Why Stablecoins Are Crypto's Biggest Opportunity | Charlie Noyes & Bam Azizi

This episode delves into why stablecoins represent crypto's most significant near-term opportunity, exploring the infrastructure challenges and investment landscape through the lens of Mesh's $82M raise and insights from Paradigm's Charlie Noyes and Mesh's Bam Azizi.

Charlie Noyes on VC Visibility

• Charlie Noyes, General Partner at Paradigm, addresses his relatively low public profile over the past few years. He emphasizes Paradigm's focus on tangible development over public discourse, stating, "We hope that our role is more building things than just talking about things." This builder-centric approach reflects Paradigm's investment philosophy, prioritizing substantive technological progress within their portfolio companies.

Paradigm's Investment in Mesh

• Charlie explains Paradigm's investment rationale for Mesh, highlighting its alignment with their broader thesis on stablecoin adoption and payment infrastructure. While known for backing crypto-native protocols like Uniswap and Optimism, Paradigm has also historically invested in traditional-looking infrastructure companies like Fireblocks and Chainalysis. The Mesh investment was driven by excitement around the stablecoin narrative, increasing merchant adoption, and strategic moves like Stripe acquiring Bridge, signaling a maturation of the crypto payments space.
• Strategic Insight: Paradigm's backing of Mesh underscores institutional VC confidence in the critical infrastructure layer supporting stablecoin payments, marking it as a key area for investors tracking crypto's integration into mainstream finance.

The Mesh Fundraising Story

• Bam Azizi, Founder of Mesh, shares the journey behind their $82 million raise, emphasizing long-term relationship building over rapid outreach. Contact initiated over a year prior led to a year-end update shared with select firms, including Paradigm. Bam highlights Paradigm's deep engagement, value-add proposition, and rapid execution, closing the deal in just two weeks. He cautions against misinterpreting this speed, noting Mesh is a five-year-old company and his journey took 12 years, stating it wasn't an "overnight success."
• Actionable Insight: This narrative highlights the importance of strategic patience, persistent relationship cultivation, and demonstrating product-market fit before seeking significant funding rounds, lessons relevant for founders and investors assessing startup maturity. The raise was notably conducted significantly in stablecoins, reflecting the company's core focus.

Mesh's Evolution: From B2C to B2B Infrastructure

• Bam recounts Mesh's significant pivot. Initially launched as 'Front,' a B2C crypto portfolio management app, the core challenge and expertise lay in building hundreds of integrations across chains, wallets, and exchanges. Facing monetization difficulties in 2022, Mesh pivoted to leverage this integration capability as a B2B offering.
• API (Application Programming Interface): A set of rules and protocols that allow different software applications to communicate with each other. Mesh provides an API for developers to integrate crypto functionalities.
• Launched as Mesh Connect on Product Hunt in September 2022, the B2B API product quickly gained traction, securing customers like Revolut, MetaMask, and Coinbase. This pivot focused the company on its core strength: providing the connection layer for the fragmented crypto ecosystem, now aimed squarely at the payments use case.
• Strategic Insight: Mesh's successful pivot demonstrates the value of identifying and productizing core technical competencies. For investors, this highlights the importance of evaluating a startup's underlying technical moat and its adaptability to market needs.

Mesh's Role in the Payment Ecosystem

• Mesh positions itself as a global payment network, acting as an intermediary layer. It connects numerous fragmented crypto sources (exchanges, wallets) with PSPs (Payment Service Providers) – companies like PayPal or Stripe that facilitate transactions for merchants – via a single API. This solves significant user experience (UX) friction in crypto payments, which Bam notes fails the "grandma test." Current issues include manual address copying, network selection errors, long settlement times, and gas fees. Mesh aims to abstract this complexity, enabling one-click crypto payments similar to traditional card swipes.
• Even stablecoin payments face fragmentation (e.g., needing to convert USDT to PYUSD), which Mesh handles behind the scenes. Charlie Noyes reinforces this, calling the current crypto payment UX "not sort of an acceptable user experience for widespread adoption."
• Actionable Insight: Solving the severe UX challenges in crypto payments is paramount for broader adoption. Infrastructure solutions like Mesh that abstract complexity and reduce friction for both consumers and merchants represent a significant investment thesis.

Solving Liquidity Fragmentation (Plaid for Crypto Analogy)

• The core problem Mesh addresses in payments is the liquidity fragmentation of stablecoins across different platforms and networks. Charlie Noyes draws an analogy to Plaid (a fintech company providing APIs to connect bank accounts to apps), which simplified bank connections from manual routing number entry to a seamless API integration. While Bam prefers the "Visa for crypto" analogy due to the payment focus, he agrees the user experience goal is similar to Plaid's abstraction of complexity.
• Strategic Insight: The "Plaid for crypto" analogy effectively communicates the value proposition: creating a unified access layer for a fragmented financial landscape. This highlights the market potential for aggregation and abstraction infrastructure in crypto finance.

