differentiator has not become mainstream, a few blockchain-based assets and services have nevertheless achieved product-market fit. The two clearest examples are Bitcoin and stablecoins. The former is now increasingly viewed within traditional finance as a store of value and a hedge asset. The latter, meanwhile, is being adopted across the world for a variety of local reasons.

Source: DefiLlama

Interestingly, while Bitcoin’s price has recently been moving sideways, the stablecoin market is growing at a rapid pace. Comparing the on-chain DeFi TVL with the total stablecoin market capitalization reveals two noteworthy points.

First, since 2022, the market cap of stablecoins has consistently remained higher than DeFi TVL. This illustrates the sheer scale of the stablecoin market. Second, a recent decoupling trend has emerged. Historically, stablecoin market cap and DeFi TVL moved in tandem, but now, even as DeFi TVL is shrinking rapidly, the stablecoin market cap continues to grow significantly.

This trend suggests that the stablecoin market has found a product-market fit of its own, independent from the broader blockchain sector. This conclusion becomes even more convincing when we look at how stablecoins are perceived and used globally. What’s especially interesting is that different countries are adopting and using stablecoins for very different reasons. Let’s take a brief look at this next.

1.2 Africa and Latin America: Store of Value and Remittance

Africa and Latin America are leading regions in using dollar-pegged stablecoins as tools for storing value and sending remittances, driven by political and economic instability.

Source: Chainalysis

1.2.1 Africa

In Africa, the share of stablecoins in crypto transactions is significantly higher than that of Bitcoin, and retail-level stablecoin usage is growing rapidly. Unlike in developed countries, many people in Africa do not have access to bank accounts and lack basic remittance infrastructure and liquidity, which makes stablecoin-based transfers especially practical. Moreover, due to high inflation and currency depreciation, stablecoins are increasingly used as a store of value. However, one major drawback is the lack of clear regulation, with stablecoins largely existing in a legal grey area.

1.2.2 Latin America

Source: Chainalysis

Latin America shows similarly high retail adoption of stablecoins. As of 2024, 61.8 percent of Argentina's crypto transactions were in stablecoins, far exceeding the global average. The primary driver is the collapse of the Argentine peso, with inflation surpassing 140 percent in 2023.

As we will examine more closely in the case of Russia, stablecoins are also used in Latin America to bypass international sanctions. Venezuela is a notable example, where the state-owned oil company PDVSA reportedly began using USDT to conduct oil transactions in an attempt to circumvent U.S. sanctions.

Brazil is the most active country in Latin America when it comes to regulating stablecoins. In 2023, its central bank was granted oversight authority over crypto assets and stablecoins. The central bank governor also officially announced in October that Brazil aims to establish regulations for stablecoins and asset tokenization by 2025.

1.3 United States: Demand Engine for Treasuries and Next-Generation Financial Infrastructure

Source: Tether

The United States is at the center of the recent stablecoin boom and is one of the primary catalysts behind it. With the Trump administration in place, stablecoins are being promoted as one potential solution to address the national debt. As of 2024, Tether already holds $113 billion in U.S. Treasuries, making it the seventh-largest holder globally, surpassing many countries.

To support this strategic positioning, the U.S. is actively debating legislation related to stablecoins. The most prominent bill is the GENIUS Act.

1.3.1 GENIUS Act (Guiding and Establishing National Innovation for U.S. Stablecoins Act)

The GENIUS Act passed with bipartisan support in the Senate Banking Committee but recently failed to secure the 60 votes needed in a cloture vote on May 8. Opposition stemmed from Trump’s ties to crypto ventures like World Liberty Financial, as well as concerns over AML enforcement and oversight of foreign-issued stablecoins. A re-vote is currently being prepared.

Even though its passage remains uncertain, the GENIUS Act is significant as it would be the first federal stablecoin legislation in the U.S. The bill's current contents are outlined below and may be revised in future votes:

• 1:1 Reserve Requirement: Stablecoin issuers must hold reserves equivalent to the number of issued tokens, composed of U.S. dollars, short-term Treasuries, and cash.

• Federal and State Regulatory Framework: Issuers must obtain approval from either federal or state authorities, depending on the scale of issuance.

• Non-bank Issuer Eligibility: Non-bank entities can also issue stablecoins with federal approval.

• Consumer Protection and AML: Issuers must comply with consumer protection measures and AML regulations.

If passed, the GENIUS Act would allow not only existing stablecoin issuers but also banks, asset managers, and fintech firms to issue stablecoins, provided they meet the requirements. It would bring much-needed regulatory clarity to the industry.

