SOLANA SUMMER: Why $14 Billion in Stablecoins are Flooding the Network with Lily Liu at KBW2025

All right, here we are again.

What's up, Cash?

What's going on, everybody? Uh, my name is Cash D. I'm the cat herder over at Jupiter. That is my real title. Uh, but the real emphasis of this panel is Lilloo, the president of the Salana Foundation.

What does it mean to be a cat herder, Cash?

It is uh a very precise title. I mostly just constantly try to get people to do different things while they're going in a thousand different directions.

Yeah.

I see. I see. So, what should we talk about, Cash?

Let's talk uh let's talk about stable coins and the Salana moment uh in it all. So, Salana's stable coin volume, as people might know, is at an all-time high in terms of TBL. I think it's around 14 billion or so. Uh and the inflows are the greatest of any chain that's happening right now. Why is that happening?

Uh well I think that um there are thousands of blockchains out there. There have been there are there will be. Uh and I think uh for the last 15 years that we've all been in this industry uh people have equated things that kind of have a uh shared infrastructure design as being somewhat equivalent but in fact they are not. Uh and the vision that different blockchains have for their purpose for their goals their objectives are fundamentally different. I think we've already seen that many times in the past where there's general purpose, there's L2s, there's apps, there's more recently there's asset chains.

Um, and but I think the vision of blockchain, if you really kind of go back to the beginning, uh, is if you look at the the title of the white paper, it says uh, peer-to-peer electronic cash system does not actually say Bitcoin is digital gold uh, state free sovereign or sovereign uh, sovereign story value or anything like that. Uh and so if you kind of go back into how all this evolved uh actually one of the foundational sort of inspirations of Bitcoin from the very beginning is that you would have this global financial infrastructure available equally accessible to anyone who's using the internet. And what that would mean is that 5 a half billion people have access to more or less free flowing content on the internet. Unlimited free flowing content 24/7 365 uh anything you know that you can even put in your pocket these days. It's pretty tremendous.

And then we would also apply you know now that money is dated and today's money that would be uh that would be also a set of rails that you could use to access a financial system. That's been kind of the broader dream. Uh and then back in 2016 uh there was big debate over the block size. And so yes it was a very specific debate about the block size but the more philosophical debate back then is is Bitcoin a store of value or is it a technology platform? And we know what happened with Bitcoin uh Bitcoin onemeg blocks.

Uh it took a couple a couple of years for SegWit even to get implemented uh and ongoing debates around opcap because it's not meant to be a tech platform. It's meant to be a good enough technology uh infrastructure in order to be able to sort of have this digital store of value and that's good enough right actually the more you change it the worse it potentially becomes as a store of value. Uh and so we have this bifurcation now where sort of these blockchains they can they have an asset aspect to them. They also have an infrastructure kind of tech platform aspect to them. Uh and so I think what happened after the block size debate in 2017 is uh are you asset are you an asset?

Are you primarily an asset or are you primarily an infrastructure platform? And basically everyone after Bitcoin which is now essentially everyone is proof of stake. uh everyone who is after Bitcoin is now proof of stake and you are here to be technology platform for financial infrastructure uh and that is something that uh I feel like has been sort of these are the two broad broad categories you're in one or the other and there's room for one in the asset category and there's room there's going to be you know a sort of some sort of power laws on the infrastructure side but there's going to be a little bit more diversity on the on the infrastructure side but then if you have clarity that you are financial infrastructure uh then there's got to be a few things that have got to be true in order to actually be a functional platform. And one of those is quite simply performance. Uh that's something that I uh I think has been really interesting.

There's been a lot of debates back and forth as to whether performance is even important, whether it's something you care about, something you think about. Uh but now that we're sitting in this uh actually very real adoption cycle in 2025 uh where there are real use cases around people using uh using money which is uh blockchain first digital first uh internet first uh if you talk about the two ends of that spectrum moving money or uh or trading both of those things you want to preserve as much of your money as you can in the transaction rather than paying the network in the form of fees. And I will say the market for people that want to pay $1 in order to send $1 and also wait one minute at least in order to do so, that market just doesn't exist. That market is only comprised of people who are already okay with paying wire fees. So that's like, you know, $10,000 send transaction or a whale trade of some sort uh where the relative uh cost of those fees is insignificant in comparison to the size of the transaction.

And that's just a minority of the way people use money and the way people move money in the world today. Uh and that's something that it creates like a hard cut off for what your addressable market is. Um and that's uh that I think that's just that's just economic reality, right? Um, and so I think if you ask three questions, uh, if you, if you were to take coin gecko.com and filter through three questions, the first is which one actually has a performance both cost and speed profile to actually support money movement base requirement, right?

