Original Article Title: Plasma: The World of On-Chain Payments

Original Source: Sumcap

Original Translation: Alex Liu, Foresight News

This article provides an in-depth analysis of Plasma, traces the evolution of stablecoins, and explores how Plasma's architecture is reshaping this field.

From "Sound Money" to "Stablecoin"

On January 3, 2009, the first Bitcoin block was mined, containing a message: "Chancellor on brink of second bailout for banks." This referred to the UK Chancellor Alistair Darling at the time preparing to once again use taxpayer funds for a large-scale rescue of troubled banks—just a few months after the initial bailout.

First Bitcoin Block; Source: https://bitaps.com/0;

These bailouts occurred after the 2008 September Wall Street collapse. Following the bankruptcy filing of the 158-year-old investment bank Lehman Brothers, the shockwave of its collapse swept the globe. Overnight, the credit markets froze, and trillions of dollars in mortgage-backed securities became worthless—clearly demonstrating the unreliability of the "traditional finance": banks had taken reckless risks, regulators had turned a blind eye, and when everything crumbled, taxpayers had to bear the loss.

For many, BTC was seen as a direct byproduct of this crisis, completely opposed to the existing banking system: i) fixed supply, ii) no central authority, iii) inflation-resistant peer-to-peer network.

However, this "sound" money came with a trade-off: price volatility against the dollar. As more and more people got involved, the demand for predictable payments and invoices increased. Another option—(a) wire funds to a bank, (b) wait for days for settlement, and (c) pay high fees in the process—only added fuel to the fire.

Finally, in July 2014, BitShares introduced BitUSD—allowing users to lock BTS (BitShares' native token) as collateral and create a token pegged to the dollar. However, it relied entirely on BTS, meaning a price drop could easily cause the collateral ratio to fall below the safety level, triggering mass liquidations.

Just a few months later, in November 2014, Tether launched USDT—a fiat-backed token that could be exchanged on a 1:1 basis for the custodied US dollar. Unlike BitUSD, it did not require overcollateralization or complex mechanisms, a simplicity that saw it achieve $19.3 million in transaction volume and a $1.45 million market cap in less than a year. For comparison, ETH was only worth around $1 at the time, while BTC hovered around $240.

The Success of USDT; Source: https://www.coingecko.com/en/coins/tether/historical_data;

USDT's success led to more alternative solutions. MakerDAO (@SkyEcosystem) launched SAI in December 2017, allowing users to lock ETH into a debt position to mint a soft-pegged dollar token, but ETH's volatility prompted an upgrade: multi-collateral Dai (DAI) was launched in November 2019. Through diversified collateral and increased risk control governed by MKR, DAI became the first truly adopted decentralized stablecoin.

Meanwhile, fiat-backed competitors were also evolving in parallel: USDC was introduced in 2018, positioning itself as a regulated, fully USD-backed, and transparently audited token, quickly becoming the preferred collateral for DeFi.

Stablecoin Development Timeline

Stablecoin Adoption vs Infrastructure Discrepancy

Today, by transaction volume, stablecoins are the most widely used product in cryptocurrency. Their market cap ($271.6 billion) now exceeds the total value locked in DeFi ($166.1 billion). Additionally, by 2024, when Visa processed $13.2 trillion in payments, stablecoins settled more than $22 trillion in on-chain transaction volume—adjusted for exchange internal transfers and MEV, it was $5.67 trillion. Moreover, adjusted daily transaction volume grew by around 120% in a year (rising from $432.3 billion to $949.1 billion), highlighting the growth in demand.

Adjusted Stablecoin Daily Trading Volume; Source: https://visaonchainanalytics.com/transactions;

In July 2025, the U.S. "Genius Act" officially recognized stablecoins as a legal payment instrument, placing them on par with debit card networks, ACH, and wire transfers. However, the infrastructure still lags behind. USDT, which occupies over 60% of the market share, still relies on a non-payment-oriented chain, where transactions on these chains require the volatile Gas token, and institutional scalability and compliance requirements remain unmet.

USDT Dominance; Source: https://defillama.com/stablecoins;

This creates a paradox: while the annual trading volume of stablecoins can rival Visa's, on-chain they are still second-class citizens, treated as just another token.

Bitcoin faces a similar issue. As the world's seventh-largest asset and with a market cap higher than silver, BTC should have been the anchor of DeFi. However, most of it remains idle. Wrapped BTC solutions are scattered and require custody, with separate versions on Ethereum, Polygon, and Arbitrum—each version's liquidity is fragmented.

