Stablecoin Rush Breaks Out; JPMorgan, DBS and Temasek Launch Partior

Stablecoin Rush Breaks Out; JPMorgan, DBS and Temasek Launch Partior

As the Coinbase public listing approached, many analysts were looking for a $100 billion valuation. The cryptocurrency exchange, founded by Brian Armstrong and Fred Ehrsam, hit that mark briefly after listing, but COIN has settled down to a less-rarified valuation.

Meanwhile, CoinGecko calculates a total market capitalization of $128 billion for decentralized finance (DeFi), the corner of the cryptocurrency industry that represents a wide range of lending, trading and betting activities carried out almost entirely on blockchain networks using tokens as proceeds and collateral. The top five tokens on CoinGecko’s list are UNI, LINK, LUNA, AAVE and CAKE.

The following chart is from a CoinGecko page that tracks the combined market cap of all DeFi tokens:

Related: Stablecoin Rush Breaks Out; JPMorgan, DBS and Temasek Launch Partior

Coinbase, it should be noted, listed DeFi as a potential competitor when it filed for a public listing, but for whatever reason, market caps aren’t how we usually talk about the DeFi market. We usually talk about the value of assets people have deposited in DeFi apps to earn yield.

But that measure gives a similar reading: There is now more than $100 billion worth of assets locked up in DeFi.

These get to be very large numbers, numbers that are worth reviewing to illuminate a story that somehow continues to be missed even as cryptocurrency has started going mainstream.

Here at CoinDesk we have focused on DeFi on Ethereum because DeFi originated on Ethereum, and it is where the best-known entrepreneurs have committed to operating.

Related: Paxos Joins Crypto Unicorn Club After Latest $300M Funding Raise

Those aforementioned deposited assets are referred to as total value locked (TVL). TVL on Ethereum, using the most widely cited data site, DeFi Pulse, is $66 billion as of this writing, more than quadrupling since Jan. 1 when it was $15 billion.

Meanwhile, DeFi has taken off in a big way on Binance Smart Chain (BSC). According to Defistation, the current TVL on there is $38 billion, led by PancakeSwap but also including money markets filling a similar role to Aave and derivative solutions that fill a similar role to dydx.

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DeFi on BSC has grown much faster than on Ethereum; it first hit $1 billion in TVL only at the end of January.

DeFi vs. ICOs

Here’s a chart that compares funds entrusted to Ethereum’s many DeFi smart contracts in the last year or so to funds that went to founders in initial coin offerings during the 2017-2018 boom (an updated version of one published here):

It should be noted that DeFi Pulse was in the midst of updating how it tracks the TVL for the robo-adviser for yield, Yearn Finance, when this was made, and so those numbers aren’t in this graph. According to Yearn itself, though, it has had several billion dollars tied up.

Read more: DeFi reshapes the CoinDesk 20

While the 2020 surge was known as “DeFi Summer,” it’s already evident the market is much bigger now.

For example, TVL first broke $1 billion in February 2020. It broke $10 billion in September, on Ethereum. Earlier this month, the money market platform Compound broke $10 billion in TVL all on its own.

Tuesday night, the original DeFi protocol, stablecoin minter MakerDAO, also broke $10 billion for the first time.

1 million users? Maybe 2 million?

Richard Chen, at the venture firm 1confirmation, has been assembling on-chain data about users using Dune Analytics. One chart is worth citing here in particular.

This shows there are at least 2 million wallets that have interacted with DeFi protocols. So that probably means something like more than a million individuals, maybe even close to two? It’s very hard to say, but it is also worth noting that sometimes individuals participate in DeFi via third parties. So while some users hold many wallets, it’s also true that some wallets represent many users.

Whatever the real count of users, the amount of money changing hands shows these applications are real businesses. The site Crypto Fees has been tracking usage fees charged on different DeFi applications. The top DeFi applications it lists (Uniswap, SushiSwap and Compound) show a seven-day average of daily fees collected ranging from $1 million to $4 million.

If there’s one kind of finance that everyone understands, it is lending. The blockchain software company ConsenSys just released a first-quarter report on DeFi on Ethereum, showing a growing market for loans:

DeFi represents a much more credible narrative with more substantive businesses because it shows products with genuine returns and provides a way for people to earn impressive yields on deposits rather than making wild bets and hoping.

Wild bets are the best way to describe much (though certainly not all) of the investing that took place in the initial coin offering boom of 2017 to 2018. That boom drove the prior bull run, and the public appeared capable of making that connection.

Four years later, the cryptocurrency industry is in a bull run again, but the public appears incapable of connecting it to these billion-dollar deposits into this new iteration on finance. For whatever reason, the main topics are, again, bitcoin’s price and, somehow, non-fungible tokens and dogecoin.

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Cardano Sees First-Ever Stablecoin Launched on Network

AgeUSD, a brand new algorithmic stablecoin, will become the first stablecoin to launch on the Cardano network.

Another day, another stablecoin

AgeUSD, a new type of algorithmic stablecoin, will launch on the Cardano (ADA) network. Its native token, ADA, is now the seventh-largest cryptocurrency by market capitalization. The launch will be the first time a stablecoin launches on the top-blockchain network.

The stablecoin is the result of a collaboration between Input-Output Global, Cardano’s parent company, blockchain-solutions provider Emurgo, and the Ergo Foundation, the stabelcoin’s principle developers.

The news comes as demand for cryptocurrencies soars as the flagship cryptocurrency, bitcoin (BTC), continues to set new all time highs.

Accordingly, this demand is apparently triggering a surge in the value of stablecoins in circulation, since they dominate cryptocurrency trading pairs.

The most popular stablecoin is tether (USDT). It has seen the value of USDT in circulation more than double to $47.2 billion year to date. According to data from CryptoSlate, there are now over 30 different stablecoin options available in the market.

A new approach

With the influx of stablecoin options comes the development of innovative solutions to the underlying mechanism maintaining their stability. AgeUSD is part of a new class of stablecoin using algorithms rather than collateral to maintain value.

In stablecoins like USDT, the value of each USDT is assured by an equal value of USD being pegged to it. To reduce the reliance on centralized stores of value like fiat currencies, some stablecoins are pegged to baskets of other cryptocurrencies. The quantity of each cryptocurrency in the basket is determined by smart contracts executing trades on the open market.

These include stablecoins such as DAI and FLOAT. However, the ability to maintain value can be impacted by significant swings in the value of this collateral. Indeed, DAI has seen several “Black Thursday” events, due to market swings affecting the value of the stabelcoin’s collateral.

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AgeUSD proposes a rules-based approach to value determination in an effort to reduce its exposure to the cryptocurrency market’s volatility. According to Emurgo, its goal is to “automate as much as possible within the mathematics of the protocol itself, rather than relying on dynamic transaction postings that can break down in a blockchain overload.”

What lies ahead for Cardano?

In February, Cardano introduced the ability for users to create and transact in their own native tokens on its main chain.

The transformation into a multi-asset blockchain is one of the ways Cardano is attempting to differentiate itself from other blockchain platforms such as Ethereum (ETH) and Polkadot (DOT).

Moreover, the transition is part of Cardano’s roadmap to Voltaire. The platform upgrade will be “the final pieces required for the Cardano network to become a self-sustaining system.”