1.3.2 Next-Generation Payment Systems

With the Trump administration leaning pro-crypto, payment companies have begun accelerating their integration of stablecoins into payment systems. Blockchain and stablecoins are seen as solutions to issues like slow settlements and high fees in cross-border payments.

• Payment Networks: Visa and Mastercard consider stablecoins a critical part of future payment infrastructure. Both companies have issued stablecoin-linked cards, implemented or piloted stablecoin-based settlement systems, enabled peer-to-peer remittances, and developed tokenization platforms for enterprise clients.

• Acquirers: Acquiring firms like Worldpay and Nuvei, along with PSPs like Stripe and Checkout.com, are supporting stablecoin-based payment and settlement services for merchants.

• Issuers: While traditional banks and card issuers have typically handled card issuance, crypto exchanges like Kraken, OKX, and Coinbase are now collaborating with Visa and Mastercard to issue cards that let users spend their crypto directly in the real world.

1.4 Russia: Sanctions Evasion

Today, most international remittances are conducted through SWIFT. SWIFT is not a network that actually transfers funds, but rather a standardized messaging system for global financial transactions. However, for various reasons, some countries may be restricted from using SWIFT, and Russia is a prime example.

Currently, Russia is partially banned from SWIFT. In March 2022, the EU excluded seven major Russian banks from SWIFT as part of its sanctions in response to Russia’s invasion of Ukraine. Because many of Russia’s key exports are energy resources such as natural gas, being excluded from the global payment network was a severe blow. In response, Russia has developed its own domestic messaging system called SPFS and has also begun using CIPS, a China-led payment system, to conduct trade with China, India, Iran, and others while bypassing SWIFT.

In this context, stablecoins can also be used as a geopolitical strategic asset to circumvent international sanctions. Russia has reportedly used cryptocurrencies, including USDT, in oil trades with China and India to evade Western financial sanctions. This is done by converting yuan or rupees into crypto, then exchanging that crypto into rubles. Considering that Russia’s annual oil trade is worth $192 billion, the potential scale of using stablecoins for trade is massive.

1.5 Everything, Everywhere, All at Once

Whatever the reasons may be, stablecoins are now being actively adopted and utilized all around the world. In other words, everything related to stablecoins — issuance, legislation, regulation, and usage — is undergoing massive changes everywhere, from North America, Asia, and Europe to Africa and Latin America, all at once.

At this perfect moment, one project that has captured the attention of the crypto community is Plasma, a network purpose-built for stablecoins.

2. Plasma: The Right Network at the Right Time

2.1 Plasma: A Purpose-Built Blockchain for Stablecoins

Source: Plasma

Stablecoins are one of the few sectors in the blockchain industry to have found product-market fit, yet ironically, there is still no blockchain network optimized specifically for stablecoin usage. Today, the vast majority of stablecoin supply is circulating on Ethereum and Tron.

Ethereum offers the highest level of security among smart contract chains, but it suffers from high transaction fees and limited scalability, making it less suitable for frequent, small-value transactions like remittances or payments. Tron is more scalable than Ethereum but still incurs considerable costs for handling high-frequency transactions and is known for its high level of centralization.

Source: Plasma

To solve these problems, Plasma is designing its network from the ground up to create a purpose-built blockchain optimized for stablecoins, especially USDT. At a perfect time with strong market demand, Plasma successfully raised $24M in seed and Series A funding, led by Framework and Bitfinex/USDT0.

Let’s take a look at the core design features that make Plasma an optimal network for stablecoin usage.

2.2 Key Feature 1: A User Experience Optimized for Stablecoins

2.2.1 Custom Gas Tokens

To achieve its goal of being optimized for stablecoins, Plasma must offer an exceptional user experience. Plasma allows users to pay transaction fees not only in its native token but also in whitelisted assets such as USDT or BTC. If a user pays fees with a non-native token, the Plasma network uses on-chain oracle data to convert the asset to the native token at market rates, which is then used as the transaction fee.

2.2.2 Zero Fees for USDT Transfers

Source: CryptoQuant

The Tron network currently hosts around $72B in USDT, nearly the same amount as on Ethereum. Interestingly, when comparing transaction fee revenue across layer-1 ecosystems over the past year, Tron accounted for $2.8B out of the total $5.8B — a dominant 48.3 percent, surpassing both Ethereum and Solana. An estimated 99 percent of Tron’s transactions are related to USDT transfers. This shows how much value USDT users are unknowingly contributing to the Tron network.

Source: Token Terminal

Plasma addresses this issue by making USDT transfer transactions on its network completely fee-free. To do this, it introduces a split block architecture, which separates the blockchain into two layers — one for fee-based transactions and the other for zero-fee transactions. These two block types are processed in parallel, allowing free transactions to coexist without degrading the performance of other transaction types.

