Executive Summary

Broad consensus indicates stablecoins are transforming the financial world (see EQT’s article here). These digital dollars have grown to ~$240 billion in size as of April 2025, and asset manager Bitwise forecasted the market could expand to $400 billion by the end of 2025. The scale of stablecoin adoption is already staggering: stablecoins facilitated $27.6 trillion in transfers in 2024, surpassing the combined transaction volume of both Visa and Mastercard. This demonstrates that stablecoins have become foundational infrastructure for the on-chain economy.

I believe this cambrian explosion of stablecoins will result in: (1) the expansion of stablecoin liquidity infrastructure; and (2) the unbundling of banking services. This article focuses on these two themes, illustrating how on-chain protocols like Perena, Maple Finance, Huma Finance, and Tenor Finance are solving critical challenges that have historically limited institutional participation. Through these case studies, I will demonstrate how the emerging stablecoin and lending stack is creating more a efficient, accessible, and transparent financial system.

Disclaimer: The views and opinions expressed are solely those of the author and do not necessarily reflect those of the author's current employer. This material is for informational purposes only and is not intended to provide legal, tax, financial, or investment advice. Recipients should consult their own advisors before making these types of decisions. The author is not responsible for errors, inaccuracies, or omissions of information; nor for the accuracy or authenticity of the information upon which it relies.

Stablecoins

The stablecoin market is at a pivotal moment. With regulatory frameworks taking shape globally and increasing participation from traditional financial institutions, stablecoins are a viable alternative for mainstream payments. BVNK projects that stablecoins could grow from 3% to 20% of global cross-border payments volume within five years, representing a $60 trillion opportunity.

Christian Catalini, co-founder of Lightspark and the MIT Cryptoeconomics Lab, identifies two primary functions of stablecoins: serving as a medium of exchange (moving money) and store of value (saving). For example, some stablecoins like PayPal’s PYUSD offer a 3.7% reward on balances to drive adoption (store of value), while others like Paxos's Global Dollar Network (USDG) have partnerships with tech companies like Robinhood and exchanges like Kraken. Furthermore, regulatory fragmentation across jurisdictions could limit interoperability and global scaling. Because of these issues, the stablecoin market will likely remain fragmented rather than consolidating around a single dominant player. From a user perspective, there will need to be an easy way to trade between stablecoins to access different benefits (on- or off-ramps per jurisdiction, yield, cross-border transactions, etc). This is where solutions like Perena are valuable.

Layer 1: Unified Stablecoin Liquidity

1. Interoperability Problem: The stablecoin market today is dominated by a few major players, but dozens more issuers are expected to launch soon (creating a liquidity fragmentation problem). This increases costs and makes it difficult to swap between stablecoin ecosystems.

2. Capital Efficiency Problem: New stablecoin projects face prohibitive costs to bootstrap liquidity on-chain. Furthermore, on-chain AMMs are not able to handle stablecoin swaps (in size) as efficiently as off-chain alternatives (OTC desks, prime brokers, etc).

3. Stablecoin Yield Problem: In traditional stablecoin systems, capital often sits idle in wallets (for liquidity purposes) or gets locked into DeFi protocols (for yield). This forces an unnecessary choice between accessibility and returns, leaving billions in potential value untapped.

Perena: Unifying the Stablecoin Ecosystem

Built on Solana, Perena creates a central hub for all stablecoin liquidity. Perena is founded by Anna Yuan, former stablecoin lead at the Solana Foundation, who brings deep domain expertise in this area. With $1.36 billion in processed swap volume across 1.86M transactions and 90,000+ users, Perena has demonstrated product-market fit.  

Three technical innovations set Perena apart:

• Hub-and-Spoke Model: Instead of isolated pools, Perena connects established stablecoins like USDC and USDT in a central "Seed Pool," creating a unified liquidity base that newer stablecoins can easily tap into. This architecture ensures all liquidity on the protocol remains available for trading against all other liquidity, dramatically reducing fragmentation.

• Capital-Efficient Architecture: Perena's two-part structure consists of a Seed Pool for major stablecoins and Growth Pools for newer entrants. The system establishes USD* (a liquidity provider token) as a central connecting hub, while implementing a bounded liquidity design (0.99-1.01) that makes stablecoin swaps up to 10x more efficient. All swaps route through USD* in two steps (e.g., USDC → USD* → USDT), isolating risk while maintaining efficiency.

