The development history of GameFi
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Introduction to OndoFinance Ondo Finance is dedicated to enhancing the security, efficiency, and accessibility of financial services through institutional-grade on-chain products. The company boasts a technical department focused on developing on-chain financial software and an asset management arm that creates and manages tokenized products. Ondo Finance is incubating protocols capable of supporting the tokenization of real-world assets and traditional cryptocurrencies, and it is the first c...
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Decentralized finance (DeFi) has rapidly risen in recent years, becoming a significant innovation in the fintech space. Among its core components, lending protocols offer peer-to-peer lending services without intermediaries, enabling users to borrow and lend assets directly on the blockchain through smart contracts. This provides greater transparency and efficiency. According to DefiLlama, as of February 2025, the total value locked (TVL) in DeFi lending protocols has reached tens of billions...
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Circle IPO Analysis: Growth Potential Behind Low Net Profit Margin
The development history of GameFi
The brief introduction of GameFi
The OndoFinance project, a king-bomb with a valuation exceeding $535 million, has recently seen a su…
Introduction to OndoFinance Ondo Finance is dedicated to enhancing the security, efficiency, and accessibility of financial services through institutional-grade on-chain products. The company boasts a technical department focused on developing on-chain financial software and an asset management arm that creates and manages tokenized products. Ondo Finance is incubating protocols capable of supporting the tokenization of real-world assets and traditional cryptocurrencies, and it is the first c...
Should Aave Expand to Solana? The Battle Between DeFi Lending Security and Innovation
Decentralized finance (DeFi) has rapidly risen in recent years, becoming a significant innovation in the fintech space. Among its core components, lending protocols offer peer-to-peer lending services without intermediaries, enabling users to borrow and lend assets directly on the blockchain through smart contracts. This provides greater transparency and efficiency. According to DefiLlama, as of February 2025, the total value locked (TVL) in DeFi lending protocols has reached tens of billions...
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Amid industry consolidation, Circle’s IPO choice tells a paradoxical yet imaginative story: despite declining net profit margins, it harbors immense growth potential. On one hand, it boasts high transparency, robust regulatory compliance, and stable reserve revenues; on the other, its profitability appears "modest" – with a 2024 net profit margin of just 9.3%. This "inefficiency" isn’t a failure of its business model but reveals a deeper growth logic: amid fading high-interest dividends and complex distribution costs, Circle is building a highly scalable, compliance-first stablecoin infrastructure, strategically "reinvesting" profits into market share gains and regulatory leverage. This article dissects its growth potential and capitalization logic "behind its low net profit margin," tracing its seven-year IPO journey from governance to business structure and profit models.
1. Seven-Year IPO Marathon: A Crypto Regulatory Evolution
1.1 Paradigm Shifts in Three Capitalization Attempts (2018-2025)
Circle’s IPO journey epitomizes the dynamic interplay between crypto firms and regulatory frameworks. Its 2018 IPO bid coincided with the SEC’s ambiguous stance on cryptocurrency classification. By acquiring Poloniex to form a "payments + trading" dual-engine and securing 110millionfromBitmain,IDGCapital,andBreyerCapital,thecompany’svaluationplunged753 billion to $750 million due to regulatory scrutiny of exchange compliance and a bear market shock, exposing early crypto firms’ business model fragility.
The 2021 SPAC attempt highlighted regulatory arbitrage limits. Though merging with Concord Acquisition Corp avoided traditional IPO scrutiny, SEC queries on stablecoin accounting treatment – demanding proof that USDC isn’t a security – scuttled the deal. This challenge inadvertently drove a strategic pivot: divesting non-core assets (e.g., selling Poloniex for $150 million) and establishing "stablecoin-as-a-service" as its core axis. Since then, Circle has focused on USDC compliance and global regulatory licenses.
The 2025 IPO choice marks crypto capitalization maturity. NYSE listing requires full Regulation S-K disclosures and Sarbanes-Oxley Act internal controls. Notably, the S-1 filing details a reserve management mechanism: ~$32 billion in assets, with 85% allocated via BlackRock’s Circle Reserve Fund to overnight reverse repurchase agreements and 15% deposited with systemic institutions like BNY Mellon. This transparency mirrors traditional money market fund regulatory frameworks.
