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YC envisions stablecoin adoption mirroring the trajectory of digital music, which shifted from being associated with illegal file sharing in the early 2000s to becoming the standard.
Y Combinator (YC), a startup incubator that provides guidance to founders during the initial stages of their projects before potentially investing, has released its latest “request for startups” (RFS), outlining 20 ideas it hopes entrepreneurs will develop, including stablecoins and artificial intelligence (AI).
Stablecoins are a type of cryptocurrency backed 1:1 to reserve assets such as the US dollar. The assets are designed to always maintain their pegs at all times, serving as a bridge between the traditional finance ecosystem and the world of crypto.
Will Be a Big Part of the Future of Money
The San Francisco-based company said in its latest RFS that it would like to see entrepreneurs developing business-to-business (B2B) and consumer products utilizing stablecoins. Additionally, YC suggested that software developers should explore the creation of tools and platforms that facilitate stablecoin finance, as well as the development of stablecoin protocols.
The incubator believes stablecoins will play a significant role in the financial ecosystem due to their benefits in areas like cross-border payments, reducing transaction fees, and preventing fraud.
“There’s been much debate about the utility of blockchain technology, but it seems clear that stablecoins will be a big part of the future of money. We know this because YC companies have been effectively incorporating stablecoins into their operations for years now – for cross-border payments, to reduce transaction fees and fraud, to help users protect savings from hyperinflation. This utility is so straightforward it seems inevitable traditional finance will follow suit,” said YC.
The firm, while not explicitly requiring entrepreneurs to pursue these ideas for funding, is likely to support ventures in these areas. YC has a reputation for backing successful startups like OpenAI, Airbnb, and Reddit, as well as notable crypto industry leaders like Coinbase, OpenSea, and Protocol Labs behind Filecoin and IPFS.
The company has a reputation for being an early supporter of highly successful startups, such as OpenAI, Airbnb, and Reddit. Among its alumni are notable crypto industry leaders like Coinbase, OpenSea, and Protocol Labs, the company behind Filecoin and IPFS.
Stablecoin Adoption to Mirror Digital Music
YC highlighted recent actions by key players, such as PayPal’s entry into the stablecoin market and major banks’ exploration of custody services, as signs of growing acceptance and integration of stablecoins in finance. The company envisioned stablecoin adoption following a path similar to that of digital music, from early illegal file sharing to mainstream acceptance.
Drawing a parallel, YC envisions stablecoin adoption mirroring the trajectory of digital music, which shifted from being associated with illegal file sharing in the early 2000s to becoming the standard as companies like Apple joined the market. Interestingly, all these major players were eventually surpassed by Spotify, a startup that emerged during that transformative period.
The company mentioned that to date, stablecoins worth $136 billion have been issued globally. However, there are more potential opportunities in the sector that would bring about more adoption of digital assets.
Despite having around $136 billion in stablecoins, only around seven million individuals have conducted transactions with stablecoins so far, even though over half a billion people reside in countries where the inflation rate exceeds 30%.
Furthermore, US banks hold approximately $17 trillion in customer deposits, which are all potential targets for stablecoin adoption.
Surprisingly, the company said that major issuers of stablecoins can be counted on one hand, and the major liquidity providers can be counted with just a few fingers.
YC to Fund Explainable AI Projects
For artificial intelligence, the company identified many areas entrepreneurs could explore to bring more innovations to the industry. The company identified explainable AI and AI to build software enterprise software as areas that need more work to unlock the full potential of artificial intelligence.
The incubator is interested in funding projects focused on developing new interpretable models or tools for explaining existing models.
“For society to reap the full benefits of AI, more work needs to be done on explainable AI. We are interested in funding people building new interpretable models or tools to explain the output of existing models,” said YC.
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