Uh, that that list filters down quite a bit. Uh, and then if you ask the next question, which one has developers? Uh, that filters down quite a bit. Uh and then if the ne and then then and then if you look at the next one which is where do you have not just performance but then also people developers then where do you also have actual asset liquidity which is what all of blockchain is all about it's about capital markets at the end of the day then uh in my opinion I think not even my opinion I think objectively that filters down to a list of one

and that one is salana

there it is uh you know Victor Frankle has this line that he says uh happiness cannot be pursued and must ensue Is that your view on stable coins on chain as well? Like you build really good tech and you build a thriving ecosystem and then stable coin demand kind of increases there because there's stuff to do with it whether it's commerce or investments. Uh or are there things that you guys are doing at the foundation specifically uh designed to attract more stable coins to Salana?

Yeah. Well, I think that um I think it's a combination of those two different things. My perspective on stable coins is that stable coins are if you own stable coins as a layer, it's like the base layer of any economy. Uh if you look at the money movement side, clearly that's going to be in stable coins. Uh because most commerce, most of just the way people denominate transactions in their minds and the economy, counterparties, it's all based in stable coins.

Um or let's call it fiat. Um no one, as much as you love Bitcoin, you're not going to be pricing uh the cost of buying a car, buying a sofa, buying coffee. You just don't think about that in terms of Satoshi's. And even if you did, we've all been conditioned to do two things with Bitcoin. one is buy and the other is never sell.

So even if you thought about your sofa in Satoshi terms, you should never actually spend your Satoshi's buy. Okay? So uh it is not uh the store of the store value asset is uh almost definitionally something you should not be using for transactional commerce. So, the only thing you're really going to be using for transactional commerce is a digital twin of the thing that you use today, which whether you like it or not is is fiat money because it has the network effect of other people who accept it, right? It's like that the the social currency kind of aspect of money.

It's a social it's a social good. Um and uh and so uh I think that you know having liquidity in stable coins like if you have that base layer then like all trades at the beginning the end of uh of a market cycle uh end up in stable coins they come out of stable coins end up in stable coins. What we saw in the past is uh when there was that uh you know the hype cycle in 2122 and then everything went away what uh everything went away in the end of 2022 and at the same time rates went through the roof uh to you know the 4 and a.5 or 4 and a.5%.

They were sitting there for quite a while. So then of course what were people doing? Well, there's no trading that's there's no sort of consistent yield that's going to be over four and a half% certainly on a yield adjusted basis on chain and I can't really conduct commerce and so I'm just going to so then people withdrew their stables and put it in their bank account right and there at the time were also there was not the tokenization sort of efforts we see today so you couldn't keep it on chain a money market fund because there wasn't enough rationale yield or utility otherwise to keep your money on chain uh and so uh you have to or industry needs to build out those use cases is and I think that those are some of the things that we're seeing now with payments whether it's stable coinbacked cards whether it is you know various the the massive amount of sort of adoption integration into existing payment providers uh it's uh the on and off ramp proliferation so many things that are actually building out this infrastructure to enable stable coins to be used on an everyday basis so that is well underway and I don't think it is hype it's like finally after 16 years we have real adop option happening which is pretty exciting uh and it's like actually useful you know

I bought my flight with stable coins right it's actually useful um and it is sustainably useful as well but then I think what it does is it creates um a sort of permanent base of that everyday utility creates a reason to keep your money on chain and there will be times when the market is more or less volatile and then that same base of liquidity is going to be the basis for which people then it creates depth for trading. So these these these things are tied together. Uh which is why you know sometimes you'll uh people will present themselves as I'm an app chain focused on trading purpose or something like that and I'm an app chain focused on uh focused on uh you know pick your pick your application on like deepen or something like that. Uh but I think that uh if you kind of go back to this original vision of you know uh global financial infrastructure right shared infrastructure for five and a half billion people uh this is about shared liquidity 5 and a half billion people there's no larger liquidity pool than that um and if you want to preserve that then you've actually got to be in the same environment and that means colllocating your DPIN app next to your DeFi app next to uh your stable coin liquidity because what people actually want is they want to be able to seamless seamlessly transition itioned from I paid for something and now I can go deposit it in a lend to borrow and I can go uh get my rewards from the deepen protocol and the sort of the the fungeibility of that which is something that is so seamless the way we use the internet for content today uh and I think the value proposition of blockchain has always been to bring that same fluidity and immedity and sort of always on experience that we have with content and bring that to financial systems

uh well said you mentioned around commerce and payments actually I'm I'm curious what your thoughts thought is on the future of stable coin usage. Obviously, the foundation and the Salana ecosystem broadly had Salana Pay and had put some effort into pushing that out over the last year or two. Uh nowadays, it seems like a lot of folks are using cards like Cast and others that allow you just to spend stable coins directly uh through like an Apple Pay, Google Pay mechanism. Uh what do you think is the the form factor? What did you guys learn from Salana Pay?

