Bitcoin and USDT dominate crypto, yet both are second-class citizens-BTC fragmented across wrappers, USDT competing for general-purpose block space. Plasma rewrites this: stablecoins as native gas, pB
2025-09-23 - 20 min read
Bitcoin and USDT dominate crypto, yet both are second-class citizens-BTC fragmented across wrappers, USDT competing for general-purpose block space. Plasma rewrites this: stablecoins as native gas, pBTC as unified omnichain Bitcoin, building settlement rails for the assets that actually matter. This piece was made in collaboration with the SumCap team. From “Sound Money” to Stable Money Definition: TARP (Troubled Asset Relief Program) - U.S. program (2008) that bought troubled bank assets to stabilize the financial system. Stimulus packages - Government spending or tax measures to boost the economy during downturns. In September 2008, the world watched a pillar of Wall Street crumble: “ Lehman Brothers ”, a 158-year-old investment bank, filed for bankruptcy after no buyer could be found. Overnight, credit markets froze and trillions of dollars in complex mortgage-backed securities became worthless in spite of what ratings suggested. Governments scrambled: the U.S. launched TARP, central banks injected emergency liquidity, and stimulus packages rolled out worldwide. For millions, the crisis wasn’t just an economic downturn, it was a sign “TradFi” couldn’t be trusted. Banks had taken reckless risks, regulators had looked the other way, and when it all collapsed, taxpayers were left holding the bill. Three months after, on January 3rd 2009, the first Bitcoin block was mined, embedding a single headline: “Chancellor on brink of second bailout for banks.” It referred to British Chancellor of the Exchequer, Alistair Darling , preparing yet another massive taxpayer-funded rescue for struggling banks (just months after the first). Figure 1 - First Bitcoin Block (Headline); Source: bitaps ; The headline was a direct statement toward the very system that had just failed, a reminder, etched into Bitcoin’s first block, of why it existed. Bitcoin entered the world as a total polar opposite: a fixed supply, no central authority, and a peer-to-peer network immune to bailouts and political manipulation. But, this “sound” money came with a trade-off: $-denominated volatility. In traditional economics, money serves three functions: A medium of exchange, A store of value, And a unit of account. Bitcoin excelled at the first two but failed on the third. As crypto matured, one problem became obvious - people needed a way to hold value on-chain without constantly dealing with price swings. Business owners wanted to invoice and pay predictably. Traders needed a way to lock in profits without fully cashing out. And everyday users wanted to participate in decentralization without volatility. The tedious process of: (a) wiring funds to a bank, (b) waiting days for settlement, and © paying hefty fees along the way, created a demand for stable on-chain money . The first to meet this demand was BitShares , with their BitUSD, launched in July 2014. The idea was ahead of its time: users could lock up $BTS (BitShares’ native token) as collateral to create BitUSD, which maintained its peg to the $ through smart contracts and market incentives. However, the problem was that BitUSD’s peg relied entirely on the value of BTS. When BTS prices fell, collateral ratios could quickly slip below safety levels, triggering mass liquidations. But, just four months later, in November 2014 , Tether launched USDT - offering a simpler (fiat-backed) alternative where each token was redeemable 1:1 for U.S. dollars held in custody. USDT didn’t require overcollateralization or complex algorithms, and this simplicity is what allowed it to capture over $19.3M in volume & $1.45M in market cap in just one year. To put it in perspective, at the time, $ETH was worth only ~$1, while $BTC hovered around $240. Figure 2 - USDT’s Success; Source: https://www.coingecko.com/en/coins/tether/historical_data ; Following USDT’s adoption, teams started searching for new ways to create stability without relying on a centralized issuer. The first major project was SAI (Single-Collateral Dai) by MakerDAO. Launched on December 18th 2017 , MakerDAO’s original system allowed users to lock ETH into Collateralized Debt Positions (CDPs) and mint SAI. While SAI did maintain a soft peg to the U.S. dollar through automated incentives and stability fees, relying only on ETH as collateral left it exposed to violent price swings - much like BitUSD. To mitigate this risk - after exactly 2 years, on November 18th 2019 - MakerDAO launched Multi-Collateral Dai (DAI). The upgrade expanded the collateral set beyond ETH, improving risk diversification and capital efficiency. It also introduced a more robust governance model, giving $MKR holders authority over critical parameters such as collateral onboarding, stability fees, and risk controls. With these changes, DAI became the first decentralised stablecoin to achieve broad adoption. Meanwhile, traditional fiat-backed alternatives continued to grow in parallel. USDC launched on September 26th 2018 and positioned itself as a regulated, fully dol