In a time when most cryptocurrencies are making significant losses due to COVID-19 uncertainty, stablecoins are instead forging ahead and dominating the market. Between them however, the race for adoption has shifted many times, with different front runners and participants making it in the top six.
The visual above shows the growth of major stablecoins since the launch of USDC in 2018. Growth in this case is measured in terms of the cumulative value transferred in US dollars, for each coin.
Today, USDT dominance is undeniable with over $200B in value transferred; but that wasn’t always the case. The timeline below takes a look at the major movements that have shaped this race.
About Stablecoins
Stablecoins aim to be cash on the blockchain. Unlike other cryptocurrencies, the value of a stablecoin is tied to another asset – usually the US dollar, but potentially other fiat currencies or even gold. The remarkable growth of the stablecoin market in the past year is telling of the increasing need for less volatile digital assets that can be trusted to store value and exchange internationally.
Backed by USD
USDT, USDC, PAX, GUSD, BUSD and TUSD are all fiat-collateralized, meaning that the tokens are backed by US dollars held in reserves. USDT is widely accepted by exchanges, though Tether’s opaque accounting practices have led to suspicions that USDT is not actually backed in full. USDC on the other hand have secured all required licensing to operate in the United States.
Backed by Crypto
MakerDAO’s DAI takes a different approach. It relies on overcollateralization with non-USD crypto assets to maintain its dollar peg. However as you may recall from our last blog post on Maker, USDC was recently added as a collateral option in order to improve liquidity, which raised questions about DAI’s decentralization and censorship resistance moving forward.