Ethereum aims to become the king of all chains, but the applications that truly run happily on the chain are actually just a few types: DEX lending protocols and various fancy derivatives. However, if we talk about what really has massive user demand, it is actually the simplest thing: transfer payments, especially stablecoin transfers. You can see the circulation of USDT on various chains to understand this.
But the problem arises. The existing general-purpose public chains handle stablecoin payments with an efficiency that drives people crazy. Ethereum is not worth mentioning; the gas fees are outrageously high. Transferring a hundred dollars' worth of USDT might cost over ten dollars in fees, which is unbearable. Solana is indeed fast, but you have to first acquire SOL for gas and also worry about the network occasionally having issues. Base, this L2, is cheap, but ultimately still relies on Ethereum's mainnet for data availability costs. Not to mention these chains are not specifically optimized for stablecoins; various functions have to rely on third-party protocols or wallets, resulting in a fragmented user experience.
The Plasma project emerged against this backdrop. It directly states that it is a Layer 1 public chain designed for stablecoins. Other things like NFTs and GameFi are not the focus. It aims to optimize the highest-frequency needs of stablecoin transfers, payments, and lending. This positioning sounds a bit unconventional, but upon careful consideration, it is quite pragmatic. After all, the stablecoin market has already surpassed $180 billion and continues to grow. Focusing on serving this area well is enough to support the value of a public chain.
From a technical architecture perspective, Plasma's design is indeed interesting. It uses the PlasmaBFT consensus mechanism, which is essentially a reimplementation of the Fast HotStuff BFT protocol in Rust, with added pipelining optimizations. The benefit of this is that throughput can be increased significantly; internal testing reportedly can reach thousands of TPS, and the confirmation time stabilizes at the second level. Unlike Ethereum's slot-based consensus, which sometimes requires waiting over ten seconds for confirmation, the speed experience in payment scenarios is completely different. Waiting a few seconds for card payments in a store versus waiting over ten seconds can feel entirely different.
More critically, Plasma has completely separated the consensus layer and execution layer. The consensus layer is responsible for ordering and finality guarantees, while the execution layer runs a modified Reth client to handle EVM logic. The benefit of this modular design is that both sides can be optimized independently without interference, and since the execution layer uses Ethereum's framework, EVM compatibility is fully native. Solidity contracts running on Ethereum can be deployed on Plasma without changing a line of code, and development tools like Foundry and Hardhat, as well as wallets like MetaMask, fully support this seamlessly, resulting in nearly zero migration costs for developers and users.
But having these is not enough. What truly impresses me about Plasma is that it has directly integrated several functions specifically optimized for stablecoins at the protocol level. This is where it differentiates itself from other general chains.
The first function is zero-fee USDT transfers. Note that this is not a marketing gimmick or a temporary subsidy activity, but rather a protocol-level native support. The specific implementation is through a protocol contract called paymaster. When you initiate a transfer or transferFrom call for USDT, this contract automatically pays the gas fees for you. Of course, to prevent abuse, some restrictions have been put in place, such as requiring API key integration and rate limits based on addresses and IPs. However, for normal users, these restrictions are hardly felt. You simply open your wallet, enter the address and amount, click send, and you don't need to worry about gas or prepare native tokens like XPL in advance.
This design solves a user experience problem that all public chains face. Think about it, ordinary users wanting to transfer USDT on a chain must first buy the native coin of that chain on an exchange, withdraw it to their wallet, and then use that coin to pay the transfer fees for USDT. This process is cumbersome, not to mention that before each transfer, they have to calculate whether the native coin in their wallet is sufficient; if not, they have to buy more. For users who only want to use stablecoins for payments, this is entirely unnecessary friction.
Plasma's zero-fee transfers simplify this process to the extreme. As long as you have USDT in your wallet, you can transfer without needing to hold XPL, without needing to exchange at an exchange, and without needing to calculate whether you have enough gas. This is a qualitative leap in experience for users treating Plasma as a payment tool, and this function is subsidized by the protocol foundation, so sustainability is not too much of a concern.
The second function is the customizable gas token. This feature is more flexible, allowing you to use any ERC20 token on the whitelist to pay transaction fees. Currently, USDT and pBTC are supported, and more stablecoins are expected to be added in the future. The implementation principle is through a paymaster contract combined with oracles to price in real-time which token you choose to pay with, and the system will automatically deduct the corresponding amount based on the current exchange rate from your account.
The imagination for this functionality is vast. For example, if you are a Bitcoin holder, you can bridge Bitcoin over to pBTC through Plasma's BTC bridge and then directly use pBTC for various DeFi operations like lending and trading on-chain. All transaction fees for these operations can be paid directly with pBTC, with no need to touch USDT or XPL throughout the process. This is a perfect solution for Bitcoin purists.
