The stablecoins sector has been working behind the scenes and has been witnessing great growth in 2020. Even though Tether was at the top spot in terms of its supply, DAI and USDC were catching up.
DAI, a community-driven experiment has acquired a similar share of transaction count as its counterpart, USDC. USDC, a regulated stablecoin that mainly focuses on application-specific use cases like remittance. A similar split of transaction count between DAI and USDC suggested how much a community can replace a centralized entity, noted Joel John in his recent research.
The USDC and DAI do not fair well in terms of dominance in comparison to Tether, because the exchanges had integrated the stablecoin early on, whereas, USDC and DAI served different purposes like having a token-based transfer mechanism [for USDC] and maintaining a community-driven experiment [for DAI]. The two stable coins were also partially responsible for driving stablecoins volume in Q3.
Data suggested Q3 consistently reported higher volumes, every month. In September alone more money was moved on-chain than the entirety of the first quarter. A part of the reason driving growth was traders’ ability to receive returns on a non-volatile asset like USDC and DAI.
Although Tether’s volume accounted for close to 67% capital moved on-chain in 2019 and Q1 2020, the advent of DeFi pushed volume towards DAI and USDC. USDC doubled its market-share by growing from 10.7% to over 22%, at press time. Interestingly, as other stablecoins were relishing in the DeFi boom, Tether was losing volume. The USDT volume shrunk by 20% between Q2 and Q3 [from 75% in Q2 to 55% in Q3].
Centralized exchanges like Binance began offering yield-products as DeFi started holding better capital. The popularity of USDC and DAI that have become prominent and important in the DeFi ecosystem have also contributed to this, as their percentage of supply locked up in smart contracts has also been rising since Q2.
With DAI noting a higher token velocity, which was a measure of how quickly units are circulating in the network, its users are now experiencing increased utility of the token. This made DAI a crucial part of the DeFi ecosystem and as it moved onwards, users may find even more uses for the asset.
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