Tether vs Other Stablecoins
A data-driven comparison of Tether, Circle USDC, Gemini Dollar, Maker Dai, Paxos Standard & TrueUSD
Update: The data from this post is now updated live on Blockspur’s stablecoin page.
Earlier this year we published a review of Tether’s blockchain and released the relevant transaction data. Tether has returned to the news due to its change of banking relationship and the resulting uncertainty. Since our last Tether post, however, there has now been a proliferation of stablecoin products, primarily running on the Ethereum blockchain. In this post, my partner @edwin and I will compare Tether with 5 popular Ethereum stablecoins — the 4 “centralized” stablecoins from Circle, Gemini, Paxos, and TrustToken and the collateralized Dai stablecoin from Maker.
Fundamentally, the Circle, Gemini, Paxos, and TrustToken coins are similar to Tether: a centralized entity holds assets in a banking/trust account and issues corresponding tokens that represent a 1:1 claim to the underlying assets. What differentiates these stablecoins from Tether, however, is that they are substantially more transparent with disclosures of their holding entities, bank accounts, and regulatory compliance.
For example, Gemini is regulated by the New York State Department of Financial Services, uses State Street, the United State’s 2nd oldest bank in continuous operation, as its custodian, and publishes regular audits, a far cry from the banking relationship guessing game and “audits” from Tether.
Even though these stablecoins are issued on a blockchain and can be sent peer-to-peer, they are not censorship-resistant in the same way that a bitcoin is. The issuing entity has the ability/authority to modify or reverse a transaction if it is so compelled, for example, by a court order or if there is a major security incident. Whether this counter-party reliance is a feature or a bug depends on the user and the intended usage.
The Dai coin from Maker operates differently. To mint a Dai, a user sends collateral (ether, for example) to a smart contract to create a “collateralized debt position” (CDP). This CDP allows the user to create Dai that is a portion of the value of the original collateral. With the help of price feed oracles, as the price of ether fluctuates, various smart contract and incentive mechanisms are in place to maintain a relative 1:1 peg between US dollar and Dai. In Dai’s case, because the underlying assets (collateral) are on-chain and managed by smart contracts, the counter-party reliance is theoretically reduced relative to the centralized stablecoins, dramatically increasing censorship-resistance.
These newer stablecoins are all issued on the Ethereum blockchain as ERC-20 tokens. This means that they work with the vast majority of software and hardware wallets, fit into the infrastructure of most centralized exchanges (including Coinbase’s), and can interoperate with the emerging decentralized lending and derivative projects on Ethereum.
Supply (aka Stablecoin AUM)
When it comes to total supply, Tether is substantially larger than the other 5 stablecoins. At over 2B tokens issued (and this is excluding the number of tokens in its own treasury account, currently holding over 900M tokens), Tether is more than 6X bigger than Circle, Dai, Gemini, Paxos, and TrueUSD combined. In fact, even Tether’s own ERC-20 is bigger than Circle and Gemini.
Tether Redemption & Arbitrage?
What is not shown in the supply data above, however, is that the rate of growth of the other stablecoins is much higher than that of Tether.
In fact, Tether’s “real supply” has been contracting, even though it has not done an on-chain supply revocation since January. Assuming Tether and Bitfinex are the same entity, Tether has been “redeeming” its own tokens, including over 130M in the last 24 hours and over 740M in October, by receiving tokens in its treasury account from a Bitfinex account. The transactions between the two accounts can be seen on Blockspur’s relationship page.
Why is the redemption accelerating? One plausible explanation is that Tether has been buying its own tokens at a discount, as the price fluctuates below $1 due to the recent uncertainty. At a 2% discount, Tether/Bitfinex would have netted nearly $15M in arbitrage profit this month.
Holders & Holdings
Tether substantially outranks the other coins when it comes to the number of holders. With over 400K “active accounts” (account with non-zero balances), Tether has 45 times the number of “users” as the other coins combined.
When it comes to holding per account, however, Circle USDC and Paxos are leading with over 200K tokens per account. This likely reflects the institutional usage of these regulated stablecoins. Dai, as a more enthusiast-oriented coin, shows its relative popularity with more users holding fewer tokens on average.
With the high number of users, Tether is at 4,523 tokens per user. However, as discussed in our previous post, Tether’s holdings are highly concentrated in the top few hundred addresses. In fact, each of the top few accounts on Tether’s richlist singularly holds more assets than the total assets of any other stablecoin.
When it comes to usage, Tether obviously outranks the other coins with 3M+ number of transfers overall, including 300K+ in the last 30 days. Dai has been growing over the last few months and now has 250K+ overall number of transfers. The other stablecoins are much less active, with Circle USDC only doing dozens of transfers a day. Since Circle USDC, Gemini Dollar, and Paxos are only a few weeks old, these are preliminary numbers that should be continually tracked and analyzed.
Price & Arbitrage
Per the Tether redemption data above, stablecoins present traders with arbitrage opportunities when the prices deviate from their 1:1 peg in the markets.
The volatility in the crypto market means that stablecoins can often exhibit price deviations, even if we exclude the more highly discounted Tether. In October, for example, Gemini Dollar has thinly traded as high as $1.19 per token and as low as $0.9598 per token. And this is for an audited, regulated product with assets stored at State Street.
With stablecoin being one of the candidates for what some believe to be the eventual “super mega winner(s) in crypto,” it is not surprising that the market has quickly evolved from a Tether monopoly into a crowded one with many different players. Andreessen Horowitz alone has invested in at least 4 stablecoin projects (Basis, Celo, Maker, TrustToken), each using a different price-stability or go-to-market mechanism. As more products emerge, we will continue to track stablecoins and make more data publicly available.
If you have specific questions about stablecoins or about this post in general, please leave a comment and we’d be happy to share our perspectives. If you are interested in more data, please feel free to contact us to learn more about Blockspur’s stablecoin data/SOR product.