Summary of 2019: Annual development status, trends and nature of on-chain user behavior of stablecoins

Stablecoins are a natural outgrowth of the crypto industry's search for a "product-market fit." The long winter bear market in 2018, coupled with the increasing scrutiny of banks around the world, created the stage for stable tokens, which in turn led to the development of a wider DeFi ecosystem. When I started writing this article (early November), about $250 billion in assets had already been moved on-chain via stablecoins. However, few articles have explored who is driving this trend, to what extent it has developed, and what is the nature of user behavior on the chain.

The following is my attempt: What are the characteristics of stablecoins worth summarizing in terms of transaction volume and user behavior?

USDT ranks first with 40,742 active wallets (the number of Bitcoin wallets is about 750,000). DAI, the second-ranked stablecoin, is farther away, with only 2,752, followed by USDC and Paxos. USDT takes the lead, DAI catches up, and stablecoins issued by well-known institutions such as Circle and Gemini lag behind DAI. This ranking will run through the chart below this article.

On-chain transaction volume in 2019

In 2019, more than $237 billion was transferred on-chain via stablecoins. Much of this can be attributed to exchange-driven demand. It is easy to see from the above figure that USDT accounts for most of the transaction volume on the two chains (Bitcoin-based Omni protocol and Ethereum-based ERC-20 protocol). It can be said that the ecosystem using them today is much larger To use the ecology of other chains.

However, this pattern is likely to change if the market for DeFi tools grows exponentially and reaches a critical point that exceeds the demand for exchange funds. For this to happen, there must be more accessible tools, such as a product portfolio that uses stablecoins as payment tools, and wallets that make it easier for users to manage stablecoins. Projects like Argent and Mosendo are paving the way for this to happen. However, if the transaction volume of USDC and DAI is to increase, it is likely to rely on the promotion of the lending market (such as Juno, Dharma, and Compound) and transaction demand (such as Uniswap). It will be very interesting to watch how the dynamics change over the coming year.

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Excluding USDT, DAI is the only stablecoin that has actually seen an increase in transaction volume over the past year. Since January 2019, its transaction volume has surged by approximately 300%. The launch of multi-asset-collateralized DAI is likely to drive this number up even further. The transaction volume of DAI can already compete with centralized stablecoins like GUSD.

Due to the adoption of exchanges, and the speed advantage provided by Ethereum, ERC20 USDT has comprehensively surpassed Omni and all other well-known stablecoins combined. If there is any conclusion in 2019, it is that USDT-ERC20 has established its leading position in the world, MakerDAO has explored its "Tao", while other projects are dying (in terms of transaction volume).

Conversion process for Omni and Erc-20 products

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The lightning growth of USDT-Erc20 can be written into the textbook

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• The truth about on-chain transactions

• Trading volumes, however, only tell part of the story. To understand what is really going on in these projects, one also needs to explore the number and frequency of transactions processed by each blockchain. To do this, I looked at the following data:

Active wallets per chain

Number of transactions on each chain

Amount contributed by each chain

One way to make sense of this data is that as the number of transactions in a network increases, the average value of each transaction may decrease.

This is based on the understanding that as adoption increases, people may not store large sums of wealth in a stablecoin, but "use" the stablecoin as a tool. A chain may have high transaction volume in its early stages (e.g. Paxos) because its creators are issuing assets and transferring them to partners. However, if its penetration rate is not good, and the average transaction amount per address remains high, it means that there are "giant whales" manipulating the blockchain network.

The graph below shows how DAI compares to its peers. The following data can be used as a reference in terms of scale: USDT processed transactions between Omni protocol tokens and ERC-20 protocol tokens, in 2019 (as of November), there were 20 million transactions.

• When it comes to the average amount per user, there are usually two conclusions I hear from analysts I talk to. One way of thinking is that if the per capita amount on a certain chain is high, it means that users have a lot of confidence in the chain. According to this logic, Paxos may be a more popular chain for transferring institutional assets to the chain, because large amounts of funds are often transferred to the network. Another conclusion is more concerned with practicality, that is, as the rate of personal adoption increases, we will see that the average transaction amount per wallet will drop significantly. This is true for DAI and USDT, with August and September figures down a massive ~80% from their all-time highs.

• However, no matter how I look at these data, my personal conclusion is that DeFi and DApp (decentralized applications) are in fact still controlled by giant whales. If an app or tool doesn’t catch those whales early in its growth cycle, it may not get much traction given that the cryptocurrency market is still small today. Ideally, as this ecosystem evolves, the number of active wallets should increase as incoming on-ramps increase. If transaction volume remains stagnant (or grows slowly compared to user growth), the averages shown in the chart below should drop significantly. That's the ideal situation for 2020.

• Multiple factors may have contributed to this result. which includes

• Bank cards linked to crypto wallets are increasingly common (e.g. crypto.com)

Mobile wallet (eg Samsung)

Increased number of ramps (e.g. Local Crypto, Ramp.network)

However, I found a very interesting data: if you choose any day, you will find that the average number of transactions per address is approximately equal to 2. DAI has the highest number and its upper limit can reach 5.

In my opinion, this means that individual investors still view stablecoins as a "volatility hedge" rather than as a transactional layer. In contrast, the average number of transactions per wallet on DApp is higher, and can reach 4 according to the standard of Ethereum ecology. My hunch is that if EOS and Tron based stablecoins were included in this numbers game, the numbers would be much higher. But that's for another day. DAI's average monthly transactions are indeed higher, and that's because it has other use cases besides exchanges.

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beyond the exchange

The question I have been thinking about personally is: If you want to build a unicorn company on the basis of DeFi and stable currency, what is the basis?

If regulation follows through and provides a stable framework for the development of the space, the future versions of Stripe, Paypal, and Monzo are not yet formed. For this prospect to become a reality, it must be established under the premise of a surge in the number of individual users.

Markets I personally track (and related stablecoin usage) include remittances, the gig economy, digital asset insurance, revenue sharing agreements, and DAOs. Despite the popularity of exchanges, when I researched B2C applications and last-mile solutions based on blockchain products, I found that there is still a lot of room for growth in these areas. Projects like Bitpesa and Coins.ph not only bravely explore the frontier market, but also set the stage for the first batch of blockchain-based new-generation financial technology companies, making them even more eye-catching.

David Perell

Another very early example of this is LocalEthereum. The project launched products to the world with a very small team, the transaction amount is growing steadily, and most of its functions are operated on the blockchain. I think, in theory, stablecoins are to cryptocurrencies what cloud services are to data. It allows small teams to serve millions of users with smart contract-based interactions.

In the mobile Internet era, WhatsApp and Instagram are examples of small teams serving mass users. I'm still waiting for some sort of surprise: a consumer-facing app that does something similar with stablecoins in terms of banking services.