• Simultaneous Liquidity and Yield: By integrating with Solana Interest Bearing Tokens (tokens that automatically generate yield), Perena allows users to earn returns without sacrificing liquidity. This eliminates the traditional tradeoff between keeping assets available and generating yield, as LP positions can be used across multiple Growth Pools simultaneously.

Layer 2: Institutional-Grade Lending Infrastructure

Catalini suggests that stablecoins themselves may eventually be less important than the applications and interfaces built on top of them. As stablecoins grow, they're enabling the unbundling of traditional banking services. While the overall crypto lending market has fluctuated (reaching $64 billion at its peak before settling at $36.5 billion in 2024), institutional participation is growing rapidly. Currently, the top three centralized finance (CeFi) lenders control 88.6% of the CeFi lending market with a combined loan book of $9.9 billion.

Despite growth, several critical barriers have limited institutional adoption of on-chain lending:

1. The Collateral Problem: Traditional DeFi platforms typically require overcollateralization with crypto assets, limiting participation to those already holding digital assets. This is not capital efficient.

2. The Trust Problem: Automated, code-based liquidations during market downturns can damage institutional reputations and create cascading liquidations through oracle manipulation or delays.

3. The Regulatory Challenge: Even with technical readiness, regulatory uncertainty remains the largest barrier to full institutional participation, with concerns around compliance, KYC/AML requirements, and custody laws.

4. The Real-World Asset Gap: Until recently, no scalable way existed to assess, tokenize, and finance income streams like invoices, payroll, or recurring payments on-chain.

Three DeFi primitives are systematically addressing these barriers, enabling the remarkable 959% growth in on-chain lending over just eight quarters:

Maple Finance: Creating Institutional-Grade Lending

Maple Finance addresses the first three challenges by bridging traditional finance expectations with DeFi innovation:

• Beyond Overcollateralization: Maple enables lending against off-chain collateral (held at custodians) while maintaining blockchain transparency, opening DeFi to institutions using traditional assets.

• Human-in-the-Loop Risk Management: Unlike pure DeFi platforms, Maple offers a 12-hour margin call window (managed by human representatives) rather than instant liquidations, preventing flash crashes and market cascades that institutional players fear. For instance, if BTC price drops 15% in an hour, rather than triggering immediate liquidations as traditional DeFi protocols would, Maple allows a 12-hour window where a representative contacts the borrower to add collateral or partially repay the loan, preventing forced sales during temporary market dislocations.

• Compliance Integration: Through products like Syrup.fi, Maple creates a permissioned DeFi layer with proper KYC/AML procedures, allowing institutions to participate in DeFi yields while maintaining regulatory compliance.

Three technical innovations set Maple Finance apart:

1. Hybrid Custody and Collateral Model:

   • Borrowers deposit native collateral (BTC, SOL, ETH) with custodians; Maple manages lending and liquidation logic through smart contracts tied to off-chain custody status.

   • For example, an institutional client might deposit $10 million in ETH with Fireblocks as custodian, while Maple's smart contracts automatically track this position, enabling them to borrow $5 million in USDC based on a 50% LTV ratio without moving their ETH on-chain.

2. Programmable Loan Structures with Margin Tiers:

   • Loan-to-Value (LTV) ratio bands, margin call thresholds, and liquidation triggers are customized by collateral type and borrower profile, not hard-coded.

3. Cross-Chain Liquidity Infrastructure:

   • Use of LayerZero OFT (Omnichain Fungible Token) technology allows LP tokens to move across chains, setting the foundation for Maple pools to aggregate liquidity across Ethereum, Base, Solana, and more.

This hybrid architecture enables flexibility, transparency, and interoperability not achievable by pure on-chain lending protocols.

Huma Finance: Bringing Real-World Assets On-Chain

Huma Finance tackles the real-world asset challenge through income-based lending:

• Income-Based Borrowing: Instead of requiring crypto collateral, Huma allows users to borrow against verifiable income streams, achieving a 0% default rate while processing over $3.8 billion in lifetime volume. For example, a small business with $50,000 in monthly recurring revenue could tokenize this income stream on Huma, allowing them to access a $30,000 credit line immediately rather than waiting 30-60 days for customer payments to arrive.