The third function is confidential payments. This feature is still in development, but from the technical white paper, the design idea is quite advanced. It does not involve complex zero-knowledge proofs but instead uses relatively simple techniques like invisible addresses and encrypted notes with selective disclosure to achieve privacy protection. The key is that this system is EVM-native, implemented with Solidity smart contracts, and has considered compliance and auditability in its design. This means your transfer amount and counterparty can be encrypted, but in necessary situations, such as regulatory audits, it can be selectively disclosed to authorized parties.
This design finds a balance between privacy and compliance, meeting some users' demands for financial privacy, such as companies paying salaries without wanting all employees to see each other's wages, without causing regulatory troubles due to complete anonymity. Moreover, because it is a protocol-native function, its compatibility with other DeFi applications will not be affected.
In addition to these stablecoin-specific features, Plasma has also developed something that I think is quite strategic—a native Bitcoin bridge. Current Bitcoin cross-chain solutions are either centralized custodial solutions like WBTC that require trust in the custodian or synthetic assets that are not backed by real BTC. Plasma's solution has established a network of validators that run complete Bitcoin nodes and manage BTC assets through multi-party computation (MPC) and threshold signatures (TSS).
The specific process is as follows: you deposit to a designated BTC address, and the validator network will monitor this BTC transaction and mint an equivalent amount of pBTC for you on the Plasma chain. pBTC is issued according to LayerZero's OFT standard, so theoretically, it can circulate across chains. When you want to withdraw, you destroy pBTC, and after the validator network approves the transaction through a statutory number of votes and uses MPC signatures to initiate the BTC release transaction, the entire process does not rely on a single custodian, making it trustless.
This design allows BTC to genuinely participate in Plasma's DeFi ecosystem. You can use pBTC as collateral for lending, pay gas fees with pBTC, and create liquidity pools with pBTC and USDT. Moreover, since pBTC is pegged 1:1 to real BTC and is not a synthetic asset, there is theoretically no risk of decoupling. For those who want to hold BTC and gain DeFi yields, this bridge holds considerable value.
Of course, this validator network is still permissioned for now, meaning validators are selected and not everyone can participate, which does pose a centralization risk. However, Plasma's roadmap mentions a gradual move towards permissionlessness, introducing staking and penalty mechanisms to ensure validators' honest behavior. This evolutionary path seems reasonable; after all, going fully decentralized from the start poses too much risk, and starting with a permissioned system to stabilize before gradually opening up is a common approach for many projects.
Speaking of which, you may ask how these functions actually work in practice. Based on existing data, there are indeed some real application scenarios running.
The most noticeable thing is the lending market. Aave has developed at an astonishing speed since its launch on Plasma, reaching a TVL of $5.9 billion within 48 hours, becoming the second-largest Aave market globally. Although some funds flowed out later, as of the end of November 2025, active loans still maintained around $1.58 billion. The borrowing rate for USDT has stabilized between 5-6%, and the capital utilization rate has remained above 84%. This indicates that there is indeed a large demand for real lending occurring on this chain.
Another relatively successful application is the SyrupUSDT by Maple Finance. This is an institutional-level USDT lending pool that can provide on-chain credit services for institutional users through Plasma. As of December 23, 2025, the TVL of this pool reached $1.1 billion. It is worth noting that Maple previously operated mainly on Ethereum, and moving such a large-scale business to Plasma shows their recognition of the performance and stability of this chain.
There have also been some recent developments in payment scenarios. On January 8, 2026, the payment application Rain announced integration with Plasma, allowing users to spend USDT on Plasma via the Rain card at over 150 million Visa merchants worldwide. This scenario aligns well with Plasma's zero-fee transfer positioning. Just think, if every transaction incurs a few cents in gas fees, that adds up to a significant expense. But transferring USDT on Plasma without fees minimizes the cost for daily expenses.
There is also a DEX called CoWSwap that launched on Plasma on January 12, 2026. They focus on MEV protection and zero gas fee trading. Combining Plasma's zero-fee USDT transfers, the experience of swapping tokens on this DEX should be quite smooth, with no worries about sandwich attacks and no gas fees, which is very appealing to retail investors.
From these applications, it is clear that Plasma has found some product-market fit in the directions of stablecoin lending and payments. Especially in lending, Plasma's high throughput and low latency are advantages for the rapid response mechanisms needed. Although the user base in payment scenarios may still be small, there is potential as more payment applications integrate.
But honestly, no project is perfect. Plasma also has some aspects that I think need attention.
The most obvious issue is the token economics. The total supply of XPL is 10 billion, but as of January 2026, only 2.067 billion are in circulation. This means that nearly 80% of the tokens are not circulating. Although there is an unlocking schedule from the official side, such a large potential selling pressure will certainly be a long-term burden on the price. Moreover, from price performance, XPL reached a historical high of $1.68 on September 28, 2025, but dropped to $0.1158 on December 18, with a decline of over 90%. Although it has recently rebounded to around $0.13, such sharp fluctuations are not good for a project aiming to establish payment infrastructure.
