Learn about the development history of Circle, the leading compliant stablecoin

If you want to know something about stablecoins, you still need to first understand Circle’s path: How did Circle get to where it is today?

Author: Yue Xiaoyu

Cover: Circle

introduction:

The Web3 industry is developing so fast that new things appear every day. Therefore, many daily thoughts are worth recording.

These thoughts will be updated in real time on the Twitter account and regularly summarized and published on the WeChat public account.

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Friends around me have started to learn about stablecoins through Circle.

After Circle went public, its stock price soared from US$31 at the time of issuance to over US$200, attracting a lot of attention to stablecoins.

The market's recognition of Circle, on the one hand, shows how much importance Wall Street attaches to stablecoins. On the other hand, the most important reason is that stablecoin-related assets are very scarce.

If you want to know something about stablecoins, you still need to first understand Circle’s path: How did Circle get to where it is today?

In general, the development history of Circle can be described as twists and turns, going through three major stages:

The first stage was in 2013, when Circle was founded in Boston, USA. Its initial positioning was Bitcoin payment, similar to "Bitcoin Alipay".

The name of this product is "Circle Pay".

The second phase was in 2018, when Circle had become a very diversified company.

Circle currently has three major business lines: cryptocurrency trading platform Poloniex, over-the-counter trading (OTC), and the original payment business Circle Pay.

The third stage was in 2019, when Circle closed all three main business lines and only retained the stablecoin business USDC.

What happened during these stages? Why did these stages change?

We can dive in together and take a closer look.

1. From Bitcoin payment to diversified business layout

First, in the first stage, around 2013, Bitcoin fluctuated violently, with prices often soaring and plummeting, so it was not suitable as a stable payment medium.

By 2017, the cryptocurrency market entered a bull market, with the price of Bitcoin rising to nearly $20,000, and other cryptocurrencies such as Ethereum also rising rapidly.

The ICO (initial coin offering) boom and the proliferation of blockchain projects have driven demand for exchanges and trading services.

Circle also took the opportunity to enter the exchange business. In 2017, Circle acquired the US compliant exchange Poloniex for approximately US$400 million.

At that time, Poloniex had a market share of about 60% in the United States and was the number one exchange, which also became the core of Circle's business.

After establishing such an exchange, Circle expanded its OTC services, which is actually over-the-counter trading business, to help institutions match large-scale over-the-counter cryptocurrency transactions.

As a result, Circle has formed three major business lines: exchange, OTC, and payment services.

2. From diversified business to stable currency

The good times did not last long. From 2018 to 2019, the cryptocurrency market experienced a very bleak Crypto Winter.

Before Circle acquired Poloniex, Poloniex's market share in US compliant exchanges was around 60%.

However, by the second half of 2019, Poloniex's market share in all US compliant exchanges was less than 1%.

Moreover, the entire crypto market in the United States was in a sensitive period in terms of policy at the time. They had to delist many trading pairs that were considered suspected of being securities. Therefore, the trading business was actually struggling at that time, and Circle was on the verge of bankruptcy.

In 2018, Circle raised $3 billion in financing, but by 2019 its valuation in the secondary market was only $700 million to $800 million.

There are opportunities in crisis.

In 2017, the Chinese government issued 94 bans, suspending the operations of all Chinese exchanges, resulting in the emergence of a large number of offshore exchanges in the market.

Offshore exchanges have become the main trading venues for cryptocurrencies, and the stablecoins issued by USDT have become a particularly popular product in these exchanges.

A large number of trading pairs have changed from direct transactions between fiat currency and cryptocurrency to direct transactions between USDT, a stablecoin, and cryptocurrency.

The stablecoin business really started to grow in 2017 after Tether was launched in 2014. @Tether_to

Therefore, all parties with the resources hope to explore the stablecoin business. For the first time, stablecoin has become a very popular business.

Although all offshore exchanges are using USDT, there is a lack of a compliant stablecoin.

Circle also saw this track at the time. Circle felt that it could not only occupy a track but also promote some of their other businesses at the time, so they decided to develop USDC.

However, the stablecoin USDC was just a product issued by a joint venture between it and Coinbase, and its main business line at the time was the cryptocurrency trading platform Poloniex.

Therefore, when the Crypto Winter of 2018 to 2019 came, the stablecoin USDC, which was a marginal business, became Circle's only growing business.

So, Circle made a very important move: it sold Poloniex to Justin Sun and divested all its businesses, leaving only the USDC-related business.

At this point, Circle entered the third phase: focusing on stablecoins.

3. Completely switch to stablecoin business

When Circle and Coinbase established the joint venture Center as the issuer of USDC, the two companies basically held 50-50 equity and control of Center, and the two companies shared equally in all aspects of USDC issuance and governance. @coinbase

But strictly speaking, in the actual operations over the past few years, the main driving force behind the promotion of USDC and its operations is still Circle, because Coinbase's main business is still the exchange.

In the second half of 2023, Coinbase and Circle closed the joint venture Center, and all control, governance and issuance rights were given to Circle, basically making Circle fully responsible for the operation of USDC.

After the last cycle of DeFi Summer (Summer of Decentralized Finance) and then the resurgence of Solana, USDC has experienced a wave of rapid growth.

Today, with the implementation of crypto-friendly policies after Trump took office, USDC is growing rapidly again, increasing by 80% in the past year.

Circle took the opportunity to go public and became the first compliant stablecoin on the U.S. stock market, bringing a very strong demonstration effect and benchmark effect.

To sum up

No company's development is smooth sailing. Even Circle, the first compliant stablecoin, has experienced twists and turns and was even on the verge of bankruptcy.

What did Circle do right?

First of all, it is because Circle was able to keenly grasp the potential market trends and laid out the stablecoin business in advance when the exchange business was booming.

Although it can be said that Circle does whatever is popular, because it can follow the market trends, it can also seize a glimmer of hope in the crisis and rise again.

There is no such thing as a long-lasting company. Only companies that can see market trends and respond quickly to the market can survive longer.

Many large platforms/tracks/trends have developed from a single point, from point to surface, and finally to scale.

Therefore, you need to find a specific scenario and a clear type of user, serve this group of users well, and verify the feasibility of your business logic, then there will be unlimited possibilities in the future.

mutual encouragement.

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