1000 Stablecoin Banks: Who Will Emerge as the Ultimate Winner?
Original Article Title: A World of 1000 Stablecoin Neobanks
Original Article Author: @proofofnathan
Translation: Peggy, BlockBeats
Editor's Note: The emergence of stablecoin neobanks is exploding, and the industry seems to be entering a golden age. However, the real key lies in one thing: reliability.
Sleek applications, cashback, and perks cannot compensate for the fragility of infrastructure. When payments fail, cards are declined, or deposits and withdrawals are blocked, users will not hesitate to return to traditional banks or centralized exchanges.
We don't need 1000 "usually operational" stablecoin banks; we only need one that is "always online." Only by building robust, redundant, and 100% operational infrastructure can stablecoin banks truly replace traditional banks and the industry secure its future.
The following is the original article:
The explosion of stablecoin neobanks has begun. New players emerge every day.
Does this mean our industry is about to sweep the globe? Can we defeat traditional banks with a more cost-effective, efficient, and digital infrastructure? Or will we, like all previous "hype cycles," eventually collapse due to overexpansion?
This article will explore a world with 1000 stablecoin neobanks, what it means for users, and its potential impact on stablecoins.
Why Now?
First, let's ask a simple question, why now?
Why do we see so many new banks appearing right now? Is it because stablecoin neobanks are the latest trend?
While this is indeed a fact, stablecoin neobanks have become a hot trend, this is not the fundamental answer to my question.
The real reason is that the infrastructure supporting these stablecoin neobanks has matured enough (or "sufficient") to allow anyone to quickly build an application that provides banking and payment services.
Developers no longer need deep expertise, no longer need to establish complex relationships with banks to benefit users, and no longer need to obsess over getting the best price to make the product as efficient as possible.
If you need a virtual dollar account and payment channel, Bridge has a great solution. If you need to quickly launch a crypto debit card, Rain can help you out, without having to deal with underlying card networks like Visa or Mastercard. If your neobank's user registration process is complex, Privy can help you solve it.
All infrastructure solutions already exist, and any developer can use them, just need to complete the integration. And indeed they do work - at least for now.
The Bank of the Masses
Let's take a moment to look at traditional banks that serve billions of people globally.
They may charge high fees, offer low deposit interest rates, almost no cashback, insignificant perks, poor customer service, payment delays, blocked transactions, and you may not truly own your funds... but they always work. Traditional banks are reliable, trustworthy, with brands standing strong for decades or even centuries. People know they are reliable, and what the masses need is reliability.
People want to trust an institution that holds the majority of their wealth, they want to be able to call a bank manager and get assurance of the safety of their funds.
The masses value this over "complete control of their funds." They do not want to take on that responsibility and the complexity it brings.
While they may want higher interest rates, it is not a top priority; they also do not need much cashback or perks, those are not the most important.
What they need is reliability.
Traditional banks are not pursuing upside potential, they are guarding against downside risk. That's how they build trust, reliability, and a large customer base.
The Cracks Will Eventually Show
Returning to the stablecoin neobank, it is evident that our existing infrastructure cannot compete with traditional banks.
So what are developers to do? They instead focus on perks, discounts, and offers. They tell users they can get cashback on purchases, not disclose expensive forex fees openly; they advertise virtual bank accounts without mentioning that these accounts are more expensive due to leasing licenses from other service providers.
But the cost-effectiveness of these apps is not the most crucial. It's the reliability.
Let's consider a couple of hypothetical scenarios (note, I intentionally exaggerate to illustrate systemic risks): Suppose a neobank relies on three core, non-modular infrastructure providers to go live swiftly: Company A provides virtual bank accounts; Company B provides card issuance; Company C provides fiat and crypto on/off-ramp.
Now, if the Cloudflare service, relied upon by Company A, goes down again, payments cannot go through because this neobank is entirely reliant on Company A's virtual USD accounts.
Further suppose Company B is banned in a key region due to new regulations, if the neobank cannot quickly find an alternative issuer, users' cards will keep getting declined during transactions.
Lastly, suppose Company C's bank relationship for custody and fiat transfer is severed, and the bank is no longer willing to serve them. Since this neobank relies entirely on Company C as the sole fiat on/off ramp, users now must go through a complex process to convert stablecoins to cash.
As a result, this neobank, which had almost no funds, went live in just a few weeks or months, completely collapses. Vulnerabilities are exposed, cracks widen, trust is lost. Users revert back to centralized exchanges because they mostly offer the same services and are more reliable.
Back to square one. Well played.
The Only Thing That Matters
Returning to the original point, currently, a world with 1000 neobanks for stablecoins means they heavily rely on a few centralized infrastructure providers.
This is not good. We can't win this way, and stablecoins can't win this way either.
The infrastructure is not robust enough; we don't need those pretty applications that use airport lounge and hotel perks to mask product flaws.
We need to build infrastructure that always operates, must be unconditionally reliable: cards are never declined; payments always go through; user balances are always visible; crypto assets can always be smoothly converted to cash.
Everything works, always, or at least approaches that limitlessly.
Conclusion
If you only remember one thing from this article, let it be this: right now, we don't need 1000 "usually operational" neobanks for stablecoins; we only need one that is "always operational."
We need an application based on robust infrastructure, with 100% uptime, multi-layer fault tolerance, and redundancy mechanisms, ensuring the neobank for stablecoins is fundamentally and consistently reliable.
The current infrastructure we rely on is merely "enough," and this reality cannot be ignored. While building pretty applications is more fun and easier, the underlying infrastructure must be radically improved.
Only then can we replace traditional banks and neobanks. Only then can stablecoins succeed. Only then can we succeed.
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