Why Agents Could Be Blockchains' Biggest Users (ft. Circle CEO Jeremy Allaire and Chris Dixon)

When we think about an economic operating system that runs on the internet, which goes way beyond payment, every kind of financial contract and economic contract and governance decisions, if you want that to be something that's internet scale, it has to have geoeconomic and geopolitical diversity.

The most widely used interoperability protocol in the world right now on all blockchain networks is Circle's cross-chain transfer protocol, CCTP. We mint and redeem $150 billion a quarter of this, and that liquidity that exists on a primary basis, on a secondary basis in on-chain markets and on-chain protocols, that's very powerful.

We're going to go through a shift towards...

So, I guess maybe stepping back a couple things. It actually goes back to like when we started Circle in 2013, late 2012, 2013 when we were getting started. I think the thing that drew me to this whole space was sort of this idea of programmable money and this idea of these networks. At the time, there's blockchain network, etc., or the Bitcoin network, excuse me, but these networks actually becoming, you know, computers that you could run applications on. And the founding vision of the company was, you know what, I think that these networks are going to become like new distributed compute engines. I think that they're very purpose-built for things where you want to have like assured data and transactions and compute. That's the problem that they can solve that hasn't been solved, but doing that in a public environment where you have essentially a public computer and that you could issue, you know, things on top of that. You could issue a digital dollar. We at the time, we always used the phrase digital currency. We never said cryptocurrency, but you could have a dollar digital currency. And the idea was first you could build like a protocol for dollars on the internet, like an HTTP for money. And that protocol, in order to do that, you needed these computer networks to actually let you build protocols, stuff that, you know, Chris and I go way back in terms of the internet protocols. But it's like you need to be able to build these higher-level protocols on these computers, and then you need to be able to scale them and make them user-friendly and all this stuff. And so...

I mean, I worked on early web protocols. I worked on Web 2 protocols. I worked on video protocols, communications protocols, programming languages, virtual machines, like all the infrastructure stuff of the first and second generation of the internet. And so to me, this was like, this is the next logical infrastructure layer of the internet. And, you know, at the time, our view was, well, you know what, Bitcoin has early mover advantage. It's a good open source project. Let's get involved with that open source community and like, let's add the things that let this be more capable. Let's add more programming language capabilities. Let's add the things that let us realize our vision. Well, that didn't work out very well because it became a very, very kind of closed community in the sense of tightly controlled the open source community, like the contributors. It was more narrow in terms of what it was trying to do, and there was a lot of ideological battles about that, etc. And we were on one side of that, and there were others on the other side of that, and we don't need to repeat all that history. But I think Sean and I were always thinking like, should we build, should we just build one of these computer networks ourselves? And given the other stuff we had going on, as you just noted, like we've had a lot of stuff has gone on in our history, it never felt right. You know, interestingly, when the second generation of these computer networks came out, Ethereum, a lot of those ideas, programmability, a virtual machine, issuing assets, like it actually worked. And, you know, I think you could be skeptical of it technically because if you looked at it as a technical purist, you'd say, wow, this is like gum and bailing wire. I don't know what this Solidity thing is like. It's not like an enterprise-grade thing or however you want to characterize it. By 2016, it was clear to us it was good enough. And so, as you recall and probably wrote about, we abandoned the kind of layer of moving dollars over Bitcoin and instead said, let's actually build a protocol for dollars that runs on Ethereum. And that led us to the development and launch of USDC. And so basically, by 2017, 2018, we were like, okay, we can now do this. We can do that layer. And it wasn't again, wasn't clear to us like we should build our own computer network and our own operating system. And then you kind of fast forward to like 2020, 2021, it was really clear that the infrastructure model of these networks was not adequate. Like Ethereum itself was slow. It was expensive. The gas fees were really a problem. And so a lot of people started saying there's an opportunity to like have a clean room and build like de novo networks. And we started to say, well, let's align with those because we need them to realize our vision of like scaled applications and programmability and velocity of money. Like we need those. So we partnered with the Solana team in 2020. We partnered with other L1s that were emerging, and then we started to work with the L2s. And so then our philosophy really became like, well, let's just make sure that digital dollars that we make and the protocols that support them run everywhere. I kind of make it akin like USDC is like Spotify or Netflix. Like you just buy a device, you know, it works. We want to make sure that if you have a blockchain, like you have these digital dollars and they work, and you can integrate them. And then we built the interoperability layer to connect it all so that you can safely move them around. Through all of this, like I think our view was like these networks keep improving and, you know, solving for different things. But about two and a half years ago, I think we started to see a couple things happen. I think one was major institutions were starting to say, "Hey, actually, we might use this technology for actual money, actual securities, like there's real promise here."

