Crypto Stablecoin Report 12: USDT is additionally issued 690 million The use of stablecoins outside the cryptocurrency market
Original link: https://bihu.com/article/1415009638
Original publish time: August 4, 2020
Original author: HaiBo Jiang, researcher of MYKEY Lab
We released MYKEY Crypto Stablecoin Report to share our interpretation of the development status of stablecoins and analysis of their development trends to help the participants in the crypto market stay updated on the development status of stablecoin. The MYKEY Crypto Stablecoin Report will be published every week, looking forward to maintaining communication with the industry and exploring the development prospects of stablecoin together.
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- Last week, the market capitalization of major stablecoins increased by $723 million to $13.408 billion.
- The circulation of USDT increased by 690 million, with an additional issuance of 240 million on Ethereum and an additional issuance of 450 million on Tron.
- The circulation of DAI increased by 30.85% from 286 million to 374 million.
- The data on the number of holding addresses, the number of active addresses, the number of transactions on the public blockchains, and the volume of transactions on the public blockchains are overall improving.
- There is a downward trend in the proportion of the volume of transactions of USDT on the public blockchains.
- Research by IMF believes that consumers will gradually switch to new payment methods that are more useful than existing payment methods.
- Coinbase pointed out in the report that 41 of the best 50 universities have offered blockchain-related courses.
- The G7 working group mentioned in an investigation report that stablecoins, regardless of their size, face legal and regulatory risks. Only by addressing these risks can the potential benefits of stablecoins be realized.
1. Overview of Stablecoin Data
First, let’s review the changes in the basic information of the various stablecoins in the past week(July 25, 2020, ~ July 31, 2020, same below).
Market Circulation
Source: MYKEY, CoinMarketCap, Coin Metrics
At present, the market circulation of major stablecoins has reached $13.408 billion, and the market capitalization continues to grow.
Source: MYKEY, Coin Metrics
In the past week, the circulation of major stablecoins increased by 723 million. USDT was additionally issued four times, and the circulation increased by 690 million. Among them, two additional issuances occurs on Ethereum, totaling 240 million USDT, and two additional issuances occurs on Tron, totaling 450 million USDT. The circulation of PAX, HUSD and DAI increased by 7.46 million, 10.85 million and 88.08 million. The circulation of USDC, BUSD, TUSD, and GUSD decreased by 19.74 million, 18.85 million, 33.35 million, and 690,000.
Source: MYKEY, Coin Metrics
With USDC accounting for half of the circulation of other major stablecoins other than USDT, and the proportion of DAI has increased significantly recently. In the past week, the circulation of DAI has increased by 30.85% from 286 million to 374 million. The proportion of DAI in stablecoins other than USDT increased from 13% to 16.8%.
Source: MYKEY, Coin Metrics
The proportion of USDT on Omni is getting lower and lower, and the proportion of USDT on Tron is getting higher. At present, the circulation of USDT on Omni, ETH, and Tron are 1.34 billion, 6.4 billion, and 3.45 billion, and their proportions are 11.93%, 57.19%, and 30.87%.
The Number of Holding Addresses
Source: MYKEY, DeBank
Last week, the number of main stablecoin holding addresses on Ethereum all increased and increased by 31,774.
Source: MYKEY, DeBank
The number of holding addresses of USDT, USDC, PAX, TUSD, and DAI increased by 24,627, 3,555, 693, 321, and 2,578.
The Number of Active Addresses
Source: MYKEY, Coin Metrics
The number of active addresses of stablecoins last week increased by an average of 14.5% compared to the previous week.
The Number of 24-hour Transactions on the Public Blockchains
Source: MYKEY, Coin Metrics
Compared with the previous week, the number of daily transactions of major stablecoins increased by an average of 11.1%.
The Number of 24-hour Volume of Transactions on the Public Blockchains
Source: MYKEY, Coin Metrics
Source: MYKEY, Coin Metrics
Compared with the previous week, the daily volume of transactions of major stablecoins last week increased by an average of 55.4%. On July 27th and 28th, the transfer amount of USDT on Ethereum was relatively high. In the past two days, USDT was additionally issued 120 million on Ethereum each day. There is a downward trend in the proportion of the volume of transactions of USDT on the public blockchains.