Business Model: API vs. SAS and Stablecoin Growth

• Bam discusses the choice between SAS (Software as a Service) – typically subscription-based – and transaction-based API business models. Mesh employs a hybrid approach: a minimum recurring fee for predictability, supplemented by a transaction-based model (charging basis points or "bips") to capture upside from volume growth. This decision was supported by data showing stablecoin transaction volume growing rapidly and consistently, even during market downturns, reportedly surpassing Visa and Mastercard combined volume plus 7%.
• Actionable Insight: The demonstrated resilience and explosive growth of stablecoin transaction volumes validate transaction-based revenue models for infrastructure providers. Investors should assess how well a company's business model aligns with underlying, durable market trends. Bam notes his preference leans towards transaction models if forced to choose one.

The Stablecoin Investment Landscape

• Charlie Noyes views stablecoins as perhaps crypto's first true "lab leak" into the mainstream world, potentially even underrated in their disruptive potential. He outlines investment approaches:
• Decentralized Stablecoins (e.g., DAI/Maker): Historically challenging to scale.
• Structured Products (e.g., Ethena): Viewed more as a distinct category than a traditional stablecoin.
• Issuers (e.g., Circle/Tether): Highly profitable and dominant, but difficult to compete with directly due to network effects and regulatory hurdles.
• Infrastructure & Application Layer (e.g., Mesh, Bridge, BVNK): A "super fruitful and interesting field," particularly attractive for fintech-focused founders and offering significant surface area for building value-added services on top of stablecoins.
• Quote: Charlie believes "we're probably collectively underrating how disruptive they [stablecoins] have the potential to be."
• Strategic Insight: While direct investment in dominant stablecoin issuers presents challenges, the infrastructure and application layers enabling stablecoin usability (payments, orchestration, UX) offer fertile ground for venture investment and innovation.

Competition and Network Effects in Stablecoins

• Competition against established issuers like Tether and Circle is difficult due to strong Network Effects (where a service becomes more valuable as more people use it), deep liquidity, and navigating a complex, shifting regulatory landscape. Charlie cites Binance's BUSD stablecoin, which, despite Binance's massive user base (many using it as their primary financial account), faced significant challenges gaining traction and ultimately regulatory headwinds. While fee agreements might evolve (e.g., with platforms like Agora enabling white-label stablecoin issuance), displacing incumbents remains a formidable task.
• Actionable Insight: Investors evaluating new stablecoin issuers must critically assess their strategy for overcoming the powerful network effects and liquidity advantages of incumbents, alongside navigating regulatory compliance.

The Future of Stablecoin Issuance: Fragmentation Ahead

• Following news of Fidelity potentially launching its own stablecoin, Bam predicts significant market fragmentation. He anticipates banks, brokerages (Robinhood), fintechs (Revolut), and potentially even Big Tech companies launching their own stablecoins, likely using white-label services like M0 or Agora rather than partnering directly with Circle or Tether to maintain brand control. This will lead to a proliferation of stablecoins tailored to specific regions (non-USD) and use cases (e.g., payment-focused like PayPal's PYUSD or Ripple's upcoming stablecoin).
• Strategic Insight: The anticipated fragmentation of the stablecoin market will heighten the need for aggregation, interoperability, and UX abstraction layers. Companies providing these solutions (like Mesh) stand to benefit significantly from this trend.

User Experience Challenges Amid Fragmentation

• Both speakers acknowledge that this proliferation will initially create a "period of hell" for user experience, citing the increasing complexity even in simple tasks like angel investing across different stablecoins and chains (USDC on Base vs. Ethereum vs. Solana, USDT, PYUSD, etc.). Seamless integration and abstraction will be crucial to navigate this complexity.
• Actionable Insight: The immediate UX challenges created by fragmentation represent a clear market need. Solutions that simplify choices and streamline transactions for end-users will be in high demand.

Identifying the Winners in the Stablecoin Space

• Predicting outright winners is difficult:
  • Charlie's View: Tether is likely to remain a dominant global player due to its extensive last-mile distribution and deep network effects, particularly in emerging markets. The winner in the more regulated, US-centric market (USDC's current domain) is less clear, with banks and fintechs having credible paths.
  • Bam's View: Agrees on Tether's potential but notes compliance hurdles. He is bullish on payment-focused stablecoins like PYUSD (PayPal) and the upcoming Ripple USD, citing their existing distribution networks (PayPal's 400M users, Ripple's B2B payment flows) as key advantages for capturing payment volumes.
• Strategic Insight: Investors should analyze stablecoins based on their target niche: global P2P (Tether), regulated institutional/US payments (USDC vs. new entrants), or specific payment corridors (PYUSD, Ripple USD). Distribution, compliance, and use-case focus are critical evaluation factors.