Plasma Architecture: A Blockchain Prioritizing Stablecoins and Natively Supporting BTC

To address this issue, Plasma reimagined the foundation itself. It didn't treat stablecoins and BTC as add-ons but made them first-class citizens through specially crafted components:

· PlasmaBFT - A Fast-HotStuff version with pipelining, offering fast finality without sacrificing security

· Reth Execution Layer - An EVM-compatible execution engine written in Rust

· Native BTC Bridge - A decentralized validator network safeguarding pBTC activities

· Stablecoin-Centric Functionality - Native Gas paid in USD, enabling feeless transfers through a paymaster, and auditable confidential payments.

With this architecture, Plasma diverges from the generic design to serve as a natural settlement layer for BTC-USDT activity.

PlasmaBFT

Plasma's consensus layer secures the chain through high-performance Fast-HotStuff. In traditional BFT protocols (such as HotStuff), finalizing a block goes through 3 stages:

· Prepare - Leader proposes a block, validators check its validity and vote to approve;

· Precommit - Validators confirm a supermajority (>⅔) has approved the prepare stage, then "lock in" on that block to prevent forking;

· Commit - Validators confirm a supermajority has precommitted, making the block finally decided and irreversible.

While this process does ensure security, it slows down the speed as each step requires network communication and coordination. Fast-HotStuff reduces this overhead through the "two-chain-commit rule": if two consecutive blocks (N and N+1) have both received a supermajority's approval, then N can immediately be finalized because validators' proof of the supermajority on N+1 while approving N+1 is already locked in on N—thus eliminating the need for the precommit stage.

In essence, the 3 stages are simplified to 2:

· Stage 1 (Prepare) - Vote for block N

· Stage 2 (Commit) - Vote for block N+1 to finally decide block N

FHS vs. HS Comparison; Source: https://europe1.discourse-cdn.com/flex013/uploads/aave/original/2X/0/0f142a3d4d228f2b4baa2ff4b51e2016fe76bb73.png;

Furthermore, in edge cases where the network fails to achieve the consecutive two supermajorities required for rapid finality, PlasmaBFT will fall back to a full three-stage commit protocol, ensuring all honest validators safely "lock in" on the same block before finalization. Once the fallback is resolved, PlasmaBFT reverts to the fast two-stage path.

FHS vs. HS Workflow Comparison

But that's not all. Through pipelining technology, multiple block stages can be overlapped and processed simultaneously: when validators are in the submission stage of block N, they may already be in the preparation stage of block N+1. This effectively keeps the network busy at all times, maximizing efficiency, as the next block does not have to wait to be fully finalized to start its voting process.

Furthermore, by selecting only a subset of validators (committee), PlasmaBFT reduces communication overhead while still applying the same supermajority rule.

FHS + Pipelining Technology

Reth Execution Engine

The execution layer of Plasma is built on Reth, which is an Ethereum client written in Rust, fully compatible to handle state transitions, transaction processing, and EVM operations. It connects to the consensus layer through the same engine API Ethereum has been using since its inception—allowing PlasmaBFT to handle consensus and block ordering while Reth focuses on transaction execution and state transition:

1. Block Proposal - CL sends ordered blocks to Reth via engine_newPayload

2. Transaction Verification - Reth validates each transaction's format, signature, nonce, and Gas requirements

3. State Execution - Reth processes transactions sequentially

4. State Root Calculation - After executing all transactions, Reth uses the Merkle-Patricia tree to calculate the new state root and transaction receipt root

5. Execution Confirmation - Reth returns the execution results (including Gas used, transaction receipts, and updated state root) to PlasmaBFT

6. Block Finalization - PlasmaBFT incorporates the execution results into the final block header and completes the consensus process

RETH Workflow

Native BTC Bridge

Today, most BTC bridges appear to be decentralized, but if you peel back the layers, you'll find that they are either:

· A single custodian (such as wBTC's issuer BitGo) holding everyone's coins, or

· A small multisig wallet that can freeze the treasury at any time.

This is the trade-off users have already accepted: if you want to use BTC in DeFi, you have to give up Bitcoin's trust-minimized design.

The BTC bridge on Plasma is not custodian-driven but supported by a validator network, with each validator running their own Bitcoin node. There is no single party in control of the treasury, and BTC transfers in and out must be collectively signed by a threshold signature set of validators reaching a quorum.