2. The use of stablecoins outside the cryptocurrency market
Stablecoin is an effective medium of exchange for cryptocurrency. Cryptocurrencies such as Bitcoin have very high volatility, and investors can use stablecoins to hedge. Holding a certain percentage of stablecoins in the investment portfolio can effectively reduce the overall risk. The role of stablecoins in the cryptocurrency market is getting bigger and bigger, and their proportion in the volume of transactions of cryptocurrency is also getting higher. At the same time, stablecoins are being used more and more outside the cryptocurrency market. In this report, we will introduce the use of stablecoins outside the cryptocurrency market.
Research by IMF believes that consumers will gradually switch to new payment methods that are more useful than existing payment methods.
The key to the use of stablecoins outside the cryptocurrency market is still to be reflected in ‘usefulness’. For example, it can reduce payment fees, improve payment efficiency, and eliminate payment friction. To this end, we have summarized the following points of demand for stablecoins from people outside the cryptocurrency market.
Cross-border transfers. Traditional banks often need a few days to process cross-border transfers. Stablecoins have broadened global remittance channels. Satoshi Nakamoto wrote in the Bitcoin white paper that Bitcoin is a point-to-point payment tool. In the past few years, some companies did use Bitcoin for cross-border transfers. But now, this usage scenario has been replaced by stablecoins, and the property of value stability make stablecoins more suitable for transfers.
Settlement tool. JPM Coin issued by JP Morgan Chase is a representative of stablecoin for settlement. Customers deposit funds in the designated account of JPMorgan Chase and receive the same amount of JPM Coin. JPM Coin is a DDR generated by JPMorgan Chase for fund settlement. It is just a settlement tool and can only be used within the JPMorgan Chase banking system.
Payment instrument. Fees are lower when using stablecoins to pay, Terra is a relatively well-known stablecoin payment project with more than 1.8 million users. Terra is more advantageous for large payments.
Global uncertainty drives up the demand for stablecoins. In April of this year, Coinbase issued a document stating that the transfer activities on the stablecoin blockchains have increased and the market capitalization has increased. The stablecoin is rising rapidly, and global businesses may soon require the intervention of stablecoins. When the world is facing an economic crisis, it needs a haven, and the stablecoins anchored to the US dollar is a choice.
Hedging the risk of legal currency. In some countries where there is a greater risk of devaluation of legal currency, it is necessary to hold a certain proportion of foreign exchange, and stablecoin is a tool that is easier to obtain and easier to keep.
Low barriers to use. It is relatively simple to buy USDT from OTC channels, while payment with PayPal requires a VISA/Master credit card. As of the third quarter of 2018, China has 5.31 bank cards per capita and 0.47 credit cards per capita nationwide. People who hold credit cards often have multiple credit cards. Most Chinese people do not have a credit card and cannot use PayPal.
Gray and illegal transactions. Due to lack of supervision, various illegal websites support the use of cryptocurrencies including stablecoins for payment. The smart contract address 0x8a91c9a16cd62693649d80afa85a09dbbdcb8508 is marked as MMM BSC on Etherscan. MMM is a famous MLM fraud organization in the world. In MMM BSC, the core gameplay is to invite the following users, and you can get benefits from the following 1st-51st following users. In May, the number of daily transactions of PAX for this contract address accounted for 40–50% of the total number of transactions of PAX.
Source: MYKEY, Coin Metrics, Etherscan
The concept of ‘stablecoin’, in addition to being known to everyone in the cryptocurrency market, has also been spread wildly outside the cryptocurrency market through certain iconic events in the past two years.
Facebook announced the launch of Libra. In December 2019, the monthly active users of Facebook family products (Facebook, Instagram, Messenger, WhatsApp) were 2.9 billion, and 2.3 billion people used them every day. The influence of Libra is so great that Zuckerberg, the founder of Facebook, also attended a Hearing in the United States Congress. As a Facebook user, you may know that there are products such as stablecoins.
The development of CBDC. China, Japan, and the EU are all studying CBDC, and they will inevitably popularize digital currencies with people before they are officially put into use. For example, at the end of last year, Chinese state leaders mentioned CBDC many times in their speeches and Mu Changchun gave a lecture on CBDC and Libra. CBDC is a kind of stablecoin. The popularity of CBDC will make some ordinary people know about stablecoin.
The popularization of blockchain knowledge. According to the Coinbase report, 41 of the best 50 universities have offered blockchain-related courses. People of Generation Z may learn about Bitcoin directly from the school. Blockchain courses will talk about Bitcoin and it is possible to recognize stablecoins from this. After speaking on October 24 last year, many people began to take the initiative to learn about blockchain. Besides, the attention of some celebrities outside the cryptocurrency market has also led to the spread of blockchain knowledge. For example, J.K. Rowling retweeted a tweet and asked ‘I don’t understand Bitcoin, please explain it to me’ so that her fans outside the cryptocurrency market will learn about Bitcoin and the blockchain.
