On-Chain Data Interpretation of Stablecoin Wars: Which Are Growing Fastest? Which are the most liquid?
Original post by Ben Giove, Bankless
Original title: "The Stablecoin Wars!"
Compilation of the original text: Poplar
Compilation of the original text: Poplar
While NFTs, DeFi, and DAOs have taken center stage in cryptocurrencies over the past few years, stablecoins have been quietly growing in the background.Stablecoins have now become one of the largest and fastest-growing tracks in the cryptocurrency industry, with a total market value of more than $180 billion, a figure that has grown by about 109% in the past 2021.
In the past 2 years, it has increased by 1748%.
While the space was initially dominated by major players such as USDT, USDC, and DAI, there were also new competitors entering the market and making a name for themselves - protocols such as FEI, UST, FRAX, etc. all had their own unique designs and adopted different issuance Strategy.The risk of the stable currency track in the encryption industry is very high, with a potential market size of trillions of dollars, and as a form of currency,。
These stablecoin assets benefit from the huge network effects brought about by liquidity, and early winners can easily establish a leading position
And now the competition is getting fiercer, with every project wanting to be the reserve stablecoin of the multi-trillion dollar crypto economy, which of course begs the question: who is winning the stablecoin war? Which are growing the fastest? Which are the most liquid and are used for various use cases on-chain?
Let's take a closer look and find out by analyzing on-chain data.
"Seed Players"
Before delving into on-chain data to understand the state of the stablecoin wars, let’s take a brief look at the 7 major stablecoin/currency issuers so we can get a full picture of how they work, and some of the drivers behind their success.
For our purposes, we'll be covering USDC, USDT, BUSD, UST, DAI, FRAX, FEI, and OHM (though it's not a stablecoin, but a non-pegged currency).
While these 7 stablecoin projects are not necessarily the largest by market capitalization, they (for reasons explained below) are in the best position to maintain or grow market share and are in one of DeFi's most competitive verticals.
Centralized stable currency
USDC, USDT, and BUSD
USDC, USDT, and BUSD are the three largest centralized stablecoins. Issued by an off-chain entity, all three are (supposedly) backed 1:1 by fiat (i.e. “real” USD) collateral.
This results in opacity and complete centralization, but this design has also proven to be the most scalable solution among stablecoins, with the combined circulation of the three being $144.2 billion — roughly 80% of the industry.
While these three corporate entities cannot be audited on-chain, but have each issued proofs of their reserves to varying degrees, the issuers of USDC, USDT, Circle, and Tether hold low-risk, short-term assets such as commercial paper, etc. generate income.in particularThe deep liquidity of USDT and USDC enables both to build substantial network effects
, which is also the most widely adopted stablecoin on-chain (more on that later).
UST
Decentralized stablecoins (UST, DAI, FRAX, FEI, OHM)
UST is a decentralized, algorithmic, USD-pegged stablecoin.
UST uses a simple minting and burning mechanism to maintain stability. To mint UST, users must burn LUNA (the native asset of the Terra blockchain, and the stablecoin UST is issued on Terra), and the burned LUNA is the same as the minted LUNA they want to mint. The number of UST units is equal (ie 1:1).
Likewise, users can redeem their LUNA by burning an equivalent amount of UST.As we can see, UST is not backed by any exogenous collateral. on the contrary,It relies on arbitrage to maintain its stability
, when UST is trading above the peg, market participants are incentivized to expand the supply by minting new UST to lower the UST price, and vice versa.However, Terra has recently raised a total of approximately $1.75 billion worth of reserve funds including BTC and Avalanche’s native token AVAX through the Luna Foundation Guard (LFG) to help support the UST peg,。
This makes the UST stablecoin approximately 9.3% backed by reserve assets at current prices
DAI
While this design has its own set of significant risks, it allows UST to quickly scale to a circulating supply of over $18.65 billion, the 3rd most stablecoin and its next closest decentralized competition It is more than 2 times that of the opponent's DAI.DAI is MakerDAO's decentralized, dollar-pegged stablecoin. DAI is over-collateralized, and users can deposit different forms of collateral (such as ETH) into the vault to mint the stablecoin.
Users must keep their positions over collateral because the protocol can liquidate users' collateralized assets when it falls below a set collateralization ratio (which varies by asset).
FRAX
DAI is one of the oldest and most proven stablecoins in DeFi. Maker is known for its strong decentralized governance system and first-class risk management policies, coupled with the extensive integration of DAI and various DeFi protocols, making it a The market capitalization of DAI has grown to over $8.13 billion, ranking 2nd among all stablecoins and 2nd among decentralized stablecoins.FRAX is a decentralized, USD-pegged stablecoin. As the name suggests,
The FRAX stablecoin is both partially collateralized and algorithmic.
