The cycle paths in the journey of stable money - From Visa to Stablecoin

Currency history has never been a straight line. Instead, it follows three cyclical paths—repeating cycles where technology and social organization face the same problems in different forms. These three cycles are not just coincidental historical patterns but reflect fundamental challenges related to structure and organization. When we observe the current stablecoin industry, it becomes clear that it is repeating the same mistakes that the credit card industry once faced.

Cycle One: Payment Network Fragmentation in the 1960s

In the 1960s, the global payment system was in chaos. Every major bank across the United States wanted to build its own credit card network. As a result, the payment infrastructure was divided into dozens of independent networks, each operating within its own scope.

If you held a credit card from Bank of America, you could only use it at stores partnered with that bank. When transactions needed to cross banks, the system relied on outdated, cumbersome check infrastructure. Interbank payment difficulties became a major nightmare, and each new bank added to the network made the problem more complex. This is the picture of a fragmented system—where the power of network effects is sliced into small pieces, preventing anyone from benefiting from scale.

Cycle Two: The Birth of Visa from the Failure of BankAmericard

American Express tried to solve this problem by building its own network, but they could only approach merchants and customers gradually. This model limited their scalability. Meanwhile, BankAmericard—owned by Bank of America—faced a different infrastructure problem: they lacked an efficient payment system to process transactions between different banks’ accounts.

The solution did not come from more advanced technology but from a different organizational approach. In 1970, Visa was formed as an independent cooperative organization. Instead of a single bank controlling the entire network, Visa empowered all member banks.

Dee Hock, the founder of Visa, led a revolutionary shift in thinking. He didn’t sell a product to banks but sold them a future. He had to convince hundreds of banks that participating in a shared network would be more profitable than building their own systems. And he succeeded. By 1980, Visa processed about 60% of credit card transactions in the US. Today, Visa operates in over 200 countries.

Four Pillars of Visa’s Dual Network Effect

Visa’s success was not instinct or luck but the result of four carefully designed structural elements.

First, the neutral third-party position. Visa does not compete for market share with banks. By maintaining independence, Visa ensures no bank feels threatened. Instead, banks compete with each other for customers and market share.

Second, transparent profit-sharing model. Each member bank receives a share of the profits from the entire network, proportional to the total transaction volume they handle. This incentivizes large banks to participate because they earn substantial rewards, while smaller banks are motivated to join because they benefit from the network’s scale.

Third, decentralized governance. Visa’s rules and changes are not decided by a single person or small group but require votes from all banks. A proposal needs at least 80% approval to pass. This ensures no bank is left behind.

Fourth, strategic exclusivity clauses. Participating banks are only allowed to use the Visa network, creating a dual network effect. To interact with any bank within the Visa network, you must join this network. This combination creates a strong positive feedback loop.

Cycle Three: Stablecoins Repeating Historical Mistakes

Today, we are witnessing three cyclical patterns repeating in the stablecoin space. Like in the 1960s, the stablecoin industry is fragmented into hundreds of different tokens. Companies such as Anchorage Digital, Ethena, M0, and Bridge provide tools that allow each issuer to create their own stablecoin.

The result is counterproductive. Over 300 stablecoins are listed on Defillama, but none are large enough to become a true standard. Liquidity is dispersed. Each stablecoin exists within its own ecosystem, creating hundreds of small liquidity pools instead of one large, unified pool.

This issue differs significantly from credit cards. In credit card systems, brand differences between banks do not cause friction in transactions—Visa remains the basic payment layer. But with stablecoins, each different token means a different liquidity pool, and applications will only accept stablecoins with the highest liquidity on the market. The natural outcome is a preference for a few dominant coins, while others are left behind.

MegaETH attempted to address this by issuing USDm through the USDtb support tool, but this model proved unsuccessful. It only worsened fragmentation.

A Visa-Like Model for Stablecoins—A Solution to the Three Cycles

To break free from these three cycles, we need a model similar to what Visa implemented. Instead of allowing each organization to issue its own stablecoin, we need independent third-party organizations managing stablecoins backed by different underlying assets.

Key elements include:

First, an independent cooperative structure. Like Visa, stablecoin issuers and supporting applications should not be exclusive controllers but equal members of a cooperative system.

Second, a fair profit-sharing model. Issuers and protocols should receive a share of the reserves proportional to the support they provide. This creates economic incentives to participate in a unified network.

Third, governance rights. Each member should have a voice in the development direction of the stablecoin. This ensures transparency and prevents any single organization from controlling the system.

When these three elements are combined, the network effect can be maximized. Liquidity is not dispersed but concentrated into a few widely recognized stablecoins. Applications will choose to accept these stablecoins because they are highly liquid and supported by a global network.

Conclusion: Understanding the Three Cycles to Avoid Repetition

The three cycles are not inevitable disasters—they are lessons from history. Visa demonstrated that when faced with fragmentation and network effect issues, the right organizational structure—rather than better technology—is the key to solving them.

Stablecoins are currently facing similar three cycles: fragmentation, failure, and the opportunity to rebuild correctly. If the industry learns from history, the Visa model will not only be a feasible option but the only path toward a truly unified, efficient, and sustainable global stablecoin system.