1.2 Coinbase Partnership: From Ecosystem Co-building to Nuanced Relations
From USDC’s inception, Circle and Coinbase collaborated through the Centre Consortium. Coinbase held 50% equity when Centre launched in 2018, rapidly expanding market access via "technology for traffic" models. Circle’s 2023 IPO filing reveals acquiring the remaining 50% stake from Coinbase for $210 million in stock, with revised USDC revenue-sharing agreements.
The current agreement features dynamic terms: both parties split USDC reserve revenue proportionally (Coinbase shares ~50% of reserves, per S-1), tied to Coinbase’s USDC supply. With Coinbase holding ~20% of USDC’s total circulating supply in 2024, it captures ~55% of reserve revenue, posing risks for Circle as USDC expands beyond its ecosystem, escalating marginal costs non-linearly.
2. USDC Reserve Management and Equity Structure
2.1 Tiered Reserve Management
USDC reserves exhibit "liquidity tiering":
Cash (15%): Held with GSIBs like BNY Mellon for emergency redemptions.
Reserve Fund (85%): Allocated via BlackRock’s Circle Reserve Fund.
Since 2023, USDC reserves are limited to cash in bank accounts and the Circle Reserve Fund, comprising U.S. Treasury securities with ≤3-month maturities and overnight U.S. Treasury repurchase agreements. The portfolio’s dollar-weighted average maturity ≤60 days, duration ≤120 days.
2.2 Equity Classification and Layered Governance
Per the S-1 filing, Circle’s post-IPO structure features three equity tiers:
Class A: Common shares issued during IPO, with one vote per share.
Class B: Held by co-founders Jeremy Allaire and Patrick Sean Neville, with five votes per share (capped at 30% total voting power), ensuring foundational control post-IPO.
Class C: Non-voting shares convertible under specific conditions, aligning with NYSE governance rules.
This structure balances public financing with strategic stability, safeguarding executive decision-making authority.
2.3 Executive and Institutional Shareholding Distribution
The S-1 reveals executives hold significant stakes, while renowned VCs and institutions (General Catalyst, IDG Capital, Breyer Capital, Accel, Oak Investment Partners, Fidelity) each own >5% equity, collectively holding >130 million shares. A $5 billion IPO offers substantial returns.
3. Profit Model and Revenue Breakdown
3.1 Revenue Model and Operational Metrics
Revenue Sources: Reserve income, Circle’s core revenue, stems from USDC’s 1:1 dollar-backed reserves, invested in short-term U.S. Treasuries and repurchase agreements, yielding stable interest in high-rate cycles. S-1 data shows 2024 revenue reached 1.68billion,with991.661 billion) from reserve income.
Partner Splits: Coinbase’s 50% reserve income share undermines Circle’s net profit, a necessary trade-off for ecosystem co-building and USDC adoption.
Other Revenue: Income from enterprise services, USDC Mint, and cross-chain fees contributes minimally ($15.16 million).
3.2 Revenue Growth vs. Profit Contraction Paradox (2022-2024)
Structural drivers underlie this paradox:
Concentration: From 2022 to 2024, Circle’s revenue surged from 772millionto1.676 billion (47.5% CAGR), with reserve income’s share rising from 95.3% to 99.1%. This centralization reflects "stablecoin-as-a-service" success but heightens macro-rate dependency.
Distribution Costs: Spiking from 287millionin2022to1.01 billion in 2024 (253% increase), these costs, mainly for USDC issuance, redemptions, and clearing, grow rigidly with USDC supply.
Gross Margin Compression: Driven by uncompressible distribution costs, gross margin fell from 62.8% in 2022 to 39.7% in 2024, exposing B2B stablecoin models to systemic profit compression in rate-down cycles.
Profit Turnaround but Slowing Growth: Circle turned profitable in 2023 (268millionnetprofit,18.45155 million (9.28% margin) in 2024, halving YoY. General & Administrative expenses surged 37.1% to $137 million in 2024, reflecting compliance-driven cost rigidity.
3.3 Growth Potential Behind Low Net Profit Margin
Despite cost and compliance pressures (2024 net margin: 9.3%, down 42%), Circle’s model harbors growth drivers:
Circulating Supply Expansion: USDC’s market cap surpassed 60billioninearly2025,with2616 billion increase) implies a CAGR of 89.7% (2020-2025) or 160.5% (if growth slows to $90 billion by year-end). Lower rates may boost USDC demand, offsetting interest-rate risks.