• Efficient Asset Circulation: Huma's system enables income tokenization with a velocity of 5.78x per month (assets recirculate nearly six times faster than in traditional finance).

• Real-World Impact: By making income streams like invoices and subscriptions usable as the basis for loans and creating modular "tranching" for different risk levels, Huma delivers 10x faster settlement than traditional finance rails.

Three technical innovations set Huma Finance apart:

1. Modular PayFi Stack: Six-layer architecture (transaction, currency, custody, compliance, financing, application) enabling flexible cross-chain credit issuance across Base, Solana, Celo, Polygon, Scroll, and Stellar.

2. Structured Credit Primitives: First-loss tranches, hybrid underwriting agents, tokenized invoices, and dynamic credit limit adjustments that bring sophisticated bank-level credit structuring on-chain in a modular, composable format. For instance, a $1 million invoice financing pool might be structured with a 10% first-loss tranche taken by specialized underwriters, allowing the remaining 90% to achieve investment-grade risk profiles attractive to institutional capital seeking stable yields.

3. Cross-Chain Compliance Framework: Supports both permissioned and permissionless pool deployment while partnering with Circle, Request, and Superfluid to embed KYC-ready income verification rails.

Tenor Finance: Creating Fixed-Rate Certainty

Tenor Finance completes the lending ecosystem by bringing fixed-rate structures to DeFi:

• Predictable Terms: While platforms like Aave offer only variable rates that fluctuate constantly, Tenor provides the predictable terms that institutional treasuries need for expense forecasting.

• Market-Based Matching: Using AMM mechanics, Tenor matches lenders and borrowers at their desired rates through self-executing contracts that settle automatically at maturity.

• Customizable Conditions: Participants can use limit-order-like functionality to specify exact terms, solving the critical institutional need for hedging against market volatility.

Three technical innovations set Tenor Finance apart:

• Direct Fixed-Rate Matching: Tenor enables lenders and borrowers to match directly at fixed rates on-chain, eliminating traditional money markets' structural utilization spread and providing borrowers with certainty over their borrowing costs. For example, a corporate treasury looking to borrow $5 million for 90 days at a maximum of 4.5% can set these exact parameters on Tenor, and the protocol will automatically match them with lenders willing to provide capital at or below that rate, eliminating the unpredictability of floating rates.

• Passive Position Management: The protocol removes the pain of interest rate fluctuations, allowing borrowers to avoid unwinding positions during market volatility and enabling lenders to automatically roll forward their lending positions upon maturity.

• Composable Market Infrastructure: Tenor layers fixed-rate markets on top of existing money market protocols without requiring additional governance, while directing all idle liquidity to the underlying money market—effectively creating a fixed-rate term structure that inherits established parameters. For example, when a user deposits USDC into Tenor's 30-day fixed rate market, any unmatched funds automatically earn Aave's variable yield until matched with a borrower at their specified fixed rate, eliminating capital inefficiency while maintaining access to predictable terms.

Conclusion

The stablecoin market is at a pivotal moment. With regulatory frameworks taking shape globally and increasing participation from traditional financial institutions, stablecoins are transitioning from crypto trading tools to viable alternatives for mainstream payments.

The next phase is about building the infrastructure that transforms how money moves, how value is stored, and how financial services operate. As builders, we should focus on deepening liquidity, improving banking connectivity, and building more sophisticated on-chain primitives for lending/borrowing in the DeFi ecosystem. As regulatory clarity emerges and adoption accelerates, these infrastructure improvements will continue driving both institutional and retail participation in the on-chain economy, ultimately delivering on the promise of a more accessible, transparent, and efficient financial system.

Disclaimer: The views and opinions expressed are solely those of the author and do not necessarily reflect those of the author's current employer. This material is for informational purposes only and is not intended to provide legal, tax, financial, or investment advice. Recipients should consult their own advisors before making these types of decisions. The author is not responsible for errors, inaccuracies, or omissions of information; nor for the accuracy or authenticity of the information upon which it relies.