Reassessing Stablecoins: Building a User-Oriented Multidimensional Classification Framework

With the widespread use of stablecoins in various fields such as global payments, DeFi, and hedging value storage, it is no longer a concept that can be defined by a single term. Different users have significant differences in their understanding and usage of stablecoins, ranging from a primary tool for cross-border transfers to a core component of on-chain yields, with a variety of application scenarios.

This diversified demand has driven the formation of a multidimensional classification framework based on user intent, risk trust, and technical architecture. This framework has become a key starting point for understanding the current stablecoin ecosystem. This article will attempt to reconstruct the worldview of stablecoins from the user's perspective, focusing on user goals, risk models, and technical architecture, in order to establish a cognitive framework for stablecoins that is truly based on user needs and adapts to various use scenarios.

1. Limitations of Traditional Stablecoin Classification

The cryptocurrency world is ever-changing, but stablecoins have always been a constant theme. Traditionally, the market has been accustomed to focusing on the "anchoring mechanism," categorizing stablecoins mainly into three types:

1. Fiat-collateralized: such as USDT, USDC, etc., pegged to the US dollar at a 1:1 ratio, with strong liquidity and high acceptance.
2. Crypto-collateralized: such as DAI, RAI, maintaining the peg through over-collateralization of assets like ETH, emphasizing decentralization and censorship resistance.
3. Algorithmic stablecoin: such as the collapsed UST, relies on mechanism design and market expectations to regulate prices, without the need for actual asset collateral.

In addition, there are stablecoins pegged to non-USD assets such as gold and euros. For example, the recently popular Tether Gold (XAU₮), where each token represents one ounce of gold, supports on-chain transfers and physical redemptions. Currently stored in Tether's self-built vault in Switzerland, the holdings have reached 8 billion USD, making it one of the largest private holders of gold in the world.

However, as the use of stablecoins expands, this classification method based on anchoring mechanisms has become difficult to meet the understanding and choice needs of diverse users. The main reason is that the users of stablecoins are no longer limited to on-chain traders or DeFi participants, making it hard for a single anchoring mechanism dimension to answer the most concerning questions for users: Is it suitable for me? Is it safe to use? Can it be used on the blockchain I commonly use?

For example, although both USDT and USDC are fiat-collateralized stablecoins, they have significant differences in their reserve structures, compliance levels, and market trust. At the same time, new regulations (such as the GENIUS Act and MiCA) are starting to use utility and compliance as classification criteria, further highlighting the gap between traditional classification methods and the actual policy framework.

2. Diversification of Stablecoin User Demands

In an interview, Tether CEO Paolo Ardoino explained that during the economic downturn since 2020, some developing countries have been severely impacted, facing issues such as soaring prices, currency devaluation, and high unemployment rates, which have led many families into financial distress. In this context, stablecoins like USDT have to some extent met the needs of these families, being used for value storage, cross-border remittances, and daily payments.

Therefore, in regions such as Latin America, the Middle East, and South Asia, many users are becoming global users who are first encountering the crypto world. The main reasons they use stablecoins are the devaluation of their local currencies and the difficulties of cross-border transfers; thus, they are most concerned about stability, costs, and the ability to cash out at any time.

In contrast, experienced on-chain users, arbitrageurs, and institutional-level traders, who are native players in the cryptocurrency space, have completely different focuses on stablecoins. They pursue native liquidity, protocol support, portfolio efficiency, and arbitrage paths, rather than just the anchoring mechanism.

The differentiation of this user group is becoming increasingly apparent, indicating that the stablecoin sector has reached a point where it must break out of the traditional framework of "fiat collateral/crypto collateral/algo pegging" and reconstruct classification logic from the user's perspective. The "change" in stablecoins is essentially the result of the joint promotion of user demand and market ecology.

This change includes the explosion of stablecoin application scenarios (from DeFi staking to cross-border salary payments), the differentiation of user groups and usage needs (from capital preservation to high yields), and the improvement of macro-level regulatory frameworks (from the EU MiCA to the US GENIUS Act). Therefore, in the eyes of users, the world of stablecoins has already split into multiple different fields:

• Crypto newcomers need a "simple and secure" stablecoin to safely store funds and learn gradually.
• DeFi enthusiasts focus on "yield potential", using stablecoins for lending on Aave and liquidity mining on Curve.
• Experienced traders pursue "extreme liquidity" and need stablecoins that can be quickly exchanged on mainstream exchanges.
• Global users place more importance on "low-cost cross-border payments", with on-chain fees and transaction speed being the core metrics.

This means that traditional classification systems are gradually becoming ineffective in the context of current diversified demands. In the current Web3 world and the stablecoin space, there is no "best" stablecoin, only the "most suitable for a specific goal" stablecoin.

