From the market distribution of DAI stable coins, see the behavior patterns of DeFi users

Introduction: This paper has carried out comprehensive statistics and analysis on the data of supply growth, liquidity, loan demand and price fluctuation of DAI stable currency. Through data and charts, we can observe the behavior patterns of DeFi users under the incentive of the financial system.

01 DAI supply growth

The chart below shows the growth in the supply of tokens since the introduction of DAI in December 2017. Its daily liquidity has grown to nearly 100 million. On March 19, 2019, the daily circulation reached a record high of 95,451,24. At present, the daily supply of DAI is around 84 million.

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Figure 1: DAI supply trend

As of now, the largest holder of DAI is Compound, which controls 17.11% of supply. Followed by dYdX, controlled by 3.74%. Maker's Eth2Dai ranks tenth.

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Figure 2: Distribution of all holders' shares in DAI

Here are the top ten holders of DAI and their holdings:

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Figure 3: DAI Top Ten Holders

02 DeFi loan platform trend

The chart below shows the daily borrowings of the major DeFi lending platforms for the past 6 months:

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Figure 4: DAI's daily borrowings on major lending platforms (last 6 months)

Please note that the area maps in the above image are not stacked. We can see that MakerDAO (blue area) has always dominated. In late June and mid-September, MakerDAO reached a peak of 4.3 million DAI per day.

Compound migrated their protocol to v2 (version 2) in early May, where we only reference the data from the Compound v2 protocol. As can be seen from the figure, the orange area (Compound v2) and the pink area (dYdX) are always in the second position, which are comparable to each other, reaching a peak of about 3 million DAI per day.

We also noticed that the NUO Network (green area) and bZx (red area) played a role in the market. In the first quarter, NUO Network launched their new platform and quickly gained a lot of traffic. bZx has been steadily rising since June.

The chart below compares the monthly loan activity of the above DeFi project. The growth rate of dYdX DAI loans over the past six months has been surprising. According to the data we collected, as of October 17, dYdX's monthly DAI borrowings have exceeded MakerDAO since August; by October 17, dYdX users accounted for almost all major lending platforms. Half (about 49.37%).

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Figure 5: Market share of DAI loan amounts for each lending platform (last 6 months)

03 Liquidity of major decentralized exchanges

The chart below shows the daily trading activities of several major decentralized exchanges. OasisDEX is the DEX platform from the MakerDAO system and dominates. Followed by Uniswap, followed by Kyber and RadarRelay.

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Figure 6: Market share of DAI trading volume on major decentralized exchanges in 2019

Note that we don't show the 0x name here because they are the underlying protocols for many decentralized exchange relay classes (such as RadarRelay, Paradex) and may replicate transaction volume. In fact, most of the traffic on 0x comes from RadarRelay, which has similar sizes.

The same type of dYdX, which is exchanged with OasisDex's Eth2Dai market, we show its trading volume under the name of OasisDex, thus avoiding the expansion of total sales. The actual trading volume of DAI on dYdX is between Uniswap and Kyber, and peaked in June, with a total monthly trading volume of 17.9 million.

All in all, according to the above transaction situation, the trading volume of DAI has increased since the beginning of the year. In July, the total transaction volume of DAI reached 90 million per month, and then decreased by nearly 50%.

Based on the above statistics, we observed the life cycle of autonomy in the DAI financial ecosystem. From the trends and correlations of the following time series, DAI describes how to maintain price stability from user incentive behavior.

“DAI manages supply and demand through economic incentives. When the price exceeds $1, anyone can create a DAI and sell it at a price above its value. This increases supply, causing the price to fall back to $1.

Similarly, when the price of the DAI is less than $1, the user can repay the debt at a lower interest rate in the system because they can purchase the DAI for less than $1, but pay the debt at a fixed rate of $1. The DAI used to pay off debts was burned and the supply was reduced, resulting in higher prices.

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Figure 7: 2019 DAI price, supply, transaction volume, loan amount (price data from coinmarketcap.com)

As early as February, DAI prices fluctuated slightly (Figure 1 & Figure 2) and may have caused an increase in the number of loans/loans in the next few days (Figure 5). On February 24th, DeFi users borrowed one day. The 4.33 million DAI resulted in the supply chart (Figure 3) turning blue and the cumulative supply for the day was 88.01 million.

Subsequently, in early April, the increase in DAI supply led to the depreciation of DAI. When we look at the price change of -6.54%, this may lead to an increase in the volume of transactions (Figure 4) and the amount of borrowing (Figure 5). When the price falls, the borrower and the trader can pay less dollars to hold the DAI. .

It is difficult to deduce the causal relationship between the variables, because in an economic system they always interact and guide each other. However, one conclusion we can draw is that they are in-phase vibration and highly correlated.

04 DAI price fluctuations: Is the stable currency really stable?

So when we see that the price of DAI is largely influenced by user behavior, the above problems may linger in people's minds. We will use beta analysis and compare DAI to multiple stable currencies to measure risk.

By definition, stable currencies (such as DAI) are a type of cryptocurrency that try to maintain a stable value relative to other assets. Stable coins that attempt to anchor a dollar value include DAI, TrueUSD, USDCoin, Tether, Gemini Dollar, and others.

Below is the price performance of these stable currencies over the past 12 months (data from CoinMarketCap).

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Figure 8: Price chart and percentage change in stable currency over the past 12 months (source: coinmarketcap.com)

As can be seen from the table below, their average price is maintained at around US$1, with the average price of DAI being the closest. In addition, their changes are small, with USDC being the smallest:

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Figure 9: Average price and movement of stable currency (based on 365-day window period)

In addition, we also attached statistical data of ETH and BTC as the main currency for comparison.

Unlike other cryptocurrency markets, stable currencies should not be affected by violent price fluctuations. One measure of the volatility of stable currency prices is its beta coefficient relative to major cryptocurrencies such as BTC and ETH. The following are the beta values ​​of several major stable currencies relative to BTC and ETH:

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Figure 10: Beta Coefficient of Stabilized Currency and ETH/BTC (Based on 365 Day Window Period)

The token itself has a coefficient of 1. It is a threshold for risk metrics in stock market analysis practice:

  • When beta > 1, it means that stock market volatility exceeds the market benchmark index (usually the SP500 index of the constituent stock market). It can also be interpreted as sensitive to market changes. For example, when the market fluctuates, the stock will be greatly affected, resulting in higher returns and higher risks;
  • When beta =1, they have the same volatility;
  • When 0 < beta <1, stocks are less affected by market trends.

Usually, stocks are positively correlated with such markets, ie the beta coefficient is usually positive. However, there are also cases where the coefficient is negative, that is, when the market falls, the stock price will instead rise.

For the above five stable coins, we see that their absolute values ​​are less than 0.1, which means that they are more stable than ETH and BTC, and are unlikely to be affected by cryptocurrency market trends. In the appendix, we also attached a table of beta coefficients for other mainstream currencies for comparison.

Among them, USDC and TUSD have the lowest value and are negatively correlated with ETH and BTC , indicating that they are used as “storage” tokens to avoid risks when the market is unstable: When the ETH/BTC market rises, users may sell TUSD/ The USDC enters the market; when the market falls, users can exchange their holdings of TUSD/USDC for asset preservation.

appendix

The beta coefficient of the mainstream currency based on the 60-day window in 2017

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Figure 11: Beta coefficient of other mainstream currencies and BTC (based on the 60-day window beginning with 2017-10-05)

Author: Christian Seberino, Danning Sui @ Alethio

Translation: DUANNI YI

Edit: Sonny Sun

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