The amount of collateral in the system is called Collateral Ratio (CR), which is dynamically changed and set by the market according to the supply and demand of FRAX. Similar to UST, a part of the FRAX stablecoin (i.e. 1-CR) is unsecured, and its stability is maintained through FXS (the protocol’s seigniorage and governance token). When new FRAX is created and used for service redemption, The corresponding FXS is burned.
FRAX also uses so-called algorithmic market operations (AMO) to set monetary policy. These AMOs allow protocols to deploy FRAX and its reserves into various DeFi protocols such as Curve, Uniswap, and Aave to generate yield and help achieve strategic goals.
FEI
FRAX's "best of both worlds" design and use of AMO and numerous partners has expanded the stablecoin's supply to over $2.6 billion, ranking 7th among all stablecoins and the 7th most listed in this section for the past 6 months 2nd highest growth rate among stablecoins.
FEI is a decentralized USD-pegged stablecoin issued by the Fei Protocol. FEI is a fully asset-backed stablecoin, and users can mint new FEI by depositing various assets, which can be redeemed at any time at a 1:1 ratio.
FEI only accepts decentralized collateral, with ETH and LUSD accounting for the vast majority of its backing.
FEI helped popularize the concept of protocol-controlled value (PCV), as its reserve asset is managed by TRIBE token holders through decentralized governance (and in the future, through a custodial Balancer pool). This PCV is deployed into various DeFi protocols to earn yield, and the protocols themselves can mint FEI (POF) against excess reserves to provide liquidity to venues of their choice.
Although FEI is “only” the 11th largest stablecoin with a market cap of $566 million, considering the combined value of PCV and POF, the protocol’s largest asset value is $878 million.
OHM
This, combined with the synergy of their merger with Rari Capital (the team behind permissionless money market protocol Fuse) to form Tribe DAO, should give FEI the resources it needs to grow its market share.OHM is a fully asset-backed free-floating currency issued by Olympus DAO. this means
OHM is not a stablecoin, but allows its price to be determined by the open market.
Olympus utilizes bond and pledge mechanisms to accumulate assets for its vaults and issue OHM. For the former, the protocol sells discounted OHM, vestable within days, in exchange for various assets, such as stablecoins or LP tokens paired with OHM; for the latter, OHM holders can stake their tokens for Access to newly issued OHM, which helps minimize bond dilution.
While these adjustments have had a major impact on their price, the model pioneered by Olympus has allowed the protocol to have 99.2% OHM liquidity and has allowed them to amass a vault worth over $337 million.
Like Fei and FRAX, OHM holders can decide through governance to deploy these reserves to various DeFi protocols for yield generation or further strategic purposes.
Explanation on Stablecoin Market Cap, Market Share and Growth Rate
As mentioned above,As mentioned above,UST and FRAX are the fastest growing in the past six months
, their supply has increased by 547% and 300% over the past two quarters, respectively.Among them, UST continued to expand at the fastest rate in the past three months, with a market value increase of 65%,
This has resulted in UST's share of the total stablecoin supply increasing nearly fivefold since November 2021, from 2.08% to 10.34%.In addition, the above-average growth of UST and FRAX relative to the overall stablecoin market is also an example-due to
With greater capital efficiency, algorithmically designed stablecoins can scale more easily.
At the same time, through mutual cooperation, the two may continue to achieve huge growth, such as cooperation with 4Pool: Frax and Terra cooperated to create a pool of UST, FRAX, USDC and USDT on Curve, hoping to become the basic trading pair on DEX.
UST
FRAX
USDC
Growth rate ranking:
battlefield
Now that we have an overview of the major players in the stablecoin wars, let’s take a look at the battle lines on which they are competing and see where each player stands.
To do this, we will compare the 8 assets discussed above (USDC, USDT, BUSD, UST, DAI, FRAX, FEI, and OHM) as well as MIM and LUSD (the 6th and 12th largest stablecoins by market capitalization).
To assess the adoption and usage of each stablecoin, we will examine the composition of liquidity and deposits on decentralized exchanges, money markets, and cross-chain bridges.
Additionally we will examine stablecoin holdings on DAO vault balance sheets and see which ones are most commonly used as backing for other stablecoins to assess their desirability and adoption as reserve assets.
1. Liquidity on DEXDEX is the core of DeFi and is used to facilitate asset exchange and liquidity flow throughout the ecosystem. As the frenzied "Curve War" demonstrates, DEXs are a key battleground for stablecoins because
The exchange's deep liquidity helps strengthen the stablecoin's own exchange rate peg and makes the stablecoin a popular trading pair for other assets.
Let's take a look at the composition of stablecoin liquidity on Ethereum's five largest DEXs through TVL (Curve, Uniswap, Balancer, SushiSwap, and Bancor), and look at the competitive landscape among our selected 10 stablecoins.As we can see,USDC has the highest liquidity at $2.32 billion
, accounting for 23.3% of the total stablecoin liquidity of the five DEXs totaling $10 billion, followed by FRAX (19.6%) and DAI (18.4%), which were $1.96 billion and $1.83 billion, respectively.Digging into the stablecoin liquidity composition of each exchange, we can see that,USDC is by far the most liquid stablecoin on Uniswap and Balancer
, which accounted for 39.7% and 45.8% of the stablecoin liquidity, respectively.
