Written in front: This article was written by Joel John, an analyst at Outlier Ventures, an investment company. In his article, he analyzed the trading situation of mainstream stablecoins in 2019 (as of November), and concluded that although USDT still occupies an important position, DAI is the only stable transaction volume that has grown in addition to USDT. Coin, its trading volume has increased by 300% since January 2019. He believes that the application of USDT is mainly for trading, but DAI has already had real application scenarios.
The existence of stablecoins means that cryptocurrencies have found products suitable for the market. The long winter of cryptocurrency in 2018, coupled with the increasingly stringent scrutiny of banks around the world, has laid the foundation for the adoption of stablecoins, which in turn has promoted the growth of the broader DeFi ecosystem.
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When I started writing this article (early November), about $ 250 billion was transferred on the chain through stablecoins. However, there are few related articles about who is the leader, how much, and the behavior characteristics of users on these chains. Next, I spent a month looking for answers from the data of Token Analyst and Santiment. This article is my attempt to summarize the transaction volume and user behavior of stablecoins.
(Ranking of average active wallets within 30 days)
If you need to look for any signs to prove that stablecoin and DeFi have been popular, you can look at the most active network situation. Of the top 20 networks ranked by the average number of active wallets within 30 days, 6 use stablecoins directly or indirectly. Tether leads with 40,742 wallets (about 750,000 bitcoins). DAI ranked second with 2,752 wallets, followed by USDC and Paxos. The USDT “leads the tide”, DAI tries to catch up, and the stablecoins issued by existing enterprises (ie Circle, Gemini) lag behind DAI, which is the current status of the stablecoin market.
(Transaction volume on the stablecoin chain in 2019)
Over the past year, more than $ 237 billion in stablecoins have been traded on the chain. This can be largely attributed to exchanges. Although it is easy to conclude that the two chains of USDT (Omni and ERC-20) dominate, there is also the fact that the ecosystem that uses them today is much larger than other chains. If the DeFi market grows exponentially and surpasses the exchange, then the situation is likely to change. This will mean lower barriers to entry, a set of products that use stable tokens as a payment tool, and wallets that make it easier for users to use stable tokens. Projects like Argent and Mosendo are moving towards this goal.
USDC and DAI are likely to drive more transaction volume from the lending market (such as Juno, Dharma, Compound) and transaction demand (such as Uniswap). It will be interesting to observe this evolution.
Today the market is dominated by USDT. In terms of transaction volume, this number is about 80%. We should not ignore the strange phenomenon that an ecosystem claims to rely on a centralized currency and work towards decentralization in the absence of verifiable audits. To illustrate this, I decided to see what a world without USDT would look like in terms of market share: centralization (and branding) still plays a role here. USDC accounts for nearly half of the market with a 45% market share. DAI and Paxos are very close, about 20%. What seems a bit strange here is GUSD. Despite the brand and incentives released earlier this year, GUSD's trading volume was only 2% without considering USDT, and with USDT included, GUSD had only left 0.4% of trading volume. The law of power here is brutal.
(The figure on the right shows the market share without USDT. Brands and central hosting are still necessary conditions to drive attractiveness.)
If USDT is not considered, DAI is the only stablecoin whose transaction volume has increased during the year. Since January 2019, its transaction volume has increased by 300%. The introduction of multi-collateral DAI is likely to further increase this number. The company's business volume has also begun to rival other centralized services such as GUSD. This may be the earliest sign that DAO (Decentralized Autonomous Organization) operates, and the ecosystem surrounding it can adopt centralized alternatives. If other products are built around it, they can beat them in terms of volume.
(Transaction volume on each stablecoin chain)
The service provided by the exchange combined with the speed provided by Ethereum has surpassed the combination of Omni and all other well-known stablecoins. If anything, 2019 is the year when USDT-ERC20 has established a leading position, MakerDAO explores its own path and other projects (based on transaction volume) have stalled.