You know, when I think about it, like something like USDC was really important. Stablecoins was like a thing that people were like, "Oh, wow, this actually seems to solve a problem for moving money." And so people started to look at like, I could actually, you know, I could actually start to really move money better with this. And that's when we really started to see growth in non-speculative uses of this, right? And that was important. And then I think the other change was, you know, regulators actually started to sort of look at this and say, you know, hey, if the world's financial institutions are going to connect to blockchains, we expect certain things of those blockchains. We expect them to meet certain standards. And without boring you, there are standards for infrastructure in the financial system, and those standards are actually enforced, and they're enforced by like central banks, they're enforced by the regulators that oversee our capital markets, and those are infrastructure standards. And so we started hearing that, and we started meeting with more and more of these institutions who are interested in stablecoins and the applications of stablecoins. And what we really found was that there were not blockchain networks and computers that were purpose-built for that what we saw as like a new era that was coming, this mainstream era. And so we took the decision to de novo build a new operating system and a new network with ARC. And I think we designed it in a model which, you know, I think it inherits a lot from what we've learned from how blockchain networks are incentivized, grown, and governed. It inherits a lot from other big platform ecosystem initiatives that we've seen historically, like Google with Android. It inherits a lot from open source, and we've tried to bring those together in a way where this is a network that is owned by a really broad set of stakeholders, ultimately the users on the network as well, but that the infrastructure can actually be held to standards that like the world's central banks would say, yeah, you're good to go with putting real money and real investment contracts to perform on this thing. And then I think the last thing I'll say, and we can move off this, is we really saw, you know, as we were building this, that the primary actors that were going to be using these new types of operating systems were increasingly going to be machines. We always thought that, like for a long time, we always thought that kind of, you know, autonomous software running on the internet could do this stuff. No idea about generative AI, obviously, when we thought about that a long time ago, but then it became very clear that the primary users, the primary deployers of software, and the primary, you know, entities that were going to be running on this was going to very likely be AI. And, you know, we started to think about a lot of the issues that go into that, and we continue to as well. It's like a very central set of design features for what we're doing is this shift to this agentic economy as well. But anyway, that's like the backdrop. That's the long-winded backdrop.

Obviously, one of the things that's a little bit different about ARC is that in order to operate the infrastructure of the network and to run ultimately what will be like staking validation nodes on the network, you actually have to meet a high bar of operating standards that are operational and information security and compliance and other stuff. And by knowing that the people doing that are meeting those standards and upholding them and have service level agreements and other things, part of that actually allows the network to deliver what we call deterministic settlement finality in a fraction of a second. And that's actually very, very important with real money. But the other thing about that is that when we think about an economic operating system that runs on the internet that can support the full vernacular of economic activity, which goes way beyond payments, like every kind of financial contract and economic contract and governance decisions and all this, if you want that to be something that's internet scale, it has to have geoeconomic and geopolitical diversity. It actually needs to be something that is credibly neutral vis-a-vis the stakeholders that run the infrastructure and that ultimately govern the infrastructure. That's one of the kind of covenants that we've made, and it shows up in how this has stood up. There are quite a few of the largest global players in capital markets, in asset management, in payments, as well as many global banks that cover huge amounts of international markets, Asian markets, European markets, US markets. And so we've started, and this is really just the very beginning, by trying to get this very diverse set of infrastructure stakeholders so that if I'm an entity in a market in the world, I understand that this is run in this way. And I think we would like to see that go much, much further. We would like to see kind of every major geoeconomic block in the world running the infrastructure, having significant economic stake in the infrastructure, having their local champions in their markets using the infrastructure. And that's critical. If you don't have that, it's going to be very, very hard to get internet scale if it's an American thing or what have you. And so blockchain networks and distributed governance and all these things give us some really interesting tools for that. And so that's a big motivation. And again, we're early in that. Like we had the first 10 or 11 folks launch a few weeks ago with us with mainnet. That'll obviously grow. Ultimately, there can be like 40 slots on the network. And so we really think about that. And then ultimately those staking validators and operators will vote in elections on the expansion of the membership of the infrastructure partners from around the world. But I think we're trying to steer it from the start to have that strong basis behind it.