Distribution Cost Optimization: While Coinbase splits are high, partnerships like Binance’s (one-time 60.25millionfeefor4 billion supply growth) yield lower customer acquisition costs. Future collaborations may drive growth more cost-effectively.
Undervalued Scarcity Premium: Circle’s $4-5 billion IPO valuation (20-25x P/E) mirrors traditional payers like PayPal (19x) and Square (22x), neglecting its status as the sole pure-play U.S. stablecoin issuer. Regulatory shifts (e.g., stablecoin bills) could further enhance its market share.
Bear Market Resilience: Unlike market-dependent firms (e.g., Coinbase, MicroStrategy), Circle’s profit model hinges on USDC transaction volumes and reserve interest, not crypto-price volatility. This positions it as a safe haven in market downturns, offering portfolio hedging value.
In summary, Circle’s low-margin, high-growth trajectory reflects a strategic pivot toward compliance-driven scalability, with potential regulatory and market-share upsides. Future success hinges on balancing cost efficiency and revenue diversification.
Amid industry consolidation, Circle’s IPO choice tells a paradoxical yet imaginative story: despite declining net profit margins, it harbors immense growth potential. On one hand, it boasts high transparency, robust regulatory compliance, and stable reserve revenues; on the other, its profitability appears "modest" – with a 2024 net profit margin of just 9.3%. This "inefficiency" isn’t a failure of its business model but reveals a deeper growth logic: amid fading high-interest dividends and complex distribution costs, Circle is building a highly scalable, compliance-first stablecoin infrastructure, strategically "reinvesting" profits into market share gains and regulatory leverage. This article dissects its growth potential and capitalization logic "behind its low net profit margin," tracing its seven-year IPO journey from governance to business structure and profit models.
1. Seven-Year IPO Marathon: A Crypto Regulatory Evolution
1.1 Paradigm Shifts in Three Capitalization Attempts (2018-2025)
Circle’s IPO journey epitomizes the dynamic interplay between crypto firms and regulatory frameworks. Its 2018 IPO bid coincided with the SEC’s ambiguous stance on cryptocurrency classification. By acquiring Poloniex to form a "payments + trading" dual-engine and securing 110millionfromBitmain,IDGCapital,andBreyerCapital,thecompany’svaluationplunged753 billion to $750 million due to regulatory scrutiny of exchange compliance and a bear market shock, exposing early crypto firms’ business model fragility.
The 2021 SPAC attempt highlighted regulatory arbitrage limits. Though merging with Concord Acquisition Corp avoided traditional IPO scrutiny, SEC queries on stablecoin accounting treatment – demanding proof that USDC isn’t a security – scuttled the deal. This challenge inadvertently drove a strategic pivot: divesting non-core assets (e.g., selling Poloniex for $150 million) and establishing "stablecoin-as-a-service" as its core axis. Since then, Circle has focused on USDC compliance and global regulatory licenses.
The 2025 IPO choice marks crypto capitalization maturity. NYSE listing requires full Regulation S-K disclosures and Sarbanes-Oxley Act internal controls. Notably, the S-1 filing details a reserve management mechanism: ~$32 billion in assets, with 85% allocated via BlackRock’s Circle Reserve Fund to overnight reverse repurchase agreements and 15% deposited with systemic institutions like BNY Mellon. This transparency mirrors traditional money market fund regulatory frameworks.
1.2 Coinbase Partnership: From Ecosystem Co-building to Nuanced Relations
From USDC’s inception, Circle and Coinbase collaborated through the Centre Consortium. Coinbase held 50% equity when Centre launched in 2018, rapidly expanding market access via "technology for traffic" models. Circle’s 2023 IPO filing reveals acquiring the remaining 50% stake from Coinbase for $210 million in stock, with revised USDC revenue-sharing agreements.
The current agreement features dynamic terms: both parties split USDC reserve revenue proportionally (Coinbase shares ~50% of reserves, per S-1), tied to Coinbase’s USDC supply. With Coinbase holding ~20% of USDC’s total circulating supply in 2024, it captures ~55% of reserve revenue, posing risks for Circle as USDC expands beyond its ecosystem, escalating marginal costs non-linearly.
2. USDC Reserve Management and Equity Structure
2.1 Tiered Reserve Management
USDC reserves exhibit "liquidity tiering":
Cash (15%): Held with GSIBs like BNY Mellon for emergency redemptions.
Reserve Fund (85%): Allocated via BlackRock’s Circle Reserve Fund.