(USDT Omni and ERC20 trading volume comparison)
(USDT and other stablecoin trading volume comparison)
Starting from the transaction situation
However, trading volume is only part of the story. In order to understand what might happen to these projects, you need to study the number and frequency of transactions processed by each chain. So I researched:
- Number of active wallets per chain
- Number of transactions per chain
- Contribution volume of each chain
One way to understand this data is that as the number of transactions in the network increases, the average value of each transaction may decrease. That is, with the constant popularization of stablecoins, individuals may not store a large amount of wealth on a stablecoin, but "use" it as a practical tool.
In the early stages, a chain may have very high transaction volumes (such as Paxos), because the person who builds the chain needs to issue assets and transfer them to partners. However, if pervasiveness does not arrive, the average transaction volume per address will remain high, indicating that the whale controlled the network. The following figure is a comparison of DAI's trading volume with other stablecoins. USDT processed 20 million transactions between ERC-20 and Omni in 2019 (as of November).
(DAI and other stablecoin trading volume comparison)
When discussing the average transaction volume of each user with many analysts, two main conclusions are usually drawn: one is that the average transaction volume of each user on a certain chain is high, which shows that people are very interested in this chain Have confidence. According to this logic, Paxos is likely to be the first choice for institutional transfers, because a lot of funds are transferred through it. The other is the debate about the application, that is, with the large-scale popularization, we will see the average transaction volume per wallet declines significantly. For DAI and USDT, this is indeed true, and their ATH (highest) numbers have dropped by about 80% compared to August and September.
However, no matter how people look at the data- I conclude that whales still dominate DeFi and DApps. If an app or application is unlikely to gain more users early in their growth cycle, then they may not be very attractive, as the current cryptocurrency market is still very niche. Ideally, as the ecosystem develops, the number of people entering the market will increase and the number of active wallets will increase. If transaction volume is still stagnant (or slower compared to user growth), the average value shown below should drop significantly. This is the ideal scenario for 2020.
There are many factors among them, the following are some of them:
- Cards with built-in cryptocurrency wallets are more common (e.g. crypto.com)
- Mobile wallet (e.g. Samsung)
- Increase in browser wallets (Opera, Brave)
- Entry increased (eg Local Crypto, Ramp.network)
(Average monthly transaction volume per user for each stablecoin)
(Average transaction volume of each stablecoin per transaction per month)
However, I find this area fascinating because the average transaction per address on any given day is around 2. This number is the highest on DAI, with a range all the way to 5. In my opinion, this indicates that individuals still regard stable assets as a "volatility hedge" and have not yet considered it as a trading layer. Even by Ethereum's standards, the average transaction per wallet on DApps is relatively high, at about 4. My intuition is that if EOS and Tron's stablecoins are included, this number will be higher. But that's a future thing. DAI does have a high monthly average transaction count because it is used for practical applications and not just transactions.
(Average transaction value of each stablecoin per address)
Apart from trading, what else can I think of?
Personally, I have been asking myself the question, how can I build a unicorn company based on DeFi and stablecoin. If regulators keep up with the pace of industry development and provide a stable framework for growth in this area, more companies like Stripe, Paypal, and Monzo will emerge in the future. This can only be achieved if the penetration rate has increased significantly.
The markets I have been following (and linking the use of stable assets to it) include remittances, gig economy, digital asset insurance, revenue sharing agreements, and DAOs. When I researched B2C applications and final solutions based on blockchain-based products, I found that despite the attractiveness of exchanges, there was still plenty of room for growth. For example, Bitpesa and Coins.ph have not only opened up cutting-edge markets, but also seized opportunities for a new generation of blockchain-based fintech companies. A very early example is LocalEthereum-it caters to the needs of the world, has a very small team, has been witnessing an increase in transaction volume, and runs most of its functions on the blockchain.
I believe the impact of stablecoins on assets is similar to the impact of cloud on data. It provides a path for extremely lean teams to meet the needs of millions of users. Whatsapp and Instagram are lean teams built to meet the needs of customers in the mobile age. I'm still looking for the kind of "surprise" moment when a consumer-based app can do the same thing as a bank by using stablecoins.
(Every time you think all good ideas have been used, keep this in mind: we send people to the moon long before we put wheels on the boxes)
Before this magical startup appears in front of me, or before I finally set out to build it-if you believe that only exchanges can drive the adoption of stablecoins, I hope this article can give some inspiration.