Encrypted stable currency report: USDT circulation exceeds 10 billion, interpretation of digital dollar plan

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1. Overview of Stablecoin Data

1. Overview of Stablecoin Data

market liquidity

We first review the changes in the basic information of each stablecoin in the past week (June 26, 2020 to July 2, 2020, the same below).

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Source: MYKEY, Coinmetrics

Over the past week, the stablecoin market capitalization has increased by approximately $363 million. On June 29, USDT was issued 300 million more in the Ethereum network, and the market value of USDT exceeded 10 billion US dollars for the first time; the circulation of USDC increased by 57.85 million again, and the market value reached 998 million US dollars; the circulation of DAI, BUSD, and GUSD respectively Increased by 11.65 million, 1.63 million, and 1.41 million; the circulation of PAX, TUSD, and HUSD decreased by 5.76 million, 2.46 million, and 1.21 million, respectively.

Number of currency holding addresses

Source: MYKEY, DeBank

Source: MYKEY, DeBank

Source: MYKEY, DeBank

Source: MYKEY, DeBank

Active addresses

The decline in the number of currency-holding addresses is mainly due to USDT. The number of currency-holding addresses of USDT has decreased by 91,506; the number of currency-holding addresses of PAX and USDC has decreased by 3,667 and 647 respectively; the number of currency-holding places of DAI and TUSD has increased by 3,911 respectively , 343.

Source: MYKEY, Coinmetrics

Number of transactions on the chain in 24 hours

Last week, the number of stablecoin daily active addresses decreased by an average of 11.5% compared to the previous week. USDT’s daily active addresses are down 8905 from a week ago.

Number of transactions on the chain in 24 hours

Source: MYKEY, Coinmetrics

24-hour on-chain transaction volume

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Source: MYKEY, Coinmetrics

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2. Digital dollar plan

In this report, we see that the scale of major stablecoins has exceeded US$12 billion, and these stablecoins are all collateralized stablecoins. Another area of ​​stablecoins, central bank digital currencies, has also made great progress. The People's Bank of China established a legal digital currency research group as early as 2014. The central bank established a digital currency research institute in early 2017. The scope of closed pilot scenarios was announced in April this year for internal testing in four cities: Shenzhen, Suzhou, Chengdu, and Xiongan. In addition to China, many countries have also stepped up the research and development of digital currencies. The Swedish central bank announced on February 20 this year that it would start a digital currency e-krona pilot project. Lithuania began pre-selling 24,000 digital currencies issued by the central bank this week. Yuan. Recently, the non-profit organization Digital Dollar Foundation (Digital Dollar Foundation) and consulting firm Accenture jointly released a white paper on the Digital Dollar Project (Digital Dollar Project), which describes in detail the requirements for the tokenized digital dollar and the construction of the digital dollar system. potential path. The digital dollar project is a representative of the mainstream thinking of digital currency in Western central banks. In this report, we will explain this project to you.

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America's Road to a Digital Dollar

The United States tends to be a leader in next-generation technological innovations, often through partnerships between the private and public sectors. It also reflects long-standing American values ​​of economic stability, technological innovation, individual liberty, privacy, free enterprise, and the rule of law.

Now, a new technology is developing. The value of things can be digitized, and can be certified, programmable, and decentralized. Across the globe, governments and private entities are experimenting with tokenized commodities, contracts, titles, and more importantly central bank digital currencies. This wave of digital currency innovation is underway, with CBDCs being explored by other governments and stakeholders. The question for the United States is what role it will play in this innovation, and to what extent it will embody its core values.

The project believes that the United States should take a leadership role in this innovation. The U.S. dollar is the world's primary reserve currency. The tokenized digital dollar is the key to the future development of the dollar and to embody its democratic value. Successfully creating a digital dollar will be a daunting task, and the public sector should combine the technology, creativity, and dynamism of the private sector in formulating key monetary and public policies.

Token distribution is mainly through a two-tier structure of commercial banks and regulated intermediaries.

Recorded on top of new transaction infrastructure, possibly using distributed ledger technology.