Additionally, Plasma introduces an adaptive delay-based prioritization mechanism, where users can agree to slower processing times in exchange for zero fees or pay a fee for faster transaction processing.

2.2.3 Confidential Transactions

To enable blockchain to be used in real-world financial applications, user privacy must be protected. While transparency is often cited as a core feature of blockchain in other sectors, in finance, transparency can be a liability rather than a feature. Plasma is researching the introduction of shielded transactions, which would hide transaction histories, recipients, senders, and amounts to protect user privacy.

Since this is still in its early stages, very little information has been publicly released about confidential transactions. However, because Plasma must balance privacy with security and regulatory compliance, it may include selective disclosure features that allow transaction details to be revealed upon request by regulatory authorities. This would protect user privacy by default while still enabling legal and audit requirements to be met when necessary.

2.3 Key Feature 2: A Technical Architecture Optimized for Stablecoins

Source: Plasma

2.3.1 Bitcoin Sidechain

Plasma periodically submits state diffs (differences between network states) to the Bitcoin network so that Bitcoin can finalize the state of Plasma and provide Bitcoin-level censorship resistance. This allows SPV clients and other light clients that download Bitcoin block headers to verify Plasma’s state and history without trusting Plasma validators.

This design requires that correct state diffs are submitted to Bitcoin. Details have not yet been disclosed, but potential methods may include fraud proofs or validator consensus to ensure the validity of submitted state diffs.

2.3.2 PlasmaBFT

To support stablecoin usage, a high-performance network is essential, and Plasma adopts PlasmaBFT to achieve this. PlasmaBFT is based on Fast HotStuff, a consensus protocol built on BFT principles and adopted by other high-performance blockchains like Aptos and Monad.

Source: Decentralized Thoughts

The image above shows the shared structure of BFT-based protocols (BFT, PBFT, Tendermint, HotStuff). Known as the lock-commit pattern, it prevents conflicting decisions during the consensus process. In the lock phase, nodes "lock" on a proposed value to assert its uniqueness, and in the commit phase, the value becomes final once enough nodes lock on it.

PBFT, however, has scalability issues due to its O(n²) message complexity — in each phase, nodes must send messages to every other node.

1. Pre-Prepare: The leader sends a pre-prepare message to backup nodes.

2. Prepare: Backup nodes verify the message and broadcast a prepare message.

3. Commit: Nodes receive prepare messages and, if enough match, broadcast a commit message.

4. Reply: Nodes return the final result to the client.

HotStuff improves scalability using a leader-based communication structure and Quorum Certificates (QCs), cryptographic proofs created by collecting signatures from a quorum of nodes. This reduces message complexity to O(n).

1. Prepare: The leader proposes a block; backups verify and sign it, returning signatures.

2. Pre-Commit: The leader aggregates signatures into a QC and broadcasts it.

3. Commit: Backups verify the QC and send commit messages.

4. Decide: The leader collects commit messages into a commit QC and broadcasts it for finalization.

HotStuff’s key advantage is responsiveness. It progresses based on network speed without fixed timeouts. Tendermint, an improvement over PBFT, must wait for fixed timeouts during leader changes. While HotStuff requires one extra message round, it allows for faster consensus when a valid leader is in place.

PlasmaBFT follows the core design of HotStuff but uses only two stages for consensus instead of three:

1. Prepare: The leader proposes a block, backups verify and sign it → First QC is formed.

2. Pre-Commit: A second QC is formed by collecting responses based on the first QC.

3. Fast Commit: When the QCs of consecutive blocks are connected, the earlier block is confirmed.

Unlike HotStuff, PlasmaBFT introduces pipelining that allows parallel processing of multiple rounds. For example, in round v+2, commit for block v, pre-commit for block v+1, and prepare for block v+2 can be executed in parallel. This increases maximum throughput.

2.3.3 Execution Layer Based on Reth

Plasma’s execution layer is built on Reth, an Ethereum execution client developed by Paradigm. Unlike Geth, Erigon, or Nethermind, Reth is written in Rust, offering both memory safety and high performance.

Another unique feature of Reth is its modular architecture. Reth splits the full node into independent modules — P2P networking, database, EVM execution engine, transaction pool, and RPC server — each implemented as a separate library. This allows developers to selectively use or customize components and easily add new features.

Reth also supports efficient node synchronization using the staged sync model from the Erigon client. It divides the sync process into stages like header download, block body processing, transaction execution, and index creation, which can be processed in parallel to accelerate syncing.