3. Constructing a Multi-Dimensional Stablecoin Classification Framework

To help each user find the most suitable stablecoin for themselves, we propose a stablecoin classification framework consisting of three core dimensions: user goals (why use it), risk trust (how safe it is), and technical architecture (where and how to use it). This framework aims to provide a clear portrait of each stablecoin, assisting users in making informed decisions in complex scenarios.

1. User Intent and Financial Goals (Why use it)

This dimension starts from user motivation, clarifying the usage scenarios of stablecoins, and directly answering the question of "why use them." The functions of stablecoins have diversified, with different scenarios corresponding to different choices:

• Payment and value transfer: USDT on the Tron network has characteristics such as low fees, wide coverage, and convenience for cross-border remittances.
• Capital preservation and risk hedging: such as USDC, suitable for use as an on-chain dollar account or for hedging in a bear market.
• Yield generation and wealth appreciation: such as USDe (Ethena), generates native yield through a peg mechanism and derivative hedging model.
• Collateral and leverage use: Assets such as DAI, USDC, and USDT are the most commonly used collateral in DeFi protocols, facilitating borrowing and trading.

This classification can directly address the most common question from users: I want to do X, which stablecoin should I choose?

2. Risk Status and Trust Model (How Safe Is It)

This dimension determines the level of risk that users are willing to bear when making choices, with core elements including reserve composition, audit status, and regulatory licenses.

• The top tier consists of bank-grade and regulated stablecoins, whose credibility is based on government regulation and the traditional financial system, with typical representatives being USDC and PYUSD.
• Secondly, there are market-driven and systemic stablecoins, such as USDT, whose trust mainly comes from the huge network effect and unmatched liquidity, although its regulatory status and reserve transparency are controversial.
• Again, there are decentralized and on-chain verifiable stablecoins, such as MakerDAO's DAI, where users trust the publicly auditable code and community consensus, rather than a centralized entity.
• Finally, there are synthetic assets and algorithm-driven stablecoins that represent cutting-edge exploration, such as Ethena's USDe, which is based on complex economic models of trust, while also accompanied by new types of risks that have not yet been long-term tested.

The regulatory rating agency S&P has rated USDC as "strong" and USDT as "restricted", which also confirms the practical foundation of this hierarchical framework.

3. Technical Architecture and Ecosystem Adaptation (Where and How to Use)

This dimension focuses on the technology architecture and ecosystem, determining "where and how to use" stablecoins. The method of deployment on different chains determines its availability, security, and cost structure, where the distinction between native and cross-chain deployment is crucial:

• Native stablecoins are directly issued by the authorities (such as USDC on Base), making them safer.
• The cross-chain version relies on the cross-chain bridge mechanism, which poses a risk of smart contract attacks.

Secondly, a stablecoin-dominated ecosystem determines its core application scenarios:

• The Ethereum mainnet is more suitable for settlement due to its high security.
• High-performance L1s like Solana have attracted a large amount of payment and transfer activities due to their low fees and high speed.
• Arbitrum, Base, and other Ethereum L2 solutions are quickly becoming the main venues for DeFi activities due to their low Gas fees and compatibility with Ethereum.

This means that users can choose the most suitable version among different networks based on on-chain costs and usage requirements.

Based on the above considerations, some platforms have begun to categorize stablecoins into multiple exploratory sub-collections:

• Mainstream stablecoins: USDT, USDC and other leading assets.
• DeFi protocol stablecoins: DAI, crvUSD, USDe and other stablecoins with extensive DeFi scenarios.
• Global payment stablecoins: stablecoins aimed at settlement such as Tron-USDT, TUSD, etc.
• Compliant stablecoins: PYUSD, FDUSD and other regulated assets.
• Yield-generating stablecoins: USDe, USDS, USDB and other stablecoins with built-in yield mechanisms.
• Non-USD stablecoins: EURC, XAU₮, PAXG and other currency diversification explorations.

This classification method categorizes stablecoins based on user intent (such as beginner, DeFi yield, global payments), allowing users to quickly match the most suitable combination of stablecoins according to their cognitive level, financial goals, and the availability in their region.

Conclusion

The essence of stablecoins is that they are tools that serve people. From traditional classifications to a multidimensional worldview, what has changed is not only the classification method but also the way that serves the actual needs of users. Therefore, there are no all-purpose stablecoins, only stablecoins that adapt to specific scenarios.

For example, a complete description of USDC would be: it has both "capital preservation" and "collateral" attributes according to user intent; it belongs to the first tier in terms of risk status, being "bank-grade and regulated"; in terms of technical architecture, it offers native versions on many mainstream L1 and L2.

This description is much richer and more practical than simply referring to "fiat-collateralized" stablecoins, as it can truly help users understand the trade-offs of different stablecoins in terms of security, yield potential, composability, and trading efficiency, allowing them to make the most informed choices based on their own needs.

The ultimate value of a stablecoin comes from its ability to "serve people"; it should not just be a derivative of the crypto narrative, but should be the one that is closest to practical use in the user's asset management toolbox. In the Web3 world, the best choice is always the one that is "suitable for oneself."