Why Open Networks Win
The stablecoin market’s fragmentation mirrors early payment card history and points toward an inevitable move to shared infrastructure.
In Brief
- Today’s stablecoin ecosystem mirrors the fragmentation of early card payment systems: multiple incompatible networks with limited acceptance points
- Visa’s mutli-issuer model overtook Diners Club’s exclusive approach by aligning incentives, creating value for all participants, and leveraging network effects for growth
- Current stablecoin fragmentation costs issuers billions in redundant infrastructure while limiting usability
- Open networks that enable universal acceptance, while preserving issuer differentiation in products and services, offer the proven path forward
- Ubyx provides the credibly neutral infrastructure that enables stablecoins to achieve true ubiquity
The High Cost of Going It Alone
The stablecoin market has reached $250 billion in circulation, but in many ways still resembles the nascent payment card industry of the 1950s. Every issuer builds proprietary distribution networks through direct bilateral relationships. They are forced to build platform-specific acceptance networks, redemption infrastructure and banking relationships from scratch.
This fragmentation extracts enormous costs. Individual issuers can spend hundreds of millions on direct distribution agreements — costs that can represent more than half their total revenues. With over 150 active stablecoin projects globally, the collective expenditure on redundant infrastructure and distribution partnerships approaches several billion dollars yearly.
The user experience suffers equally. A merchant accepting one stablecoin might not be able to easily accept another without separate integrations and due diligence processes on each issuer. The result is a patchwork of incompatible rails that limits the utility of digital money and creates unsustainable distribution economics. Each bilateral partnership requires custom work, legal agreements, and ongoing maintenance. This severely hinders comprehensive interoperability and the acceptance of stablecoins as a widely accepted form of money.
Lessons from the Card Wars
Diners Club’s Closed Network (1950)
When Frank McNamara launched Diners Club in 1950, he created the world’s first payment card network. The idea emerged from an embarrassing 1949 dinner at Major’s Cabin Grill in Manhattan, where McNamara had forgotten his wallet and needed his wife to rescue him with cash. McNamara’s original conception focused specifically on restaurants around New York City — the first year saw 10,000 members from New York’s business elite using cards at 28 restaurants and two hotels.
The company maintained direct relationships with both cardholders and merchants. Diners Club issued every card, processed every transaction, and controlled every aspect of acceptance. This closed model delivered immediate benefits — consistent user experience, quality standards, and the ability to capture all transaction fees from participating establishments at 7% per transaction. By 1951, the company had grown to 42,000 cardholders, but its proprietary model carried inherent limitations.
Diners Club bore all costs of customer acquisition, operations, merchant onboarding, and risk management. Geographic expansion required direct investment in new markets. The company’s resources constrained how quickly the network could grow.
Visa’s Network Effects (1958–1970s)
When Bank of America launched BankAmericard in 1958, it initially followed a similar proprietary approach — mailing out 65,000 unsolicited cards to customers in Fresno, California (the world’s first airdrop!). The bank soon discovered that building acceptance networks was expensive and that competing banks were beginning to duplicate the same infrastructure investments.
The breakthrough came in 1970 when Bank of America relinquished control. National BankAmericard Inc. (renamed Visa in 1976) was formed as an independent consortium owned by member banks. Instead of one bank controlling the network, members would collectively govern shared infrastructure. Banks could compete on interest rates, rewards, and customer service while cooperating on acceptance and settlement.
This architectural choice unlocked explosive growth. Interchange fees — where merchant banks paid issuing banks a small percentage of each transaction — aligned incentives across competitors. Small community banks could issue cards backed by the same acceptance network as global giants. Merchants needed only one relationship to accept cards from thousands of issuers.
Why Open Networks Win
The payment card story illustrates a broader principle about network businesses. Shared architectures generate more value than closed alternatives because they remove artificial constraints on growth.
Network effects compound when participation barriers diminish. Each new bank that joined Visa brought its customers, merchants, and local market knowledge. The network became more valuable for existing participants as it grew. Closed networks like Diners Club couldn’t access this distributed capacity.
Open networks also enable specialization. Banks were free to focus on customer relationships while Visa handled processing infrastructure. Merchants gained access to multiple customer bases through a single integration, allowing them to focus on commerce, not connectivity. Everyone was able to do what they did best.