There's sort of like three pillars across what we're doing. There's the stablecoin network, which is our USDC and also our euro stablecoin and other digital assets that we issue. We have a tokenized bitcoin product. We have the digital euro. We have the largest, I believe, currently tokenized treasury and money market product. And so there's like a whole family there. But USDC is obviously the central actor in that group. And, you know, stablecoin networks themselves, their platform and network effects businesses. The more applications that are connected to the network, the more utility that the network has, which means that the next developer that comes along and says, "Hey, what network am I going to support? Oh, I should support this because everyone else supports it." You have this really powerful utility flywheel. And that's there. You also have very powerful liquidity flywheels. And that's something unique to currencies and certainly unique to digital asset markets and market infrastructure is the liquidity is a huge thing. And so primary liquidity, the ability to seamlessly kind of move this in markets globally and financial market centers globally is huge. So we mint and redeem, you know, $150 billion a quarter of this, and it's plugged into all of these banking systems globally, and that liquidity that exists on a primary basis, on a secondary basis in on-chain markets and on-chain protocols, that's very powerful. The fact that Binance and Coinbase and Hyperliquid, just as a few examples, have such deep, deep fundamental liquidity on it means that its capital efficiency is greater, and therefore other products that need the most efficient capital benefit from that as well. So you have utility network effects and you have liquidity network effects, and then you also have like these, you know, what I'll broadly call like infrastructure moats, which is to say, you know, we've built regulated infrastructure in all these parts of the world, which is non-trivial. It's a major undertaking to become the sort of approved infrastructure in these markets, and we generally have been first in that. And then there's actual infrastructure, which is interoperability infrastructure, for example. So the most widely used interoperability protocol in the world right now on all blockchain networks across all assets is Circle's cross-chain transfer protocol, CCTP, and that protocol is the most widely used because USDC is the most transferred digital currency across these networks. And so...