When a user deposits BTC into the Plasma vault on the Bitcoin network, each validator: independently "sees" the deposit through their own Bitcoin node, confirms the deposit's finality, and then broadcasts a proof on-chain.

These public proofs confirm that the BTC has been received and carry the user's mapped EVM address. Once a supermajority of validators reaches consensus, pBTC is directly minted to the user's address on Plasma, and the proof is sent on-chain.

Figure 10 - pBTC Workflow;

But the trust model improvement is just part of the story. Another key flaw most BTC bridges face today is liquidity fragmentation. Take wBTC, for example—it exists as a separate version on each chain. wBTC on Ethereum cannot directly interact with wBTC on Polygon or Arbitrum without additional cross-chain steps, separate liquidity pools, adding more complexity for users and protocols.

Plasma addresses this issue by implementing pBTC using LayerZero's HTF (Full-chain Homogeneous Token) standard, creating a single token across all chains connected to LayerZero. This establishes a single liquidity pool for pBTC spanning the entire cross-chain ecosystem.

Comparison of pBTC with alternative design choices;

Stablecoin Native Design

· Zero-Fee USDT Transfers: A contract-level paymaster sponsors the transfer and transferFrom functions through an account abstraction system built on the EIP-4337 and EIP-7702 standards.

· Custom Gas Token: The protocol-managed paymaster utilizes the EIP-4337 standard to calculate the gas cost based on rates provided by an oracle (including slippage protection) and does not charge fees.

· Confidential Payments: Concealing amount, recipient, and metadata while retaining selective disclosure to comply with regulatory requirements.

Competitive Landscape and Opportunity Size

Total Addressable Market

We've all heard the classic business adage: "It's better to be the head of a chicken than the tail of a phoenix."

Plasma embodies this in the world of on-chain payments and yield market opportunities. Plasma doesn't compete as another generic chain with a tech innovation that adds no real value; instead, it laser-focuses on becoming infrastructure for institutional use.

"Native BTC": Tokenization and Yield Market Opportunities

Despite BTC being the largest crypto asset, it's mostly underutilized in DeFi — wrapped products depart from its foundational trust-minimized ethos.

Wrapped BTC; Source: https://bitcointreasuries.net/;

As the most decentralized BTC wrapping solution, pBTC offers a "native BTC" DeFi opportunity that other solutions cannot replicate. Currently, over 242,600 BTC are wrapped, with 209,800 BTC (approximately 86.5%) actually deployed in various protocols to earn yield. pBTC's core opportunity comes from retail users seeking a more secure way to:

· Use BTC in DeFi;

· Store BTC on more accessible EVM chains.

However, retail demand is just part of the story. Institutional and corporate adoption is on the rise, with public and private companies collectively holding about 1.38 million BTC. This represents an increase of 833,000 BTC since the beginning of the year — highlighting a clear trend of accelerating institutional adoption.

BTC held by institutions and companies; Source: https://bitcointreasuries.net/;

However, here is a key insight: as more and more institutions incorporate BTC into their treasuries, their strategy will evolve from simple holding to active management. In this regard, pBTC represents the perfect intermediary—since these participants prioritize infrastructure security above all else.

On-Chain Payments: Cross-Border Payments and Payrolls

By 2023, an estimated 184 million people (2.3% of the world's population) reportedly live outside their country of birth. Driven by economic opportunities, these migrant workers often need to remit money across borders to their families and communities. These cross-border payments (or "remittances") play a crucial role in supporting the economies of low- to middle-income countries—some of which rely on them for up to half of their GDP.

LMICs divided by the percentage of remittances to GDP; Source: https://blogs.worldbank.org/en/peoplemove/in-2024--remittance-flows-to-low--and-middle-income-countries-ar;

By 2024, remittances flowing to low- and middle-income countries reached $685 billion, with the top five recipient countries being:

1. India - $129 billion

2. Mexico - $68 billion

3. China - $48 billion

4. Philippines - $40 billion

5. Pakistan - $33 billion

LMICs Remittance Net Inflows; Source: https://blogs.worldbank.org/en/peoplemove/in-2024--remittance-flows-to-low--and-middle-income-countries-ar;

These massive fund flows are the lifeline of millions of families worldwide, but they come with hidden costs. Take India, for example. In 2023, it was reported that India received $16 billion from the United States in remittances. Calculated at an average $200 transfer cost of 4.16% (exchange rate difference + fees), India thus had $665 million flowing into the hands of banks/forex institutions. This pattern repeats on every major remittance corridor. Mexico receives over $50 billion annually from the U.S., and at current transfer costs, suffers over $2.4 billion in fee losses. Meanwhile, Nigeria receives $6 billion in remittances from the U.S., losing $180 million.

