Stablecoins are rapidly redefining the way developers and businesses interact with blockchain technology. By offering the stability of fiat currencies and the efficiency of cryptocurrencies, stablecoins have become a cornerstone for applications ranging from payments to decentralized finance (DeFi). For developers looking to build with stablecoins, understanding the infrastructure and tools required is crucial to creating scalable and impactful solutions.
This article explores the essential components of the stablecoin stack, highlights innovative projects in the space, and emphasizes why owning the wallet is key for developers.
Part 1: Understanding the stablecoins Part 2: Infrastructure and tools to build with stablecoins (You're here) Part 3: Navigating regulation for stablecoins
How it works
Stablecoin infrastructure forms the foundation for the creation, transfer, and utilization of stablecoins. To build effectively with stablecoins, developers must understand how this infrastructure operates and its key components.
Key processes in stablecoin transactions
- Onramp: Users enter the ecosystem by converting fiat into stablecoins via issuers or third-party providers.
- Stablecoin Utilization: Users can hold stablecoins as a store of value, transfer them for payments, or use them in DeFi applications such as lending or yield farming.
- Offramp: Users exit the ecosystem by converting their stablecoins back into fiat currency through issuers or offramps.
How stablecoin infrastructure works
- Minting: Users deposit fiat currency or collateral with the issuer. In return, the issuer mints an equivalent amount of stablecoins and transfers them to the user's wallet.
- Transfers: Once minted, stablecoins can be transferred between wallets on the blockchain. These transactions are recorded immutably on the ledger.
- Burning: When users wish to convert stablecoins back into fiat currency, they send their stablecoins to the issuer. The issuer burns (destroys) these tokens and releases the corresponding fiat amount to the user.
Stablecoin infrastructure
Building with stablecoins requires a robust infrastructure that supports their storage, transfer, and utilization. Below are the core components of this stack:
Wallet infrastructure
Wallet infrastructure is the backbone of any stablecoin application, and developers must carefully consider its design to ensure security, performance, and capabilities align with your goals.
1. Security
Security is paramount in wallet infrastructure, especially when dealing with stablecoins, which often represent real-world value. Developers must address several key aspects:
- Private Key Management: Non-custodial wallets require users to manage their private keys securely. Developers can implement features like multi-signature wallets or hardware wallet integrations to enhance security.
- Encryption Standards: Wallets should use state-of-the-art encryption protocols to protect sensitive data during transactions and storage.
- Fraud Prevention: Features like transaction monitoring, anomaly detection, and anti-phishing measures can safeguard against fraudulent activities.
At Openfort, we offer a fully open source key management solution build on top of an already audited key generation algorithm and coupled to any OIDC-based authentication system, to protect and help developers launch a self-cusotdial wallet.
2. Performance
Performance directly impacts user experience and application scalability. Developers should focus on:
- Signature Speed: Wallets must process stablecoin transactions quickly to meet user expectations, especially for applications like payments or remittances.
- Scalability: Wallet infrastructure should be designed to handle increasing transaction volumes without compromising efficiency. Multi-chain compatibility can help scale applications across different blockchain ecosystems.
- User Interface (UI): A clean and intuitive UI ensures users can interact with wallets effortlessly, reducing friction during onboarding and usage.
At Openfort, we've built the technology to enjoy the full benefits of account abstraction while still offering minimal transaction latency with most efficient signature execution time (because it happens on device).
3. Capabilities
Depending on the user flows and abilities you want to unlock for your users, you'll need to enable capabilities like session keys or gas sponsorship right from the wallet.
At Openfort, we offer fully fledge smart wallet (ERC4337 and smart EOA (ERC7702) to cover all the edge cases you might think of. Batching transactions, gas sponsorship, policies and user permissions are all build-in.
By selecting the right wallet infrastructure and incorporating advanced features like automation (e.g., Openfort’s backend wallets), developers can create secure, high-performance solutions tailored to their application’s needs.
Onramps and offramps
Onramps and offramps are critical components of the stablecoin ecosystem because they bridge the gap between fiat currencies and blockchain-based assets, enabling users to interact seamlessly with stablecoin applications.
1. Onramps (Fiat-to-Stablecoin Conversion)
Onramps allow users to convert fiat currencies into stablecoins, making it easier for them to access blockchain-based services. Key considerations include:
- Ease of Use: Onramp solutions should offer simple interfaces that allow users to convert fiat into stablecoins quickly without technical complexities.
- Geographic Coverage: Developers must choose onramp providers that operate in regions where their target audience resides, ensuring accessibility for global users.
2. Offramps (Stablecoin-to-Fiat Conversion)
Offramps are equally important as they enable users to convert stablecoins back into fiat currencies when needed. Considerations include:
- Fees: Developers should evaluate transaction fees associated with offramps, as high fees may deter users from using the service frequently.
- Local Partnerships: Establishing partnerships with local financial institutions can streamline fiat conversions in specific regions.
Interesting projects in this area is ZKP2P a trustless P2P network that uses cryptographic proofs of transfer, to have buyers and sellers recive their funds in fully noncustodial smart contract way.
Ways to use stablecoins
Stablecoins unlock numerous real-world use cases that go beyond simple transfers or savings mechanisms. Developers can integrate these functionalities into their applications to enhance user engagement:
1. Crypto Credit Cards
Stablecoins can be spent directly at merchants worldwide using crypto-enabled credit cards linked to wallets containing stablecoins. This feature bridges the gap between blockchain assets and traditional commerce, enabling users to pay for goods and services without converting back into fiat currencies.
Credit Card-as-a-service provider like Kulipa are helping many wallet providers to add ways to make stablecoin payments in the real world using traditional payments rails.
2. Peer-to-Peer Payments (P2P)
Stablecoins simplify P2P transactions by offering instant transfers without high fees or currency volatility risks. Applications targeting remittances or microtransactions can benefit significantly from this feature.
Privacy-focused projects such as Fluidkey are pushing boundaries by enabling confidential transactions, ensuring user data remains secure while spending or transferring stablecoins.
3. Programmable Transactions
Smart contracts enable programmable transactions using stablecoins, opening up possibilities such as:
- Conditional payments (e.g., escrow services).
- Automated payouts based on predefined criteria (e.g., milestone-based payments for freelancers).
- Loyalty programs where rewards are distributed automatically in stablecoins.
Extra: Unlocked by stablecoins – yields
One of the most exciting aspects of stablecoins is their ability to unlock yield opportunities through DeFi protocols. Developers can integrate yield-generating mechanisms into their applications to offer users passive income streams while maintaining stability.
Conclusion
Stablecoins represent a unique intersection of stability and innovation in blockchain technology, making them ideal for developers looking to create impactful applications in payments, DeFi, and beyond. However, building with stablecoins requires more than just understanding their mechanics—it demands robust infrastructure across wallets, on/offramps, spending mechanisms, and yield opportunities.
Owning the wallet is particularly critical for developers seeking control over user experience while unlocking advanced features that differentiate their applications from competitors.