There is a lot happening in both the stablecoin market along with AI. Both are progressing at rapid pace.
We are looking at a market cap exceeding $300 billion for stablecoins. This is up from the $250B when the GENIUS Act was signed into law.
There are a number of different types of assets appearing. We have the large issuers such as Circle and Tether. Then we have synthetic coins joining the likes of PYUSD, Paypal's payment token.
One of the concerns is fragmentation. With many more coins expected to roll out, especially once the commercial banks start issuing, liquidity issues could arise.
Might AI be the solution? This is the view of Paxos Labs head Bhau Kotecha.
AI Agents To Provide Stablecoin Liquidity
The idea of stablecoins and AI agents is growing. It is being discussed by the likes of Mike Novogratz, CEO of Galaxy DIgitial.
In the “not-so-distant future,” AI agents could use stablecoins to handle everyday purchases, he said, citing a grocery agent that knows your diet, preferences and budget and can automatically fill your cart.
The problem, as Kotecha sees it is as follows:
Bhau Kotecha, co-founder and head of Paxos Labs, told Cointelegraph that “fragmentation is a double-edged sword.” As different models compete, as well as issue stablecoins that are aligned with their businesses, it risks “creating liquidity silos and user confusion, which can hinder adoption.”
We already see this with data throughout the Internet. If we consider that a token is nothing more than a representation of a certain amount of data, we can see how this aligns.
With a crypto token, the data has a market based, monetary value. That is the major difference between it and a vote on social media. Nevertheless, we see how data fragmentation due to silos is present.
The data tied to one's Google account has no relevance with X. They cannot be merged. Instead, each company maintains it, hindering the free flow of it.
Kotecha further espouses:
“That means fragmentation isn’t necessarily a deterrent; it can actually become a market-level optimizer, where AI ensures liquidity flows to the most efficient issuers. Over time, this could compress fees and force issuers to compete on fundamentals.”
AI Agents Increasing Efficiency
Will AI agents increase the efficiency of operations. This is something that is projected to be one of the results.
The advantage of agents is they run 24/7. There is no corner of the Internet that cannot be accessed. As long as the market is accessible, the agent can trade within it.
Agents will only improve with time. To start, they are only capped in speed by bandwidth. As the pace of the Internet increases due to faster processing, the ability of agents to interact follows a similar path.
Then we have the tie to stablecoins.
If more commercial activity is being conducted by agents, we can see how their speed, efficiency, and friction reduction can lower costs. This is crucial since the banking system has long extracted trillions from the real economy.
This ultimately comes down to the movement of data. Of course, few view it that way since there is the monetary component. Data efficiency is something that network administrators and data scientists have long focused upon.
It continues to be a major point of concern.
For markets to operate efficiency, liquidity is necessary. There are times when certain assets will lack this. AI agents, always on and operating, could be a solution.
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