Stablecoin Adoption Paths: Consumer vs. Corporate

• Two main adoption vectors exist:
  • Mass Consumer Retail: Replacing credit cards at grocery stores seems less likely in developed markets like the US with existing efficient systems. However, it's highly relevant globally, especially in unbanked regions or areas with hyperinflation (Turkey, LatAm) where users need stable value and merchants adapt.
  • Corporate & Cross-Border: This is seen as highly plausible. Use cases include B2B settlements, cross-border payments (Wise use case), luxury goods purchases, and global companies (Netflix, Amazon) collecting fees internationally. Charlie suggests even US consumers might settle credit card bills in stablecoins eventually.
• Actionable Insight: Near-term, high-impact stablecoin adoption is concentrated in cross-border transactions, B2B payments, and serving populations underserved by traditional finance. These areas offer the most immediate market opportunities for stablecoin-related businesses.

The Cloud Computing Analogy for Stablecoin Adoption

• Bam draws a parallel between stablecoin adoption and the historical adoption of cloud computing. Initially met with skepticism by incumbents (like banks resisting hosting data externally), cloud services gradually became indispensable, even for cautious enterprises (using SaaS tools like Salesforce running on the cloud). He argues blockchain/stablecoins will follow a similar path, with initial resistance giving way to adoption driven by competitive pressure and the inherent benefits (global, accessible, tool-rich).
• Strategic Insight: The cloud analogy suggests that even if initial penetration into traditional finance seems slow, the long-term potential is vast. The "TAM of money" is enormous, meaning even small market share gains for stablecoin solutions can create massive businesses (Bam's "TerraCorn" concept).

The Multi-Chain Future

• Both speakers agree that a multi-chain world is the likely reality for the foreseeable future:
  • Charlie's Observation: Talent and development are highly diffused across multiple ecosystems (Ethereum, Solana, others). These communities are deeply committed and unlikely to disappear or consolidate quickly. He operates in a "multi-chain headspace." Define L2 (Layer 2): A secondary framework or protocol built on top of an existing blockchain (Layer 1) to improve its scalability and speed.
  • Bam's Analogy: Compares it to Web2's diverse programming languages (C, Java, etc.). Ultimately, these are tools, and abstraction layers will hide the underlying chain complexity from end-users, especially as AI integrates further. The focus will shift to the application layer.
• Actionable Insight: The persistence of multiple L1 and L2 ecosystems necessitates investment in chain-agnostic infrastructure, interoperability solutions, and abstraction layers that simplify cross-chain interactions for developers and users.

Barriers to Institutional Adoption

• Bam ranks the hurdles for institutional stablecoin adoption:
  1. Policy & Regulation: The primary blocker. Clear regulations act as "core rails" needed to make risk-averse institutions comfortable.
  2. Technology & Talent: Banks and traditional institutions face challenges competing for scarce Web3 engineering talent to build or integrate these systems.
  3. Crypto Brand: Considered largely a historical issue, mitigated by the rise and utility of stablecoins and improving regulatory sentiment.
• Strategic Insight: Regulatory clarity is the single most important catalyst required to unlock widespread institutional adoption of stablecoins.

Macro View and Future Trends (Charlie)

• Charlie offers a broader perspective on the crypto space heading into 2025:
  • Focus remains on building activity, talent quality (which keeps rising), and attracting the next generation.
  • Key promising areas beyond stablecoins include RWAs (Real-World Assets) – tokenizing assets like equities or debt on-chain – and leveraging the surprisingly robust DeFi (Decentralized Finance) infrastructure (lending markets, DEXes) that has been built.
  • Bringing high-quality, economically productive RWAs onto these DeFi rails could significantly expand the scope of on-chain financial activity beyond current crypto assets.
  • Actionable Insight: Investors should look beyond immediate payment use cases towards the potential convergence of traditional finance and DeFi through RWA tokenization, representing a major future growth vector.

The Changing Crypto Founder Profile (Bam)

• Bam observes that the profile of crypto founders is evolving. As blockchain becomes underlying infrastructure, more founders with traditional tech (API, fintech) backgrounds are entering the space, bridging Web2 and Web3. This shift is driven by Web2 players increasingly exploring on-chain activities. He encourages new founders, stating "there is no better time to build for crypto and a stable coin and payment use case," emphasizing the journey is just beginning. He briefly touches on the potential of combining API infrastructure with AI.
• Actionable Insight: The influx of experienced Web2 builders signals market maturation. Opportunities abound at the intersection of traditional tech/finance and crypto, particularly in building user-friendly applications and infrastructure that abstract blockchain complexity. AI's role in enhancing this infrastructure is an emerging trend to monitor.

Reflective and Strategic Conclusion

• The discussion highlights stablecoins as crypto's prime near-term driver, creating urgent demand for robust payment infrastructure and UX solutions. Investors and researchers should closely monitor regulatory developments and the rise of aggregation platforms like Mesh, which are crucial for navigating the inevitable market fragmentation.