Woofun AI reports that Lorenzo Valente, Research Director at ARK Invest, argues the recent hype surrounding OUSD fundamentally misinterprets the structural barriers protecting USDT and USDC. Despite an alliance of 150 companies spanning fintech, banking, and crypto infrastructure aiming to challenge @circle and @tether, Valente asserts that network effects in stablecoins are derived from liquidity depth and usage habits, not partner lists. The core argument posits that the duopoly’s dominance is secured by the immense cost of switching for major exchanges, rendering OUSD’s profit-sharing model insufficient to disrupt the status quo.

The fundamental misunderstanding lies in the assumption that OUSD’s economic model creates a novel value proposition for end-users. Valente notes that OUSD will comply with the GENIUS Act, prohibiting direct profit distribution to holders. Instead, the model shares reserve earnings with platforms and enterprises that integrate the stablecoin. This distinction is critical because it shifts the incentive structure from user adoption to institutional integration. The operating company, Open Standard, charges a 25 basis point management fee, while participants retain the net interest margin (NIM) generated from OUSD held on their networks. On paper, this appears attractive, but it ignores the reality that these entities already derive substantial value from existing stablecoins. The NIM from OUSD only becomes compelling if it does not threaten a larger, existing revenue stream, a condition rarely met by major industry players.

Binance serves as the definitive case study for this dynamic. Historically, the exchange operated BUSD, which reached a supply of $23 billion before the New York State Department of Financial Services (NYDFS) ordered issuer Paxos to shut it down in February 2023. Today, the landscape is dominated by USDT. @binance currently holds approximately $45 billion in USDT, while @Bybit_Official holds about $4 billion, and @okx holds roughly $9 billion. These figures illustrate the deep entrenchment of USDT in the offshore exchange ecosystem. Binance remains a stronghold for Tether, with USDT dominating the pricing landscape for large-scale purchases of BTC, ETH, and SOL, as well as derivative positions. The liquidity moat is not merely about availability; it is about the depth of order books, the activity of trading pairs, and the integration into the daily operations of market makers.

The true network effect is visible in the trading infrastructure where USDT is embedded. It is the primary asset in the deepest order books and the most active derivatives markets. For traders and market makers, USDT is the standard for settlement and collateral. This integration creates a high barrier to entry for any new stablecoin, regardless of its economic incentives. The liquidity advantages of USDT and USDC are often underestimated because they are invisible to casual observers but critical to professional participants. The desire not to disrupt existing systems is a powerful force, as switching costs involve not just technical integration but also the risk of losing trading volume and market share. This is why @tether and @circle are misunderstood; their value is not just in the stablecoin itself but in the ecosystem of trust and liquidity that has accumulated over years.

To understand why Binance does not leverage its position to demand a share of USDT profits, one must analyze its revenue structure. CZ, the founder of Binance, operates in a market where the exchange accounts for about 40% of global crypto derivatives trading volume. Daily volumes range from $40 billion to $50 billion, resulting in annualized volumes of $10 trillion to $15 trillion. After deducting VIP discounts and BNB rebates, the overall order/execution expense ratio is about 5 basis points. This single segment generates approximately $5 billion in annual revenue. Spot trading adds another layer, with daily volumes of $8 billion to $10 billion, annualizing to $3 trillion. With an expense ratio of 15 basis points, significantly lower than Coinbase’s retail rates due to a VIP-heavy customer base, spot trading contributes another $5 billion. These figures highlight the massive scale of Binance’s core business, which is entirely dependent on the liquidity provided by USDT.

Woofun AI data shows that beyond trading, Binance generates significant revenue from other services. Customers hold around $46 billion in stablecoins on the platform, which, while not invested directly like a brokerage, generates interest margins through wealth management and lending products. Additional revenue streams include Launchpool, Binance Pay, staking commissions, and profits from new coin listings. When combined with revenues from the BNB ecosystem, these services contribute an estimated $5 billion to $7 billion annually. Even in a bear market, Binance’s total revenue is conservatively estimated at $17 billion to $20 billion, potentially reaching $25 billion in a bull market. With such operational scale, the exchange’s valuation is likely to exceed $200 billion. This financial context explains why CZ does not prioritize negotiating better revenue-sharing terms with Tether; the risk of disrupting a $25 billion revenue engine is too high.

The cost of switching to OUSD can be quantified to demonstrate the irrationality of such a move. Binance holds $45 billion in USDT. If it were to switch to OUSD and receive 90% of the revenue shares, at an average Treasury bond yield of 3.8%, the annual earnings would be roughly $1.55 billion. While this figure appears substantial, it pales in comparison to the $25 billion in trading revenue that relies on USDT liquidity. Risking the core business for a potential $1.5 billion in earnings is a decision no rational executive would make. The historical precedent supports this view; Circle reportedly paid Binance a one-time fee of $60 million, plus ongoing monthly incentives, yet USDC supply on the platform remained stable at around $5 billion. This illustrates that even significant financial incentives cannot easily displace USDT’s entrenched position.

For an exchange, a stablecoin is not merely cash; it is a multifaceted asset serving as a pricing asset, a collateral asset, a risk management asset, a working capital asset, and the accounting unit for millions of traders. Replacing this underlying asset involves non-trivial costs in terms of technical integration, user education, and potential loss of liquidity. The network effects these stablecoins bring to holding companies are often underestimated. In most cases, the potential earnings from a new stablecoin are not enough to justify the risk of disrupting a core revenue engine. The stability and reliability of USDT and USDC are paramount, as any disruption could lead to a loss of user trust and trading volume, which are far more valuable than marginal yield improvements.

The OUSD alliance further complicates the landscape due to conflicting member interests. The alliance comprises companies with vastly different business models, leading to divergent incentives. One category follows an 'asset scale monetization' model, where companies like lending protocols, wallets, and exchanges rely on idle funds and deposits. For these entities, reserve earnings and net interest margins are directly relevant. @aave, for instance, can contribute to OUSD by using it as collateral or in liquidity pools, creating sustained supply. The other category follows a 'turnover rate monetization' model, including payment networks, processors, and remittance companies like @WesternUnion. For these firms, revenue is generated from transaction volume rather than idle funds. They view stablecoins as a 'track' for circulation, prioritizing reliability, cost, compliance, speed, and user experience over reserve earnings.

This fragmentation means that alliance members will not push OUSD with equal effort. Some will create supply, while others will only create turnover. A payment company is more likely to have OUSD circulate quickly within its system before destroying it, which is valuable for transaction volume but does not create sustained supply. This classic dilemma of the alliance model suggests that once the initial hype fades, many members may do nothing. From an equilibrium perspective, it is unlikely that all members will diligently work on implementation; some will reap benefits without contributing. This lack of aligned interests weakens the alliance’s ability to challenge the established duopoly.

In conclusion, OUSD represents an interesting experiment in stablecoin economics, aiming to challenge the reserve earnings advantages of existing giants.

However, the market has overestimated the speed at which a shared-profit model can break through existing liquidity barriers. The success of stablecoins is determined by long-term, repeated, and highly trusted usage in places where real capital flows occur. USDT remains powerful due to its deep integration in trading infrastructure, while USDC maintains resilience through its regulatory compliance and widespread adoption. OUSD faces a much harder path than assumed, as the real question is not whether it offers better economic conditions, but whether those benefits justify the risk of disrupting existing businesses. In many cases, the answer is no, as the liquidity barriers and network effects of USDT and USDC are too strong to overcome with yield incentives alone.