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Introduction to the Digital Dollar

• The Digital Dollar Initiative aims to encourage the next big innovation in the dollar: a tokenized digital dollar with the same legal status as physical banknotes. The US central bank digital currency issued by the Federal Reserve will enjoy the full credibility of the US government, represent the third format of central bank currency, and be fully interchangeable with Fed notes (bank notes or cash) and reserves.

• When the existing electronic payment system operates on the account-based model, the champion model can combine the advantages of the two because it is essentially a pass. It has properties similar to cash and can use the existing account-based payment system. This kind of digital dollar can not only maintain the economic stability of today's dollar, but also provide new market opportunities, wider applicability, reduce costs, and improve efficiency. The champion model describes an alternative to existing money and payments infrastructure, illustrated by a range of real-world use cases in retail, wholesale and internationally.

• A digital dollar model should have the following characteristics.

• Tokenization: The digital dollar is a tokenized form of the U.S. dollar.

• The third form of cash: the digital dollar will work together with the existing legal currency and the benefits of commercial banks, and it will reflect many attributes of physical currency.

• Maintain a two-tier banking system: The digital dollar will be distributed through an existing two-tier structure of commercial banks and regulated intermediaries. The digital dollar, like cash, adopts a two-tier structure (as does DCEP). The upper level is from the Federal Reserve System to commercial banks, regulated financial intermediaries and other financial institutions, and the lower level is from financial institutions to non-financial institutions and individuals.

• Privacy: A digital dollar will maintain a balance between personal privacy and required compliance and regulatory procedures.

• Functionality-Driven Technology Decisions and Design Choices: The policy and economic needs of a digital dollar will determine its underlying technology and design choices.

Continued innovation in the private sector: A digital dollar will be a catalyst for innovation and will not run counter to the plans of the private sector.

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Source: MYKEY, The Digital Dollar Project

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The introduction of a tokenized digital dollar will provide a driver for innovation in the broader financial system. As a new financial medium, the digital dollar, combined with new transaction infrastructure such as distributed ledger technology, will provide a new payment method based on the central bank sending and receiving money. For extended functionality, it will be as portable as the text sent, allowing settlements to be made at any time and place. Programmability is another feature that can help increase the innovation and precision of value transfers. A tokenized digital dollar could also enhance the confidence, efficiency and functionality of U.S. dollar payments in retail, wholesale and international payments.

In retail payments, a digital dollar will provide new options for peer-to-peer payments that can reduce costs, decentralize payment channels, and promote financial inclusion. In wholesale payments, the current large wholesale transactions are account-based, mainly executed by banks and payment providers that have accounts with the Federal Reserve; the tokenized digital dollar will provide central bank funds other than accounts, which can provide funds for institutions. Large payments provide a broader and more diverse approach. In international payments, the digital form of the U.S. central bank currency cannot currently be used; the use of digital dollars can establish a more direct currency relationship, reduce risks, reduce delays, enhance the competitiveness of international payments, and promote financial market integration.

The digital dollar will also provide better ease of use and inclusiveness. According to a 2017 FDIC survey, approximately 14 million adults in the United States do not have bank accounts, and tokenized digital dollars with lower system costs are expanding. There may be greater advantages in serving the population. During this COVID-19 period, the U.S. government is working hard to distribute emergency relief funds to more people in need, and the digital dollar will make it easier to achieve the U.S. government's relief goals.

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What we mean by a digital dollar is a token-based digital currency issued by the U.S. central bank, which is a bearer digital instrument similar to digital banknotes representing the liabilities of the Federal Reserve. Central bank digital currency is divided into two types: token-based and account-based.

In a token-based system, the token contains all the information the receiver needs to verify the legitimacy of the transaction and the transfer of the object. The system allows for varying degrees of decentralization. Transactions can occur as tokens are transferred without relying on an underlying centralized ledger of accounts. Distributed Ledger Technology (DLT) can ensure the uniqueness of the certificate and prevent double payment. DLT implements synchronization rules to allow multiple machines storing copies of the ledger to reach a consensus on the order of transactions.

