Stablecoin infrastructure company Brale launched the ION Protocol testnet in an attempt to address the issue of capital tied up in the circulation of customized stablecoins across multiple blockchains. As more institutions issue their own stablecoins, the liquidity required for cross-chain transfers is becoming more decentralized, increasing the pressure on infrastructure.
No longer relying on pre-built liquidity pools
ION Protocol employs a burn-and-mint model. When a stablecoin is transferred from one chain to another, the tokens on the original chain are burned, and the target chain mints an equal number of tokens. Brale states that this approach avoids deploying large amounts of liquidity upfront on each supporting chain.
Currently, common cross-chain bridges typically rely on pre-injected liquidity pools or complete transfers by encapsulating tokens. Brale believes that as the number of stablecoins and blockchains continues to increase, this model will require increasingly higher capital, making it difficult to support larger-scale expansion.
More than 350 stablecoins bring fragmentation
The total market capitalization of stablecoins has now exceeded $300 billion, with USDT and USDC still dominating the market. However, banks, fintech companies, crypto institutions, and asset management companies are issuing their own branded stablecoins, with applications covering payments, settlements, and tokenized assets.
CoinGecko's tracking data shows that there are already more than 350 stablecoins on the market. Brale believes that if more issuers enter the market in the future, the existing cross-chain model will face greater pressure due to excessively fragmented liquidity, and the expansion speed of customized stablecoins will also be limited.
The first batch of partners entered the testnet
Brale founder and CEO Ben Milne stated that the company currently supports over 100 stablecoin projects, covering more than 30 blockchains. Some clients process billions of dollars in payments monthly, but their stablecoin balances are not high because these tokens are primarily used for trading and settlement, rather than investment holdings.
He stated that insufficient liquidity across different stablecoin projects is the primary obstacle to the expansion of customized stablecoins. The capital requirements would rapidly increase if sufficiently deep liquidity pools were to be established for each stablecoin on every blockchain.
Brale stated that ION and Circle's CCTP share a similar technical approach, both achieving cross-chain transfers through burning and minting. The difference lies in that ION is open to all stablecoin issuers participating in the protocol, rather than serving only a single token.
- The initial partners include Monad, Rain, and Coinflow.
- It also includes Turnkey, Etherfuse, Spark, and Canton.
- The deployment will be rolled out on the testnet first, and then expanded later.