Moreover, the fluctuations in TVL are also quite significant. When Aave first launched, the TVL surged to $6.6 billion, but now it stabilizes between $1.7 billion and $2.7 billion. This indicates that a considerable amount of funds came for the early mining incentives, and many withdrew once the incentives ended. This phenomenon is common in DeFi projects, but for Plasma, if it cannot retain this liquidity and form real ecological stickiness, its long-term development remains a question mark.
Another potential risk is that as a new public chain, Plasma's network effect is still weak. Although technically, EVM compatibility reduces migration costs for developers, the migration of users and funds is not so easy. Currently, chains like Ethereum, Solana, and Base have formed a vast ecosystem, with user habits, wallet integrations, and application richness that Plasma will find it hard to catch up with in the short term. Plasma must attract users with a strong enough differentiation advantage that users genuinely care about.
From a differentiation perspective, Plasma has indeed captured the essential scenario of stablecoins. Zero-fee transfers and customizable gas tokens are genuinely attractive to heavy stablecoin users. However, the problem is that there are quite a few competitors in the market right now. Although Solana is not specifically optimized for stablecoins, its transfer fees have already dropped to negligible levels, and its ecosystem maturity is much higher than Plasma's. Base, while being an L2, has Coinbase's backing and traffic capabilities, and its user base is much larger than Plasma's. For Plasma to break through, it must deliver a product experience significantly superior to these competitors.
However, from another perspective, Plasma's focus strategy is not without reason. The track for general-purpose public chains is already very crowded, with giants like Ethereum, Solana, and BSC occupying the vast majority of market share. New public chains face great difficulty in breaking through in the general track, but if they focus on a specific niche and provide an exceptional user experience, they might have a chance to establish themselves. The stablecoin track is large enough, and its growth is strongly certain; focusing on doing this well is also a good strategic choice.
From the team's and funding's perspective, Plasma's fundamentals are still quite solid. Founder Paul Faecks has certain credentials in the crypto circle, and CTO Hans Walter Behrens is also a technical expert. The financing amount of $75.8 million is quite considerable in the current market environment, and the investors include top-tier institutions like Framework Ventures, Founders Fund, and Peter Thiel. These institutions do not invest in projects lightly, indicating their recognition of Plasma's technical route and market prospects.
In terms of partnerships, Tether's deep involvement is a significant plus. As the issuer of USDT, Tether directly provides native USDT support on Plasma, which is a rare endorsement for a new public chain. Binance, the world's largest exchange, also collaborates with Plasma in various ways, including listing, Binance Earn products, HODLer airdrops, etc. These collaborations can bring considerable traffic and user base to Plasma.
On the technical front, Plasma's decision to operate as an independent L1 rather than an Ethereum L2 is thought-provoking. The advantage of being an L1 is strong autonomy, not restricted by the performance ceiling of the Ethereum mainnet. However, the downside is that it needs to ensure its own security and cannot directly inherit Ethereum's network effects. Plasma evidently believes that the constraints of doing an L2 for the stablecoin scenario are too many, so it is better to go straight to L1 for a more thorough approach. Whether this judgment is correct is still uncertain and will depend on future developments.
The confidential payment function has not yet been launched, but from the design perspective, it seems quite pragmatic. It does not blindly pursue complete anonymity but seeks a balance between privacy and compliance. This approach might be more acceptable in the current regulatory environment, and because it is a protocol-native function, its compatibility with DeFi applications will be better than those independent privacy protocols.
The Bitcoin bridge is also quite interesting from a strategic perspective. BTC is the largest asset pool in the crypto world, but due to the limitations of Bitcoin's scripting language, BTC holders find it challenging to participate in DeFi directly. If Plasma can attract BTC users, allowing them to maintain exposure to BTC while gaining DeFi yields, the market potential is considerable. Moreover, since pBTC can be used to pay gas fees, this design cleverly lowers the barrier for BTC users to participate.
After all that, my overall feeling about the Plasma project is that its technical route is clear, its focus strategy is distinct, and the team and funding are also decent. However, as a new public chain, it faces real challenges. Whether it can succeed depends on whether it can create sufficiently good product experiences in the directions of stablecoin payments and DeFi to attract enough real users. In the short term, the lending market seems to have opened up, but the payment scenario still needs more application integration and user education. In the long term, if Plasma can establish itself in the stablecoin track, its value proposition will still hold. However, if other general chains can provide similar experiences at lower costs, Plasma's differentiated advantages will be weakened.
Lastly, I want to mention that for investors, the value capture logic of the XPL token is not clear enough. Although XPL can be used to pay gas fees, Plasma's main selling point is to allow users to use the network without holding XPL. So where does the demand for XPL come from? The staking feature will not launch until Q1 2026, and how much staking demand it can generate is also uncertain. Therefore, if you are looking to invest in XPL, you need to think clearly about where its value support lies. But if you are optimistic about the stablecoin payment track and want to find a project with decent technical strength to participate in, then Plasma is worth keeping an eye on.
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