In short, Reth provides an efficient and fully Ethereum-compatible execution environment. Developers in the Ethereum ecosystem can reuse existing code, making development easier. Given that most stablecoin usage revolves around DeFi and payments, this environment is highly suitable for stablecoin applications.

2.3.4 Bitcoin Bridge

Plasma is actively researching and developing a Bitcoin bridge solution. The Bitcoin bridge is not part of the initial mainnet but is planned for future upgrades.

The basic design involves Plasma validator nodes running Bitcoin clients to verify Bitcoin blocks and transactions. When users send BTC to a bridging address managed by the Plasma network, validators detect this and issue an equivalent amount of BTC on the Plasma network.

To redeem BTC, users burn their wrapped BTC on Plasma, and validators use threshold Schnorr signatures to collectively release the locked BTC on the Bitcoin network to the user.

This is a basic design. In the future, Plasma plans to incorporate advanced technologies such as BitVM, OP_CAT, and ZKPs as needed to improve security and decentralization.

2.4 Plasma Roadmap

Plasma will roll out its features in stages, rather than implementing everything at once.

• Phase 1 – Mainnet Beta: Launch of PlasmaBFT and Reth-based execution layer, onboarding key ecosystem players such as stablecoin issuers, on-ramps, liquidity providers, banking platforms, and fintechs

• Phase 2 – Bitcoin Bridge and Settlement: Introduction of Bitcoin bridge and sidechain mechanisms

• Phase 3 – Core Features: Deployment of key features like custom gas tokens, zero-fee USDT transfers, and confidential transactions

• Phase 4 – Native Tooling and Infrastructure: Launch of APIs, SDKs, and tooling optimized for stablecoin use

3. Ecosystem

Plasma has only been public for about half a year and has not yet launched its mainnet, so its ecosystem is still relatively small. However, the team is actively building it by onboarding major players one by one. The following participants have been publicly announced so far:

• Ethena: Ethena’s USDe is the largest decentralized stablecoin and is expected to onboard at the time of Plasma’s mainnet launch.

• Curve Finance: Curve is the protocol that pioneered the StableSwap AMM for efficient trading of similarly priced assets. It will be one of the essential DeFi protocols on the Plasma network, which will host multiple stablecoins, and is expected to onboard with the mainnet launch.

• BiLira: BiLira issues TRYB, a stablecoin pegged to the Turkish lira. TRYB will launch on the Plasma network, and Plasma USDT will be integrated into the crypto exchange operated by BiLira.

• Uranium Digital: Uranium Digital is a platform that facilitates efficient on-chain uranium trading and plans to launch a market on Plasma.

• Yellow Card: Yellow Card is the largest stablecoin infrastructure provider in Africa, enabling users to easily access and utilize stablecoins. It will use Plasma’s free USDT transfers to support peer-to-peer payments between merchants and users.

At this point, readers might wonder, “Even if stablecoins are gaining a lot of attention right now and Plasma offers strong features optimized for stablecoin use, does that really justify this much interest?” The reason why Plasma and its ecosystem are attracting so much attention is because of their connection to Tether and USDT0.

Plasma is backed by Bitfinex, which shares the same parent company as Tether, and has the support of Tether CEO Paolo Ardoino. At the recent Token2049 event in Dubai, Paolo Ardoino and Plasma founder Paul Faecks appeared together on a panel, indicating a close relationship between Tether and Plasma.

Source: Plasma

From an ecosystem perspective, the partnership with USDT0 gives Plasma significant potential. USDT0 is a cross-chain version of USDT sponsored by Tether and built on the LayerZero OFT standard. It allows Ethereum-based USDT to move freely across other networks. (For a detailed explanation, see “Tether USDT, Expanding its Stablecoin Empire Starting with USDT0”.) USDT0 will be available on the Plasma network from day one of the mainnet launch, and due to its OFT design, onboarding USDT0 from other networks to Plasma should be seamless and frictionless.

4. Final Thoughts

Source: Everything, Everywhere, All at Once

Just as Tron has reached its current scale and revenue largely thanks to USDT, the impact stablecoins can have on the blockchain ecosystem is enormous. Plasma is a blockchain network built by, for, and around stablecoins. Users on the Plasma network will not only be able to transfer stablecoins but also engage in trading, payments, yield farming, and a wide range of other stablecoin-based activities.

With high scalability enabled by PlasmaBFT and Reth, and features tailored for stablecoin usage, Plasma has the potential to build a powerful ecosystem through collaborations with Tether and other partners. In this sense, it resembles the “Everything Bagel” from Everything, Everywhere, All at Once — having everything needed for stablecoins. While the bagel in the movie symbolized nihilism and emptiness, Plasma could become the meaningful infrastructure that encompasses everything the stablecoin industry needs.