Part 1 of our deep-dive series into the $284 billion stablecoin revolution
The stablecoin story everyone knows begins with Tether in 2014. The real story starts six months earlier in a forgotten corner of crypto history, with two future billionaires experimenting with an idea so radical it would eventually process more value than Visa and Mastercard combined.
The Forgotten First
In July 2014, while Bitcoin struggled at $600 and most dismissed crypto as drug money, Dan Larimer and Charles Hoskinson quietly launched BitUSD on the BitShares platform.¹ Yes, that Charles Hoskinson who would create Cardano, and that Dan Larimer who would build EOS. Their creation was elegantly complex: a crypto-collateralized stablecoin backed by 200% worth of BitShares tokens, using price feeds from delegated witnesses to maintain the dollar peg.
BitUSD peaked at a mere $1.5 million market cap. By 2018, it was dead. But its DNA lived on—MakerDAO's founder Rune Christensen studied BitUSD obsessively before creating DAI, learning from its failures. The critical lesson? Over-collateralization could work, but you needed a more liquid backing asset than BitShares. Enter Ethereum.
The Child Actor's Billion Dollar Pivot
Here's where the story gets stranger. Brock Pierce—yes, the child actor from "The Mighty Ducks"—had made an unusual fortune selling virtual goods in online games. By 2013, he was looking for the next big thing. Along with Reeve Collins and Craig Sellars, Pierce saw Bitcoin's fatal flaw for commerce: nobody wants to pay for coffee with something that might double in value tomorrow.
Their solution launched on July 24, 2014, as "Realcoin." The name was terrible. The timing was worse—Bitcoin had crashed 50% from its peaks. Within four months, they rebranded to Tether, a name suggesting stability in crypto's chaos. The initial mechanism was brilliantly simple: deposit one dollar, get one USDT. Redeem one USDT, get one dollar back. No algorithms, no complex collateralization—just dollars in a bank account. Except there was a problem. No bank wanted their money.
Banking Behind Enemy Lines
This is where Tether's story becomes a masterclass in regulatory arbitrage. When Wells Fargo blocked their Taiwanese banking partners in April 2017, Tether didn't shut down. They went underground. Court documents revealed their "cat-and-mouse tricks": shell companies with generic names like "Hylab Technology Ltd," fake invoices claiming to sell computer parts, and executives using aliases. Christopher Harbourne, a major shareholder, operated as "Chakrit Sakunkrit" to open accounts.
The most damaging revelation came later. Between June and September 2017, Tether had just $61.5 million in the bank while 442 million USDT circulated—a 14% backing ratio when they claimed 100%.⁵ Phil Potter, Bitfinex's CSO, admitted on tape they had to "move money in more creative ways" through the financial system. They weren't lying about having dollars; they were lying about when they had them.
The Network Effect Nobody Predicted
By late 2017, something unexpected happened. Despite the shadowy banking, despite the backing questions, Tether became crypto's lifeblood. Every major exchange adopted it. Why? Because traders needed it desperately. Moving actual dollars between exchanges took days and massive fees. Moving USDT took minutes and cost pennies.
The network effect was unstoppable. Exchanges in countries hostile to crypto—China, Russia, India—could offer dollar trading without touching the US banking system. Arbitrage traders could exploit price differences instantly. Market makers could provide liquidity across multiple venues. Tether wasn't just solving the volatility problem; it was solving crypto's infrastructure problem.
The Regulatory Reckoning That Didn't Kill
In 2019, the New York Attorney General dropped a bombshell: Tether had covered up an $850 million loss at Bitfinex using customer funds.⁶ The market barely blinked. By 2021, the CFTC fined Tether $41 million for lying about reserves. USDT's market cap doubled that quarter. The pattern was clear: Tether had become too essential to fail.
The lesson wasn't that regulation didn't matter—it was that network effects mattered more. Every competitor launching with "we're the compliant alternative" missed the point. Tether succeeded not despite its questionable practices but because it solved real problems for real users, regulations be damned.
The Blueprint for Revolution
Today's $284 billion stablecoin market exists because a child actor, a Bitcoin early adopter, and a software engineer decided to duct-tape dollars to the blockchain. Their creation wasn't elegant. It wasn't fully legal. It certainly wasn't transparent. But it worked when nothing else did.
Circle launched USDC in 2018 as the "adult in the room," with regulatory compliance and transparency. DAI emerged as the decentralized alternative. Binance created BUSD for exchange integration. Each iteration improved on Tether's blueprint, but none could displace the original. As of 2025, Tether still commands 64% market share, processes $140 billion daily, and holds more US Treasuries than most nations.
The untold origin story of stablecoins isn't about technology—it's about timing, network effects, and solving desperate needs. The pioneers weren't trying to revolutionize global finance. They were just trying to make crypto trading less insane. In doing so, they accidentally created the rails for a parallel financial system that now threatens the banking establishment itself.
Next week in Part 2: How stablecoins became the most profitable business model in human history, generating more revenue per employee than Apple, Google, and Goldman Sachs combined.