Account-based systems rely on authentication to authorize updates to balances on the ledger. Most account-based systems rely on a trusted third-party operator to maintain a single ledger. Part of the reason for the existence of account-based systems is the limitation of physical tokens, because physical tokens such as banknotes may be difficult to transmit, store, process, and difficult to use in places other than face-to-face transactions. A tokenized digital dollar is portable and can be traded directly in near real time, regardless of physical state. This new capability complements the existing medium of money, and tokenization offers unparalleled opportunities for innovation in payments and financial infrastructure.

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A Central Bank Digital Currency Will Bring Benefits to the Existing Dollar Environment

1) The role of the United States in the global economy

The dollar is the most important currency in the world, and its role lies in the dollar's dominance in international transactions. The availability of dollar-denominated financial instruments, the depth of U.S. financial markets (including dollar-traded derivatives markets and interest rate markets), and the stability of the dollar against other currencies all contribute to the belief that the dollar can serve as an effective instrument of exchange and store of value. The dollar's high share of foreign exchange transactions, bank funds, commodity imports and exports, central bank reserves and international lending also means that foreign entities hold the bulk of dollar-denominated securities and the Fed's other liabilities.

The importance of the dollar in international transactions makes the Fed the only central bank that can create international liquidity. In March 2020, the Federal Reserve's liquidity swap lines with some developed countries showed the importance of the US dollar to maintain orderly international transactions. The continued strength of the dollar demonstrates a huge advantage that only the greenback enjoys.

2) A digital dollar will improve the utility of the dollar

More and more digital payment methods are changing traditional currencies, and currencies will need to adapt to new payment needs in order to maintain their utility. The dollar’s ​​primacy is due to many factors, some of which stem from the Bretton Woods Agreement of 1944 and the resulting network effects. The United States should ensure that its currency remains competitive, and past performance is no indicator of future success. The portability of the digital dollar endows it with new functions and practicality. The custody and recovery of digital currency can be realized through consumer wallets, which is a function that physical cash cannot provide. With the use of digital dollars, securities can be settled in the digital currency of the central bank anywhere, currency can be swapped with foreign currencies through the central bank, emergency relief can be sent in real time, and the currency relationship will be more direct.

The Federal Reserve pursues long-term public policy goals of improving the safety and efficiency of the payment system and ensuring the fair provision of payment services to financial markets. Efficient allocation of Federal Reserve funds is critical to the support of financial markets and the orderly functioning of payments, which depends on innovation in distribution, transparency, efficiency, resilience, and payment methods. The portability of a digital dollar would increase reach and efficiency, complement the Fed's existing operations, and facilitate the distribution of central bank currency abroad.

4) The U.S. dollar remains the world’s premier reserve currency

As shown in the figure below, the total amount of foreign exchange reserves held by central banks around the world continues to rise, and the US dollar still accounts for more than 60% of foreign exchange reserves.

Source: MYKEY, The Digital Dollar Project

5) The digital dollar will bring new opportunities

The emergence of a digital dollar will inspire new industries and modernize the existing ecosystem. Not only would a digital dollar create new markets, introduce new players into established markets, and break down existing market barriers, it would also provide the private sector with a modern monetary system.

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3. Views of guests

The guest invited in this issue is the chief analyst from Tokeninsight, and the following are the shared views.

Harper Li, senior analyst at TokenInsight Research:

First of all, the current DeFi application on Tron is still in the initial stage of development, and as an application provider, it cannot meet the needs of users. Simple TRC20 USDT issuance will not directly attract users.

This issue of the MYKEY stablecoin report has shared so much, please pay attention to the follow-up reports. In the follow-up reports, we will provide you with more interpretations of the development status of stablecoins and analysis of their development trends, so as to help you continuously update your understanding of the development of stablecoins.

Secondly, whether DeFi on Tron is a supplement to DeFi on Ethereum or a competing product remains to be tested by time. If it is a competing product, whether users will transfer from Ethereum to Tron, it is necessary to compare the differences in the DeFi ecology of the two chains, and this needs to be implemented at the level of each project. If it is supplemented, it is very likely that they will share the same group of users, and the development of DeFi on Tron will be better supported by the development of DeFi applications on Ethereum.