Uh where do we go with like using stable coins and kind of bridging between the onchain world and the real life world going forward? Yeah. So I think that uh maybe if one way you uh could kind of structure how that might evolve over time and I think they'll converge is one side you can look at sort of the B2B area and the other is you can look at the more consumer side uh and I think that the crossborder money movement between institutions that is a clear one where it's easier to have those focus discussions where you have a merchant in one country large merchant in one country and then uh like a a customer and a supplier in different countries and they think, uh, gosh, you know, I don't have to wait for wires, uh, 8:30 a.m. on Monday.

Uh, I can just on a Friday at 6:00 p.m. I can just, uh, send you a down payment. And I think the valid proposition around that is so clear. Um, and just as a side note, uh, it's not just about sending money, uh, but it's about actually gaining, for example, in a manufacturing context, it's about gaining 3 days of production, right?

So the efficiencies are not just about your wire fee, it's around, uh, 3 days of production time. Um and uh so I think that on the B2B front uh and this is you know you see a lot of this kind of activity and is just happening right now which is uh wow I can move money around the world much faster first of all within for example a bank will oftenimes have so many different companies around the world and so from a just pure treasury management standpoint between their 100 entities at the or even more uh that is something that is much more efficient uh much less overhead can be relatively automated those types of things so I I think that is one part of the value proposition. Um and then I think that uh as you sort of build out the network effect around this people see the utility of stable coins that's going to grow sort of from intra company to interra company and then I think on the parallel track there's going to be things like a cast card things like the stablecoin backed cards uh that people are going to think wow this is really quite convenient and the target market for that is not necessarily people I don't think it's people who are in the United States because we already have dollars right I we just we have dollars and we're so happy with them we still use paper checks in America that's how much pressure for innov innovation we have in the United States. And so, uh, the place that's going to add the most value is people who don't live in a native dollar environment, uh, but can very easily get access to stable coins because if you're on one of these exchanges, then you already have access to, you know, pick your choice of US dollar, uh, stable coins. Uh so I think that those are probably going to be the two various tracks and they will converge because then at some point you know the retail audience the consumer audience is going to meet the on andoff ramps and hopefully the institutional adoption will have built the underlying liquidity to be able to uh provide you know tighter rates uh first of all between all the variations of stable coins that everyone's competing on right now.

Uh but then also eventually as commerce becomes uh more uh I think two things are going to happen. One is that people are going to want to do commerce in stable coins. uh and when that happens then various countries are going to say okay well I don't want my economy to be dollarized so I guess you know I've got to do my own genius act uh and enable people to transact in my local currency for everyday commerce and then once that happens then uh I think you'll start to see forex systems actually build out efficient liquidity between uh between dollar stable coins and foreign exchange and like just just in terms of market volumes we are I don't know how many zeros off of the scale of actual forex markets. They were like not anywhere on the map. Yeah.

Like our entire industry when it comes to Forex would probably be uh like a fraction of one client's daily trading volume uh in the real world.

That's right.

Yeah.

U speaking of the dollarization of the world, I think it'd be fun thing to talk about for a little bit. As you know u I think one of the uh ultimate consequences of stable coins and the dollarization of all these economies is actually likely to be much less monetary influence from emerging market economies or smaller company uh smaller countries like let's say Nepal right if everyone is and I love Nepal great country whatever but if everyone there is using stable coins or dollars or has access to dollars uh does that reduce their own ability to kind of control the monetary supply and how their economy can actually function and does the rise of stable coins kind of spell the, you know, at least spell trouble for a lot of these smaller economies.

Yeah, there are some small economies that have chosen way before crypto to actually dollarize. Let's see, El Salvador and Ecuador were the two, I forget when they did that, maybe like 15 years ago or something. So, there are some situations where being part of a larger currency area uh can have benefits. Um, of course, the Euro zone is is an example where um the trade-offs can have some tension at times uh between fiscal and monetary policy. Uh so I think there are some small countries situation dependent uh that may actually think that's a better set of an okay set of long-term trade-offs.