Today, Visa’s network supports more than 14,000 card issuers, processing nearly $16 trillion of total volume each year. In contrast, Diners Club processed $29 billion last year, about 0.2% of Visa’s volume. The sheer scale of open models remains evident when comparing even the most successful closed networks, like American Express ($1.7 trillion in volume) and Discover ($620 billion) to the second-largest multi-issuer network, Mastercard, which processes $9.8 trillion.
This is a pattern that repeats across industries. JVC’s widely-licensed VHS standard eclipsed Sony’s more restricted Betamax format. The World Wide Web’s open protocols like TCP/IP and HTTP quickly overtook the walled gardens of AOL and CompuServe. SMTP enables countless email services to interoperate, while once-dominant proprietary systems like VINES Mail have disappeared. When networks open their doors, they unlock growth that closed systems struggle to match.
An Open Network for Stablecoins
Today, stablecoins face the same fundamental choice between closed and open network models. Despite rapid growth, the industry is in its infancy and most issuers today still follow the Diners Club playbook of building proprietary distribution channels and acceptance networks. This approach may work for early adoption but inevitably creates systemic inefficiencies as the market matures.
For stablecoins to achieve widespread adoption, their network design should learn from the history of open systems: emulating the strategies that led to their broad reach, while decisively breaking from models that fell short of true neutrality. No single issuer should control the rails. No participant should gain unfair advantage. The network should benefit all stakeholders — issuers, financial institutions, merchants, and end-users — through aligned incentives.
This model doesn’t eliminate competition; it channels it toward productive ends. Issuers can differentiate on a variety of features or value-added services while leveraging shared core infrastructure. New entrants can offer stablecoin services without building proprietary systems. Users and merchants gain unified interoperability, usability, and trust.
Mutualized acceptance creates powerful network effects. Each new issuer and acceptance point exponentially increases the value for all existing participants. Niche stablecoins gain instant reach. Large incumbents access new distribution channels in a larger ecosystem. The pie expands for everyone, and every slice becomes more rewarding.
Open networks create more value than the sum of their parts. They enable innovation at the edges while providing reliable, interoperable rails for connectivity. They turn zero-sum competition into positive-sum collaboration. Progressive decentralization can ensure the network remains neutral over time. Rules emerge through consensus, not decree. No single party can capture the network for private benefit.
The Path to Stablecoin Ubiquity
Achieving true stablecoin ubiquity demands more than just technical interoperability. It requires a trifecta of solutions: universal settlement, rules-based standardization, and aligned economic incentives.
With such a system in place, participating stablecoins would benefit from enhanced trust and achieve true “singleness” of money, attaining parity not only with other stablecoins but also with traditional forms of money like bank deposits and cash. Financial institutions would gain a single integration point to access the entire stablecoin ecosystem. This streamlined architecture would eliminate costly bilateral integrations, significantly mitigate counterparty risk, and improve both liquidity and capital efficiency. Isolated stablecoins would transform into truly interoperable money, evolving today’s fragmented networks into a unified, global acceptance layer where each new participant exponentially amplifies the network’s collective value.
History consistently demonstrates that while closed networks may initiate markets, open networks ultimately capture enduring value. For stablecoins, the transition to shared, open infrastructure is now underway. Ubyx is creating the shared infrastructure for stablecoins that will define tomorrow’s financial system. A system that enables digital currencies to fulfill their promise of universal, frictionless value transfer.
The future belongs to those who enable, not constrain, the movement of digital value. As stablecoins reach global scale, those that help shape open, interoperable infrastructure will be best positioned to lead in the near-future where stablecoins are ubiquitous.
About Ubyx
Ubyx is the clearing layer for stablecoins designed to deliver universal redemption at par, enable cash-equivalent accounting treatment, and provide a mutualized global acceptance network across bank and non-bank financial institutions. It preserves the singleness of money on public blockchains and gives stablecoin issuers universal distribution through a neutral, openly governed ecosystem. The Ubyx Association enables participants to shape actionable strategies for stablecoin ubiquity both within and beyond their organizations.
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This content is for information only and does not constitute legal, regulatory, financial, investment, or technical advice. Readers should consult their own advisers.