Yeah. And that bounces around. It's sort of been as high as 70% in recent quarters. And so it's significant, right? And one of, actually, it ties back to ARC. One of the big things that we've done with ARC is if you issue an asset on ARC, a tokenized equity or a stablecoin or a tokenized credit product or whatever it is, your asset actually becomes eligible to run on the payload of CCTP. And so in a sense, like we built the highways to move value around all these networks, and the only car that could drive on the highway was USDC until now. Now anyone that issues an asset, so if you're an asset issuer, you can ride those same highways and get that interoperability, liquidity, distribution that flows. So that's really powerful. So the stablecoin network has those attributes. And I think what we like to say is like the stablecoin market is sort of a winner-take-most market structure, not a winner-take-all market structure. And there's going to be, you know, over time as this goes from several hundred billion to hopefully several trillion, there's going to be multiple networks, right? And so we assume that, like, we don't assume like this is a 90% market, right? It's a winner-take-most. And then I think the other piece is we have CPN, which is our Circle Payments Network. That's also a network model. It's built for financial institutions. It is a network not dissimilar from like a Visa or a Swift, meaning FIs join and then they can use it to move value around globally using stablecoin rails and blockchains as the coordination mechanism for all that value exchange. That's growing really fast. We keep reporting every quarter how that's growing, and we've got almost a couple hundred financial institutions on it. That in turn also supports demand for the stablecoin network. But at the level of ARC, what I would say is it relates to where I started here, which is in this conversation, which is, you know, we think we're going into a new chapter in this space. And in my mind, and I think this will resonate for both of you, hopefully, but, you know, we went through different eras in the internet's development. And, you know, one era was the mobile era, and we all think of the mobile era as like iPhones and Androids, but the reality is the mobile era started like 15 or 20 years before that, and there was an unbelievable number of attempts at building the mobile operating systems and mobile platforms that we'd all use, and it attracted, you know, billions and billions of investment from everything from open source developers to the biggest companies in the world like Microsoft and Compaq. And so we had the Palm Pilot, and we had the BlackBerry, and we had the Windows Phone, and we had the Samsung phones, and we had Symbian and Nokia and NT and many, many, many others. And we all thought at the time like, "Wow, mobile's big. Look at all this stuff. Look at you can do an app on a phone." And it was all terrible. It actually didn't work for mainstream users. And so it was only the early adopters that were like leaning in. And there was a lot of money that went in to build apps. Those apps never turned into real businesses. There was a lot of infrastructure that got built. A lot of that infrastructure just is dead. It's in boxes and garbage sites all around the world, physical, I mean, products, etc. But it was like a long journey. It was like 15 years, and there was a confluence of things and a convergence of things that actually made it possible to actually create both the right kind of device and the right software operating system and experience and the right set of developer incentives and economic incentives to actually make it really work. And Apple and Google both kind of arrived there roughly the same time. You could argue about which one really drove it the most, but when I look at blockchain networks, my mental model is these are operating systems. They attract developers. They attract assets. They're economic operating systems. And I think we've been in that 15-year journey. And it's very hard to say today like, oh, this is the iOS of that or the Android of that. It's very hard to see that. And it's actually, I think most of us would agree, like most of the apps that we have that sit on these are still not like viable to mainstream users. We're only just starting to see those apps emerge. We're just beginning, like FOMO or, you know, or like these apps where you don't even know you're using crypto. And same thing with stablecoins. Like you've got these money apps, these neobanking apps, right? You don't even know you're using crypto. And AI makes that even easier. So I think my view is like going from early adopter to mainstream scale, going from the few hundred million diehards who are there to trade and make money or because they believe in it to the few billion people where this is just this infrastructure that's behind the scenes powering economic activity, that's all still in front of us. And so my view is like this is a wide open space. No one has won significant developer mindshare. The number of active developers on any of these networks is incredibly small when you think about developer activations in traditional platforms. And so it's super early, and so no one has a moat, is I guess my point. And I think you're exactly right, which is that software velocity is increasing extraordinarily fast. Our own software velocity as a company, we're shipping a lot more software than we ever...

I mean, it's phenomenal, it's phenomenal what we're seeing. And so I believe that it is a very wide open space right now. And I think Circle as a sponsor on this, the institutional credibility, the stablecoin network that we bring, the stablecoin-centricity of the compute layer, the gas layer, other things, and the designing it for this kind of future space, but it's also we're building this to be, you know, basically distributed in its ownership and its governance, and that's all public and out there. You know, we've got ARC token and ARC token white papers out there, many major firms that are stakeholders. That will just continue to be the case, and that will become much more distributed. And so this is why I sort of think of like Google's Android. Android is an open source operating system that Google is the primary author of. They bundle apps that most people include, but they don't have to. And then device makers and hardware manufacturers and telephone carriers and retailers and others have a role to play and value to get out of that ecosystem. That's 85% of the market or whatever it is. I believe it's early, and I believe the next, you know, three to five years will really redefine this. And it comes back to the other comment, which is the...

Primary actors in all this are going to be, you know, AI creating the software. Maybe there's people behind the AI creating the software, but it'll also be AI creating its own software, and it's going to be AI intermediating and interacting and performing the economic work. And in fact, cognitive labor is economic work. And so the cognitive labor itself will get performed and manifest and coordinated and exchanged on these networks as well.