After the rise of various stablecoins, no one has shaken USDT's dominant position?
Abstract: On the basis of reviewing the development history of stable currency, this article analyzes the recent development of stable currency, and finally gives the prospect of stable currency.
In a broad sense, a stablecoin is a type of asset or currency anchored to legal tender or physical objects, such as anchored to the US dollar or anchored to gold. Its price is not really "stable", but compared to encrypted assets, its price fluctuations tend to be relatively small because of the anchor as an endorsement.
In a narrow sense, a stablecoin is an encrypted asset that is issued on the basis of a blockchain and anchored to a legal currency. At present, in the market, the stablecoins anchored to the US dollar are the main ones, and the stablecoins anchored to other fiat currencies are relatively small. The stablecoins mentioned below mostly refer to the category of stablecoins in a narrow sense.
Stablecoins can be described as a special existence, from the constant thunderstorms or controversial USDT, to the Libra stablecoins in regulatory difficulties, from JPMorgan Chase and others to issue stablecoins JPM, to major trading platforms launching stablecoins one after another, The topic of stablecoins has been a hot topic in the industry in recent years.
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1. The development history of stable currency
Source: QKL123
Source: QKL123
The development of stablecoins can be roughly divided into two lines: decentralization and centralization: one is a centralized stablecoin that is represented by USDT, USDC, etc. Centralized stablecoins.
(1) Centralized stable currency
The USDT stable currency was issued by Tether and launched in November 2014. Initially, USDT was issued based on the Omni Layer, the upper layer protocol of Bitcoin, and promised to exchange reserves with the US dollar 1:1. However, the US dollar reserve behind Tether is not transparent enough. Although the ledger on the USDT chain is public, problems caused by centralization such as insufficient reserves have been criticized by the industry. In addition, Tether has an interest relationship with the trading platform Bitfinex, and the "risk of fund misappropriation" increases the possibility of USDT thunderstorms.
Unlike USDT, USDC is a regulated stablecoin. The first two compliant stablecoins, GUSD and PAX, were approved by the New York Department of Financial Services (NYDFS) in September 2018, followed by USDC in the same month. Afterwards, with the strong support of the companies behind it, Circle and Coinbase, USDC has obvious advantages in application scenarios and ecological construction, and its market share soon surpassed the former two.
It is worth mentioning that the Libra project led by Facebook will also issue stablecoins anchored to fiat currency and other assets, among which the US dollar stablecoin is the main one, and may also include a package of stablecoins anchored to assets. The Libra project will try to build a blockchain infrastructure, limited by the pressure of regulatory restrictions in various countries, the latest version 2.0 will be promoted in the form of an alliance chain and a single stable currency.
(2) Decentralized stable currency
BitCNY, BitUSD and other series of stablecoins are issued based on BitShares mortgage, and the two are anchored to RMB and US dollar respectively. BitShares is a decentralized trading platform, the project was founded in 2014 by BM (now the technical director of EOS project). However, due to the small market value of BTS and violent price fluctuations, the stablecoin that uses BTS as collateral is directly implicated, and it is difficult to guarantee the stability of the stablecoin system.
Different from the BitShares stablecoin, the stablecoin Dai is based on the ecological construction of Ethereum and is an important part of the MakerDAO project. MakerDAO was launched in December 2017. With the issuance design of hyper-collateralized loans and the liquidation model with MKR as the equity and management, the stable currency issuance system has become more stable. Dai is pegged to the US dollar 1:1. At the beginning, it was only mortgaged with ETH, and now it supports a multi-asset mortgage model.
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2. The recent evolution of stablecoins
If 2018 is the year when US-compliant stablecoins are launched one after another, then 2019 will be the year when major trading platforms around the world deploy stablecoins. So, how is the stablecoin market evolving? The following will analyze the recent performance of the stablecoin market in terms of market size, issuance platform, and changes in circulation.
Source: QKL123
Source: QKL123
As of June 1, 2020, the total market value of stablecoins was about 72.4 billion yuan (accounting for about 3.6% of the encrypted asset market), and the average daily turnover in the past seven days was about 120 billion yuan. According to incomplete statistics, the market value of fiat currency-backed stablecoins is much higher than that of encrypted asset-backed stablecoins. Among the fiat currency-collateralized stablecoins, the market value of USDT is as high as 88.91%, and the market value of USDC is 7.26%. Among the encrypted asset-collateralized stablecoins, SAI (single-collateralized Dai, formerly known as DAI) accounted for 62.28% of the market value, and BitCNY accounted for 37.72%.
In recent years, although more and more stable coins have appeared, they still have not shaken the market position of USDT. On the one hand, USDT is too big to fail, especially with the support of major trading platforms, it has been wandering outside the supervision. Even if it is exposed that the reserves are insufficient, the risk of a run (leverage ratio) is still small, and the possibility of a crash is currently very small. On the other hand, the demand for USDT is constantly increasing. Even if it has been continuously issued, the advantages and convenience of the first-mover network have led to a significant increase in market transaction demand.
Source: QKL123
Source: QKL123
In the past year, the circulation of stablecoins has shown an overall increasing trend, especially in the past three months. Among them, the circulation of USDT, USDC and GUSD has nearly doubled in the past six months, and the changes of TUSD and PAX are not obvious. However, in contrast to fiat currency-backed stablecoins, the circulation of encrypted asset-backed stablecoins has decreased significantly. Among them, the circulation of SAI has dropped from the peak in November 2019 (102 million pieces) to the current 6.8655 million pieces, which is less than one-tenth of the previous one.
The obvious decline in SAI in the past six months is due to the iterative promotion of DAI. In November 2019, MakerDAO launched multi-collateral Dai (DAI), which will gradually replace single-collateral Dai. At present, the issuance of multi-collateral Dai (DAI) is about 111 million. If the 6.8655 million of single-collateral Dai (SAI) is superimposed, the total Dai issuance (180 million) has increased significantly compared with the previous peak (102 million).
Source: QKL123
Source: QKL123
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3. Prospects of Stablecoins
In the future, with the iterative upgrade of blockchain technology and the increase in global regulation of encrypted assets, the competitive landscape of stablecoins will change.
At present, under non-regulatory conditions, non-compliant centralized stablecoins have the motivation of "bad money drives out good money", and continue to continue the pattern of barbaric growth. But in the long run, the risk of running out accumulated behind the centralization will gradually increase, and finally the fate of collapse will be inevitable. With the emergence of national regulation and global regulation, compliant centralized mortgage stablecoins or central bank digital currencies will surpass non-compliant centralized stablecoins.
For encrypted asset-backed stablecoins, it is limited by the development of technology and ecology in the short term, but it will benefit from the iterative upgrade of blockchain technology in the long run. After the public chain breaks through the technical bottleneck, it will usher in the explosion of the application ecology, and the stable currency, as an important part of the application ecology, is bound to gain benefits in the future.