Uh and there will be others that uh for whom it's going to be absolutely the wrong set of trade-offs. And uh and I think that those uh but then those generally are also the ones that probably have good enough governance to be able to uh figure out stable coin legislation and figure out uh how to how to operationalize something like this because it will be a necessary uh front of economic defense.

I think uh I hope so. Let's let's just talk about another potential downside of stable coins while we're up here to make things interesting. Uh I think there's a sense in which stable coins compete with bank deposits uh traditionally right rather than holding my money in a bank I'll just hold it in stable coins and instead of the bank then being able to make those loans out particularly small community banks across the world uh you know it's just going onchain and there's power law effects that are going to happen there where capital just goes after the high yielding opportunities as opposed to the opportunities that are maybe like local to Tulsa Oklahoma or something. Uh do you see this as a is does this kind of worry you at all? Is this on the radar?

U what do you think about stable coins? We were talking about this in the car today and I think it's interesting because what what you're effectively saying is your savings account really is a deposit. It's like a deposit vault uh where the lender where you you don't actually have a lot of transparency into what that vault operator meaning your bank uh is uh doing with those loans, right? And it wasn't until March of 2023 when a lot of people started to get really interested uh in bank holdings when the Silicon Valley bank thing was happening and credit Swiss was happening uh and the way they actually uh categorize and mark all these different f all these different liabilities. But that's been the fractional banking model that your savings account really is uh a not so transparent uh lending vault that you're depositing into.

Uh okay. So if we think about it on those terms then uh then well we already have lending vault constructs all over crypto and various I think the starting at least kind of cultural beliefs that they should be a little bit more transparent. Uh and so it does kind of restructure from your savings is like a default pool of capital that can be reinvested in the economy to something which is more opt-in. So there's definitely costs around that because I think overall I think one of the costs of it could be uh the ability to sort of enact capital formation at scale right if everything becomes optin rather that you have to proactively deposit your money into a lending vault in order to uh in order for the credit system to be active right so I think that there is a uh there is a cost around that but at the same time uh there is a lot there there is the benefit of these things being opt in and perhaps a little bit more uh discretion and uh and uh sort of require transparency upfront about what financial products are being uh are being purchased, lent, people are participating in. Right?

Right now, if you're sitting in a savings account, uh if you were to ask me where's my being my money being lent, I have no earthly idea. Right? Mortgage is somewhere, I think.

I hope. [laughter] Yeah.

All right. We only have a I think it's a good answer and not as scary as potentially

Well, I I I don't know. I mean, I think it could get kind of weird, right? So, you could say that, well, if you're going to have this larger sort of dollar uh dollar area because of the tendency for capital to flow uh into dollar into dollar stable coins, then you may have a larger economic area, if you will. uh that would sort of the the size of that capital pool which I think we've seen many times on chain where sort of the the weight of or like the the ability for global capital to rush into a product uh compensates for any fragmentation that you might have because you know your Tulsa Oklahoma community bank like maybe the global distribution of capital markets can compensate for uh [laughter] for the do the deposits lost in the Tulsa Oklahoma community bank. So uh so maybe that is the the trade-off.

That's time will tell. Yes,

I guess. All right, last question real quick. Let's make it uh back onto Salana here. Uh what does the Salana stable coin landscape look like let's say 12 months from now?

Uh so I think the only metric that the Salana ecosystem is not hands down uh winning by a long mile in is TVL just because we started later. Uh I think one year from now that's going to be very different. Um and so uh I think that uh just overall I think TVL as a metric has always been a little bit overrated in this industry. I think it was appropriate for 5 years ago when DeFi was finally the the one application space that had product market fit still has product market fit. Uh and so you know in the same way that in the 90s when people were looking at the internet before revenues showed up you would look at clicks, users, app downloads and that was an appropriate way in the early stages of a hyperrowth industry um to start to sort of benchmark across different uh companies applications, right?

It's a way to benchmark in the early days of an industry. And at some point you have to graduate from that from sort of upfunnel metrics into actual value metrics, some sort of other metrics of value creation and value capture. uh and I would you know assert that maybe in 2025 now is the time to do that. uh and so where do you actually look for revenues right oh isn't this all open source all back to the community those types of things well people still have to eat and that means protocols still have to eat and applications still have to eat uh and so I think you can look at revenue in two ways you can look at chain revenue you can also look at application revenue uh and those are the ways that uh we as an industry should start to look at uh look at uh capital productivity uh look at um look at sustainability uh and I also just don't think you have to rationalize Why revenues are important?

You know, they just are. Yeah, that's right. [laughter] Uh, excellent. Number go up, I think. Uh, well, Lily, thank you very much.

Always a pleasure. Yeah, thank you so much.

Thanks. [music and applause]