The opportunity for Plasma here is clear. With its zero-fee USDT transfers, Plasma can eliminate the billions of dollars in annual extraction imposed on vulnerable groups by traditional channels. Immigrant workers can finally send the full $200 to their family in Guatemala, rather than $187 after deducting fees. Over time, this will save each family thousands of dollars—money that will stay in the communities that need it most.

However, remittances only represent a portion of Plasma's coverage. When we combine zero-fee USDT transfers with auditable privacy, Plasma opens the door to a whole new market: on-chain payroll.

In 2023, the U.S. alone generated a total of $11.07 trillion in wages and salaries, involving 134.06 million employees. This means there are 16 billion (12 × 134.06 million) bank transfers annually—all incurring costs for companies.

For simplicity, let's assume these wages are paid monthly through ACH direct deposits. The fixed cost per transfer ranges from $0.20 to $1.50, and U.S. companies spend about $1.37 billion annually just to transfer money to employees' accounts:

134.06 million × 12 × $0.85 = $1.37 billion

Similar to remittances, the funds that companies could better utilize are wasted on fees for transferring. By adopting Plasma's gasless USDT transfers, U.S. employers would save approximately $1.4 billion annually, while adding another layer of value through privacy for both employers and employees.

Opportunity Scale Assessment

Plasma sits at the intersection of the world's three largest fund flows:

1. Savings & Capital Allocation—Enabling users to earn BTC yields in DeFi.

2. Cross-Border Payments — Saving billions of dollars in remittance fees.

3. Payroll — Eliminating friction and costs in domestic and international wage payments.

Even modest adoption in each of these areas is enough to support a TAM worth tens of billions of dollars. Scaling these opportunities based on varying adoption possibilities, we derive three different scenarios: Base, Pessimistic, and Optimistic.

Base Scenario: pBTC adoption comes from retail users seeking a more secure alternative and early institutions interested in DeFi yields. On-chain payments grow with attention to remittance cost savings and a small wave of tech companies attempting encrypted payroll.

Pessimistic Scenario: Wrapped BTC maintains dominance due to familiarity and integration, leading to lagging adoption. Regulatory uncertainty and crypto knowledge gaps slow institutional fund flows and remittance use, while payroll faces resistance from the existing system.

Optimistic Scenario: Improved user experience, regulatory clarity, and mainstream adoption drive large-scale BTC migration, remittance flow, and corporate payroll integration.

Scenario Scale Assessments;

Competitive Landscape

The competitive landscape for Plasma is as follows:

· Tron's trondao - Dominant in USDT circulation but limited by centralization, limited scalability, and continuously rising costs.

· Ethereum - Serving as the foundation for issuance and large transfers, but unsuitable for retail payments due to high fees, delays, and block space competition.

· USDC - Positioned as a regulated, transparent option, but skewed towards financial platforms and exchanges, lacking representation in real-world business.

Competitive Landscape

Conclusion

The evolution of crypto payment infrastructure has been shaped by incremental workarounds rather than thoughtful design. This has resulted in a misalignment between the assets driving adoption (BTC and USDT) and the infrastructure they rely on.

Plasma addresses these inefficiencies by rearchitecting the underlying around these assets:

· By using a stablecoin as the native Gas asset, reliance on volatile tokens is eliminated, enabling features such as payroll and remittances.

· pBTC integrates cross-chain liquidity via LayerZero's OFT standard, enabling productive deployment of BTC in DeFi.

· Privacy and compliance features align with enterprises' need for predictable costs and operational security.

Its impact spans across various market segments:

· Enterprises benefit from a cost-effective and compliant settlement method.

· Institutions can productively deploy their BTC treasuries.

· Retail users unlock instant, low-cost remittances and payroll receipt.

Plasma positions itself not as a general-purpose chain but as settlement infrastructure tailored for USDT and BTC. By aligning the infrastructure with the most critical assets, it fills the gap left by Ethereum and Tron, supporting real-world payment flows and ushering in the next phase of adoption across retail, enterprise, and institutional levels.

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