NalinA recent report labeled "The Relentless Rise of Stablecoins" starts with a striking message: stablecoins have processed transaction volumes surpassing $11 trillion, nearly outstripping Visa. The statistic begs the question – how did stablecoins develop such incredible PMF so sneakily?
Last month, we visited Istanbul in Turkey, one of the hubs of stablecoin activity. We adventured to a number of crypto exchange shops and had many surprising conversations that gave us a ground-level view of how stablecoins like USDT have found strong adoption in places where traditional banking systems have faltered.
Zooming out from the “crypto twitter” playground and Ethereum’s noisy surface of speculation, stablecoins and crypto are already having an outsized impact in the developing world, and in this blog post, we’ll document our adventures and learnings for what we saw as Real World Ethereum – grounded in reality and driven by necessity.
Everyone Wants Dollars
The first crypto exchange we stepped into was hidden behind a café. We were greeted by a friendly owner with a unique setup: a gaming rig for slow days, a phone, and a Ledger. While we transacted, he answered a ton of our questions and even made us a pair of espressos, sliding them thru the money-exchange slot in the thick plexiglass window.
His own story was as fascinating as his setup: he had been a long-time crypto trader himself, and so at some point it seemed only natural to him to start a crypto exchange given Turkey's relaxed regulatory environment around it.
He manages his balance in USDT on Tron, using a hot wallet with Ledger for added security, and uses Binance for its versatility. His 'tech stack' is informed by a mix of pragmatism and security; for example, he's aware of the risks associated with Tron bridges, so he opts for using Binance for safer cross-chain swaps. He explains he primarily uses Tron because of the “low fees”, but surely network effects have a lot to do with it too.
His perception of different chains was fascinating too. Terms like 'rollup' or 'layer 2' seemed unfamiliar to him. To him, each chain's token, be it USDC on Optimism or USDT on Tron, represented distinct entities entirely. Nuanced ideas like “the L2 inherits the security of its L1” have a long way to go before they percolate the real world.
The exchange surprisingly drew mostly international visitors, and only a few local Turks. Most clients were foreign tourists, converting USD cash to USDT on Tron, with Russians typically exchanging larger sums.
It's unclear if this usage pattern holds across all Istanbul exchanges, but it's likely a bit skewed for this exchange in particular due to its touristy neighborhood.
The shop charges a 5 to 10% commission on conversions. Understandably, the shop, too, avoids accepting Turkish Lira cash (inflation last year: 63%), preferring holding US dollar cash instead.
The shop’s marketing tells a similar story. Two logos take center stage: Bitcoin and Tether. But in our conversations, the owner revealed a telling detail: no one used Bitcoin in practice. Bitcoin has just become an international symbol for cryptocurrencies, a flag of recognition.
Everyone wants dollars.
The Cyberpunk Underground
Exiting the exchange, we unexpectedly ran into two Chinese women who recognized us as the builders of Daimo. In Istanbul for ZuConnect, their visit to the exchange gave us a fascinating window into China's underground crypto scene, a realm as intriguing as it is clandestine.
Confirming the statistics, their reliance on USDT on Tron was striking, almost to the point that it was inconceivable to them that anyone in the crypto sphere wouldn't be using USDT/Tron. Their own mobile Tron wallets held thousands of dollars in USDT. To them, Tron is Real World Ethereum.
But how do they on-ramp to USDT? In China, Binance P2P covertly bridges the gap between paper currency and digital dollars. Despite its illicit status, the network thrives, operating under the radar through VPNs and cash-only in-person transactions. Remarkably, still, exchange rates are extremely competitive, with only a minuscule deviation from the official USD rates. The market finds a way.
For Chinese users, the move towards USDT isn't driven by inflation, as in Turkey or Russia, but by stringent regulations. Bank accounts often get locked, credit and debit cards don’t work outside China, and international transfers are a Herculean task, making crypto dollars the only alternative.
They explained their preference for Tron over Ethereum rollups as simply a matter of economics – Tron makes transfers affordable. This preference, likely reinforced by Tron's strong community network, signifies the practical considerations dictating crypto choices in the real world.
Even using crypto wallets at all in China requires ingenuity. Apple App Store bans cryptocurrency apps in China, and Play Store is banned altogether. So we were surprised to see that they had installations of Daimo on their phones. They had discovered Daimo through a WeChat group and resorted to sideloading the app via third-party services that scrape Google Play.
On one hand, it's a good testament to crypto’s permissionless and open-source values. On the other, it brings unique challenges: ensuring users get timely updates and safeguarding them against malicious binaries. For Daimo, we’re working on verifiable builds for such cases.
Their community WeChat group discussing Daimo also hints at the peer-to-peer grassroots level at which crypto apps spread in these communities – a phenomenon we had noticed but couldn't pinpoint until then.
For many, the reality of Ethereum unfolds in the shadowy fringes, a cyberpunk underground where safety and liveness are more than just theoretical concerns.
USDT IRL
Our subsequent visits to various exchanges across Istanbul painted a picture of diversity and adaptation:
- Varied Operational Styles: We saw a stark contrast in operational styles. Some exchanges operated with strict formalities, requiring ID checks and multiple wet signatures before your exchange. Others facilitated transactions with a casual, almost anonymous approach.
- Diverse Customer Bases: At one exchange, we were told over 70% of customers are Turks, while at another, we encountered a Ukrainian client cautiously exchanging a significant sum of USD cash.
- Technological Sophistication: One of the exchanges we went to ran its own wallet and exchange infrastructure across all its Turkey location. Another was a franchise of a Singapore-based crypto exchange, and had very little understanding of how the systems worked under the hood.
Seeing the end to end UX of Tron for the first time was also fascinating. On the one hand, wallets called "Trust" with shield icons display overt branding, but if you dig deeper, the tech seems dubious and fragile.
Tron's fee system, a blend of "Energy" and "Bandwidth," seemed designed more to obscure its centralization than as a stable crypto-economic system.
Bonus: Real World Daimo
On our final day in Istanbul, we made a trek back to the first exchange shop we visited. The owner had become a friendly face by then, and we wanted to try something fun — onboard him to Daimo.
The teller's initial reaction was one of skepticism, a reflection of the prevailing view of Ethereum's prohibitive fees. But as he downloaded Daimo and we sent him $5 USDC to play around with it, his skepticism turned to curiosity. His questions were pointed and practical: "How did I pay the fee? I didn’t have ETH?" "Where's the seed phrase?" These aren’t just questions about Daimo, but about the future of the Real World Ethereum coming with rollups and account abstraction.
Our explanation of Daimo's capabilities, likening it to Tron in efficiency but superior security like Ethereum, seemed to resonate with him. Since then, he has used his Daimo wallet a few times, and even ended up joining our Telegram user channel.
His final takeaway from the onboarding, “new technology is great for Ethereum, we don’t use Ethereum because high fee”.
It’s time to build.
Thanks to Liam and Kenan who accompanied us on our visits!
- Of course, they have to be true first: https://l2beat.com/scaling/risk.