Source: Coincase reports
For merchants, there is no high threshold for using stablecoins to deposit and withdraw funds. Almost all Exchanges support USDT, and more and more OTC transactions are opened. Even if the source is not completely legal, it usually does not attract much attention, and privacy can also be achieved through tokens mixing operations. If you want to withdraw through Exchanges completely legally, you can also exchange USDT for assets supported by compliant Exchanges such as BTC in other places, and sell them on compliant Exchanges that supports the legal currency.
The G7 working group mentioned in Investigating the impact of global stabecoins report that only by addressing the risks can the potential benefits of stablecoins be realized. Regardless of the size of stablecoins, they face the following legal and regulatory risks:
- Certainty of law
- Sound governance mechanisms, including investment rules and price stability mechanisms
- Money laundering, terrorist financing and other forms of illegal financing
- Security, efficiency and integrity of payment systems
- Network security and resilient operations
- Data privacy, protection, and portability
- Protection of consumers/investors
- Tax compliance
It can be seen that stablecoin is indeed a useful payment tool, and its use outside the cryptocurrency market is increasing. It is believed that with the improvement of laws and regulations, the use of stablecoins will be popularized.
3. Questions of Readers
Question 1. The market capitalization of stablecoins increased by $2.4 billion in the first quarter and $3.8 billion in the second quarter. Why is the stablecoin market developing so fast? Where does the market demand mainly come from?
Answer: In both centralized and decentralized markets, the demand for stablecoins is growing across the board. USDT and DAI are representatives of stablecoins in the centralized market and the decentralized market. Their premium and additional issuance can reflect the current growth in demand for stablecoins. After March 1, the legal currency premium of USDT on Huobi OTC reached 10%, and then stabilized at 5% for a period of time. Since this time node, USDT has been additionally issued in large numbers, and these tokens have mainly flowed to centralized Exchanges. When the amount of additional issuance of USDT is large enough, USDT begins to experience a negative premium in the legal currency area. In recent months, with the popularity of DeFi, stablecoins have been used more and more in DeFi, and Maker has also added USDC as collateral for DAI. DAI is the stablecoin most commonly used in DeFi. From the beginning of May to the present, the circulating market capitalization of DAI has increased from $100 million to $380 million. We can also see the recent increase in the proportion of the volume of transactions of DAI in stablecoins.
Question 2. DAI represents the infrastructure of DeFi and USDT represents the infrastructure of CeFi. Does the world need DAI or USDT? In other words: Does the world need DeFi or CeFi?
Answer: The world needs both the centralized infrastructure and the decentralized infrastructure, and both have their own advantages. At the current stage, decentralization may mean innovation, and may have higher efficiency, allowing users to better control their own property, data and other rights. However, the current centralized infrastructure has not been popularized. Even though DeFi is very popular now, there are not many people actually participating in DeFi. The barriers for users to participate in decentralized infrastructure are still high. However, centralized infrastructure can provide protection for our lives, such as banking, insurance, etc. These centralized institutions may exist at any stage.
Tips
To better communicate with industry insiders, we decided to add two sections for questions of readers and opinions of guests. If readers have questions about stablecoins, please contact us. We will pick meaningful questions to answer in the next issue. At the same time, welcome guests from the industry to share your views on stablecoins. Contact information: jianghb@mykey.org.
This is what we’re sharing in this MYKEY Crypto Stablecoin Report, welcome to stay tuned for follow-up crypto stablecoin reports. We will provide more interpretations of the development status of stablecoins and analysis of their development trends to help you stay updated on the development status of stablecoin in the follow-up report.
PS: MYKEY Lab has the final right to interpret the content of the article, please indicate the source for the quotation. Welcome to follow our official account — MYKEY Lab: MYKEY Smart Wallet.
Past review
MYKEY Crypto Stablecoin Report 03: Where are the users of DAI?
Crypto Stablecoin Report 07: Security Analysis of Stablecoins
Crypto Stablecoin Report 08: Interpretation of Digital Dollar Project
Crypto Stablecoin Report 09: Analyze the lending leverage of Compound
Crypto Stablecoin Report 10: Introduce the Algorithmic Stablecoin Project Terra (Luna)
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