Crypto Stablecoin Report 17: The market capitalization of stablecoins increased to $17.544 billion, Decentralized payment protocol Celo
Original link: https://bihu.com/article/1131020362
Original publish time: September 8, 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 has increased by $981 million to $17.544 billion.
- Last week, Tether additionally issued 270 million USDT on Ethereum and 500 million USDT on Tron.
- DeFi on EOS continued to heat up. On September 4, Tether additionally issued 25 million USDT on EOS, and continued to additionally issue 50 million USDT on September 5. The circulation of USDT on EOS reached 90.25 million.
- Celo has special features in address-based encryption schemes, reserve assets, and shared reserves.
- The market capitalization of CELO has reached $423 million, while the circulation of cUSD is only 7.33 million.
1. Overview of Stablecoin Data
First, let’s review the changes in the basic information of the various stablecoins in the past week(August 29, 2020 ~ September 4, 2020, same below).
Market Circulation
Source: MYKEY, CoinMarketCap, Coin Metrics
At present, the market circulation of major stablecoins has increased by $981 million to $17.544 billion.
Source: MYKEY, Coin Metrics
In the past week, Tether additionally issued 270 million USDT on Ethereum and 500 million USDT on Tron. The circulation of USDC, PAX, HUSD, DAI, and GUSD increased by 230 million, 10.91 million, 5.85 million, 19.16 million and 650,000, and the circulation of BUSD and TUSD decreased by 2.69 million and 52.21 million.
The Number of Holding Addresses
Source: MYKEY, DeBank
Last week, the number of main stablecoin holding addresses on Ethereum all increased by 142,707.
Source: MYKEY, DeBank
The number of holding addresses of USDT, USDC, PAX, TUSD, and DAI increased by 129,348, 8,210, 216, 582, and 4,351.
The Number of Active Addresses
Source: MYKEY, Coin Metrics
The number of active addresses of stablecoins last week decreased by an average of 1.15% 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 12.01%.
The Number of 24-hour Volume of Transactions on the Public Blockchains
Source: MYKEY, Coin Metrics
Source: MYKEY, Coin Metrics
The daily volume of transactions of major stablecoins last week increased by an average of 12.05% from the previous week.
2. Decentralized payment protocol Celo
The stablecoin in the blockchain combines the advantages of digital currency and can maintain price stability. The payment market has a very broad prospect and is an area that many people are optimistic about. The decentralized payment protocol Celo contains stablecoins that can be used for payment, mainly for mobile payment systems. Celo is based on the two core values of ‘special purpose’ and ‘connection’. Its pronunciation /ˈtselo/ means ‘purpose’ in Esperanto. In this report, we will introduce to you the differences of Celo.
Address-based Encryption
With the development of stablecoins, USDT and USDC with stable value gradually replaced the Bitcoin feature of ‘point-to-point payment’. When using these stablecoins for payment or transfer, we must first know the address of the other party, which increases the threshold for the use of stablecoins.
Celo proposed an address-based encryption scheme. The user generates a public/private key pair traditionally, and then registers his public key to a public database, which stores the tuple of [address->public key]. Users can attach any character string to the address of the database key, and each address can store multiple public keys. Through this protocol, users can use e-mail addresses, mobile phone numbers, etc. as public keys, but need to be able to receive secure messages.
In the digital currency wallet disclosed by China Construction Bank last month, the digital RMB also has a similar feature, which can be transferred through the wallet address of the other party or the bank account.
Price Stabilization Mechanism
The Celo protocol contains two tokens. One is the reserve token CELO (formerly known as Celo Gold), and the other is the stablecoin Celo USD (cUSD, Celo USD) used for payment. Although the stablecoin cUSD is also supplied flexibly, unlike Ampleforth, Celo only maintains the value of cUSD by adjusting the total supply of cUSD, without changing the number of stablecoins held by users. When the price of cUSD is higher than $1, arbitrageurs can buy $1 CELO, exchange it for 1 cUSD, and sell it on the market. When cUSD is lower than $1, arbitrageurs can buy cUSD and exchange it for $1 CELO.
Diversity of Reserve Assets
In MakerDAO, the tokens selected by the holders of MKR through voting, such as ETH, WBTC, etc., are mortgaged, while Synthetix is used to mortgage its native token SNX. The reserve assets of Celo include not only the native token CELO, but also commonly used cryptocurrencies such as BTC, ETH, and DAI. This increases the diversity of collateral assets and makes it easier to expand the scale of cUSD. Initially, the target of the Celo reserve was 50% CELO, 30% BTC, 15% ETH, and 5% stablecoins.