Since 2023, USDC reserves are limited to cash in bank accounts and the Circle Reserve Fund, comprising U.S. Treasury securities with ≤3-month maturities and overnight U.S. Treasury repurchase agreements. The portfolio’s dollar-weighted average maturity ≤60 days, duration ≤120 days.
2.2 Equity Classification and Layered Governance
Per the S-1 filing, Circle’s post-IPO structure features three equity tiers:
Class A: Common shares issued during IPO, with one vote per share.
Class B: Held by co-founders Jeremy Allaire and Patrick Sean Neville, with five votes per share (capped at 30% total voting power), ensuring foundational control post-IPO.
Class C: Non-voting shares convertible under specific conditions, aligning with NYSE governance rules.
This structure balances public financing with strategic stability, safeguarding executive decision-making authority.
2.3 Executive and Institutional Shareholding Distribution
The S-1 reveals executives hold significant stakes, while renowned VCs and institutions (General Catalyst, IDG Capital, Breyer Capital, Accel, Oak Investment Partners, Fidelity) each own >5% equity, collectively holding >130 million shares. A $5 billion IPO offers substantial returns.
3. Profit Model and Revenue Breakdown
3.1 Revenue Model and Operational Metrics
Revenue Sources: Reserve income, Circle’s core revenue, stems from USDC’s 1:1 dollar-backed reserves, invested in short-term U.S. Treasuries and repurchase agreements, yielding stable interest in high-rate cycles. S-1 data shows 2024 revenue reached 1.68billion,with991.661 billion) from reserve income.
Partner Splits: Coinbase’s 50% reserve income share undermines Circle’s net profit, a necessary trade-off for ecosystem co-building and USDC adoption.
Other Revenue: Income from enterprise services, USDC Mint, and cross-chain fees contributes minimally ($15.16 million).
3.2 Revenue Growth vs. Profit Contraction Paradox (2022-2024)
Structural drivers underlie this paradox:
Concentration: From 2022 to 2024, Circle’s revenue surged from 772millionto1.676 billion (47.5% CAGR), with reserve income’s share rising from 95.3% to 99.1%. This centralization reflects "stablecoin-as-a-service" success but heightens macro-rate dependency.
Distribution Costs: Spiking from 287millionin2022to1.01 billion in 2024 (253% increase), these costs, mainly for USDC issuance, redemptions, and clearing, grow rigidly with USDC supply.
Gross Margin Compression: Driven by uncompressible distribution costs, gross margin fell from 62.8% in 2022 to 39.7% in 2024, exposing B2B stablecoin models to systemic profit compression in rate-down cycles.
Profit Turnaround but Slowing Growth: Circle turned profitable in 2023 (268millionnetprofit,18.45155 million (9.28% margin) in 2024, halving YoY. General & Administrative expenses surged 37.1% to $137 million in 2024, reflecting compliance-driven cost rigidity.
3.3 Growth Potential Behind Low Net Profit Margin
Despite cost and compliance pressures (2024 net margin: 9.3%, down 42%), Circle’s model harbors growth drivers:
Circulating Supply Expansion: USDC’s market cap surpassed 60billioninearly2025,with2616 billion increase) implies a CAGR of 89.7% (2020-2025) or 160.5% (if growth slows to $90 billion by year-end). Lower rates may boost USDC demand, offsetting interest-rate risks.
Distribution Cost Optimization: While Coinbase splits are high, partnerships like Binance’s (one-time 60.25millionfeefor4 billion supply growth) yield lower customer acquisition costs. Future collaborations may drive growth more cost-effectively.
Undervalued Scarcity Premium: Circle’s $4-5 billion IPO valuation (20-25x P/E) mirrors traditional payers like PayPal (19x) and Square (22x), neglecting its status as the sole pure-play U.S. stablecoin issuer. Regulatory shifts (e.g., stablecoin bills) could further enhance its market share.
Bear Market Resilience: Unlike market-dependent firms (e.g., Coinbase, MicroStrategy), Circle’s profit model hinges on USDC transaction volumes and reserve interest, not crypto-price volatility. This positions it as a safe haven in market downturns, offering portfolio hedging value.
In summary, Circle’s low-margin, high-growth trajectory reflects a strategic pivot toward compliance-driven scalability, with potential regulatory and market-share upsides. Future success hinges on balancing cost efficiency and revenue diversification.
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