Unsurprisingly, Curve has been the most competitive protocol among DEXs, with no single stablecoin accounting for more than a quarter of Curve’s stablecoin liquidity.
And FRAX is the leader on Curve, which might be a little surprising, but makes sense since the protocol is the largest holder of CVX — the governance token of Convex Finance (which controls several CRV supply, which determines token reward emissions on the DEX), and tens of millions of dollars in bribes were paid to CVX holders in order to channel more liquidity into pools paired with FRAX.
USDC
FRAX
DAI
On-chain liquidity ranking:
2. Money market deposits
Like DEXs, money markets are one of the most important components of the on-chain financial system, helping to facilitate lending, pricing risk, and quenching the (sometimes) insatiable thirst for leverage.
Let’s take a look at the composition of deposits in Ethereum’s 4 largest money markets, Aave, Compound, Fuse, and Euler, to understand the relative relationship between each stablecoin.As we can see,USDC is the most deposited stablecoin with more than $4.82 billion
, accounting for 50.7% of the total of $9.51 billion in stablecoins locked on the four platforms.
DAI and USDT are in 2nd and 3rd place with $2.32 billion (24.4%) and $2.05 billion (21.6%) in deposits, respectively.Fuse has proven to be the most competitive market among stablecoins, with FEI, FRAX, and OHM having the top three deposit shares on the platform. Given the nature of the agreement, this is not particularly surprising, sinceFEI, FRAX Both projects are under the umbrella of Tribe DAO
, so there are numerous isolated and specialized mining pools and other connections.
USDC
DAI
USDT
Currency Market Ranking:
3. Liquidity and value locked in the cross-chain bridge
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made by the dataHowever, a closer look reveals that these numbers are a bit off becauseMIM and UST are each supported by only one of the 5 cross-chain bridges. Furthermore, we can see that although USDC ranks 3rd overall,USDC has the largest market share on Stargate, Synapse, and Hop
, ranked #2 on Wormhole and Multichain.
MIM
UST
USDC
Multi-chain ranking:
4. DAO treasury holds value
Another important use case for measuring stablecoin adoption is their use as vault assets. While many protocols have the majority of their balance sheets in their native governance tokens, DAO treasuries have increasingly spread their holdings across a number of less volatile stablecoin assets.
Let’s take a look at the composition of stablecoin holdings in The DAO’s vaults and see how our 10 stablecoins perform in this regard.
As we can see, USDC accounts for 49.5% of the total value of stablecoin holdings in the tracked DAO, with $477.5 million in stablecoins on its balance sheet. USDC is also one of the most stable coins held by DAOs, with a total of 92 DAOs holding it. DAI and USDT came in second in both categories, with 22.7% and 16.7% shares respectively.
Among assets other than USDC, DAI, or USDT, OHM dominates, with 3 DAOs having a combined value of $47.5 million on their balance sheets, while FEI is held by the most individual entities, at 7.
USDC
DAI
USDT
Ranking of SM (Smart Money, giant whale) holdings:
5. Foreign exchange reserves
The final key function of stablecoins is to act as a backing asset for other currencies. As they have become more and more battle-tested, stablecoins have become more widely used as reserves for competitors, their lack of volatility increases the ease of risk management, while also helping to align incentives and encourage issuers cooperation between.With this in mind, let’s take a look at the 8 decentralized currencies with the highest adoption of reserves and collateral out of the 10 stablecoins above —
DAI, FRAX, FEI, OHM, alUSD, MAI, agEUR, and UST.
While there are many other notable decentralized stablecoins out there, this still gives us an idea of how viable each stablecoin is as a reserve asset among its competitors.As we can see,
USDC is definitely the most popular stablecoin reserve option, accounting for 83.7% of all stablecoins used as reserves.
Among them, DAI, UST and LUSD are the most widely used, accounting for 8.1%, 5.7% and 1.4% shares respectively.
USDC
DAI
UST
Reserve Ranking:
The stablecoin war has just begun
Leader: USDC
As the most liquid stablecoin on DEX, the most deposited into the money market, the third most liquid on cross-chain bridges, and the most widely used DAO treasury and asset-backed stablecoin, it is clear that USDC is only the second most stablecoin in the market despite market capitalization Bitcoin, but USDC is by far the most used on-chain stablecoin in the crypto world.
While smaller players have been able to capture market share in individual scenarios such as FRAX on Curve, FEI on Fuse, and UST on Wormhole, USDC is by far the clear “winner” of the stablecoin wars.However, there is hope for those who support decentralized challengers—
Two decentralized stablecoins, UST and FRAX, can be considered as alternatives, and despite their smaller market caps, they are growing much faster than USDC.
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