Source: cello.org
Shared Reserve System
At present, there is the only cUSD as a stablecoin in Celo, but Celo has positioned itself as a multi-asset encryption protocol for decentralized payments and introduced a shared reserve system. For example, when the protocol is to introduce the Celo euro linked to the euro, the Celo euro uses the same reserve as the Celo dollar. When the supply of stablecoins expands, the protocol issues new stablecoins and uses them to buy a basket of encrypted assets. When the demand for stablecoins shrinks, the protocol uses the same mechanism to sell reserve assets for stablecoins. CELO has played the role of the central bank in traditional finance, maintaining the prices of stablecoin through open market operations.
The shared reserve system can also improve the efficiency of the process. For example, when the demand for Celo euros decreases, before preparing to sell reserves, it will first check whether the supply of Celo dollars needs to be expanded. If necessary, Celo USD will be issued and Celo Euro will be directly exchanged at the current exchange rate.
The shared reserve system does not require all new stablecoins to be used. The Celo protocol also allows the use of its reserves to issue new tokens. When using the shared reserve system to introduce a new stablecoin, thorough consideration must be made. If a stablecoin with negative effects on the ecosystem is introduced, it may have a marginally negative impact on the stability of other currencies. Only when people generally expect that the introduction of new stablecoins will increase the long-term demand for the monetary system, will they be considered.
The Value of CELO
CELO is also the governance and incentive token of the Celo protocol. Holding CELO will enjoy the benefits of network growth.
As the use of Celo increases and new stablecoins are introduced, more CELO needs to be mortgaged, and the demand for CELO will increase.
In order to maintain the BFT consensus of the Celo network, Celo needs to elect validator nodes, and validators need to mortgage a certain amount of CELO tokens.
The block rewards of Celo will be distributed to those who contribute to the system, including those who maintain the stability of the system by selecting validators, verifying transactions, verifying users, and participating in the discovery mechanism of the price of Schelling Point, as well as those who bear the risk of austerity, those who use the protocol as a payment method, those who invite others to use the protocol, and those who improve the protocol.
CELO holders can govern the protocol by voting, such as proposing a proposal to introduce a new stablecoin, and if the vote reaches a certain threshold, the new stablecoin is introduced into the shared reserve.
Similarly, holding CELO is also at risk. When the supply is tight, if the demand for Celo stablecoins shrinks for a long time, the value of CELO may decline.
Celo Usage
The current market capitalization of CELO has reached $423 million, and it is listed on Coinbase, the largest Exchange in the United States. Celo has formed alliances with payment institutions, digital wallets, payment solution companies, digital asset lending companies, educational institutions, investment institutions, etc. to promote the use of the Celo protocol.
But there are few stablecoins in the Celo protocol. According to the latest data on the official website, the stablecoin in Celo is now only cUSD, and the circulation of cUSD is only 7.33 million. Reserve funds include CELO, BTC, ETH, DAI, and each asset is stored in a specific blockchain address.
Sum up
Celo has special features in address-based encryption schemes, reserve assets, and shared reserves. It increases the usability of stablecoins, the diversity of reserve assets, and improves the efficiency of process. The market capitalization of CELO is high enough, but the current circulation of stablecoins in Celo is not high, and the types of stablecoins need to be increased.
3. Questions of Readers
1. Is DeFi disrupting the entire blockchain ecology?
Answer: DeFi is indeed changing the entire blockchain ecology on a large scale. For example, because of the demand of DeFi, the oracle Chainlink is used more. Because liquidity mining requires LP tokens, the liquidity and transaction volume of Uniswap have doubled. Because of the popularity of DeFi, the Ethereum network has become very congested, and miners’ fees have increased, which may make it impossible for some other types of DApps to develop. In addition, DeFi is also changing the pattern between public blockchains. EOS, whose stablecoin USDT is insufficient, lags behind TRON in this wave of DeFi boom.
2. Why was SUSHI listed in three major Exchanges in one day? Is it just because of the money-making effect?
Answer: It’s not just for making money. It is certain that the token listing strategy of centralized Exchanges is now different from before, and even the largest Exchanges have generated the FOMO sentiment of token listing. At the end of August, the daily trading volume of Uniswap surpassed that of Coinbase, the largest Exchange in the United States, and centralized Exchanges could no longer ignore decentralized Exchanges.
In addition, there are also reasons for the SushiSwap project itself. Now Uniswap is the largest decentralized Exchange, and the LP tokens obtained after depositing in Uniswap can be transferred, which gives SushiSwap an opportunity. SushiSwap wants to allow users to provide liquidity on Uniswap by giving users SUSHI token incentives, and pledge LP tokens to SushiSwap, and finally convert it into its own liquidity. It now appears that this approach is effective. In the past week, the liquidity on Uniswap has increased from $308 million to $1.9 billion, most of which are to pledge LP tokens in Uniswap to SushiSwap for liquidity mining. If there is indeed a lot of liquidity left in SushiSwap in the end, then the position of Uniswap will face serious challenges.
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)
Crypto Stablecoin Report 16: The connection between stablecoins and real assets
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