USDC and DAI appear to have established themselves as preferred stablecoins in decentralized trades.
Tether (USDT) has a market capitalization of more than $16 billion. Furthermore, it continues to control the lion’s share of stablecoins in circulation, two smaller challengers are trouncing it in this year’s hottest sector, decentralized finance (DeFi).
USDC and DAI are public trading companies with market capitalizations of $2.74 billion and $608 million, respectively. Nevertheless, unlike on centralized exchanges, where Tether is the chosen stablecoin for dollar-based crypto trading, USDC and DAI appear to have established themselves as preferred stablecoins in decentralized trades.
USD currency (USDC) leads stablecoins in total value locked in six of the most prominent DeFi protocols. These are Compound, Maker, Uniswap, Curve, Aave, and Balancer – followed by dai (DAI), MakerDAO’s native stablecoin. As of October 19, this is according to statistics gathered by Flipside Crypto.
In an interview with CoinDesk, Jeremy Allaire, co-founder of peer-to-peer payments business Circle, credited USDC’s success in DeFi to his company’s early attempts to establish relationships with DeFi groups. The fact that Circle and crypto exchange Coinbase, two companies that co-founded USDC’s governing Centre consortium, are both financial entities in the United States. They also have contributions to USDC’s recent uptick. According to Allaire, institutional investors favor USDC because it is secure, reliable, and regulated. According to Allaire, having guidelines fosters greater certainty. Therefore, making mainstream market players more receptive and willing to participate.
Authorities worldwide provide additional guidance on using and regulating cryptocurrencies. For example, the US Office of the Comptroller of the Currency (OCC) delivered its first regulatory guidelines on stablecoins in late September. Thus, it confirms that national banks may provide services to stablecoin issuers in the United States.
In comparison to USDC, dai is a decentralized stablecoin with no central issuer and is resistant to censorship. Niklas Kunkel, the head of MakerDAO’s backend services, told CoinDesk DAI’s decentralized core has propelled it to tremendous popularity than the majority of its competitors. He views decentralization as a positive development for regulators.
Numerous market participants have questioned whether the stablecoin king tether is as transparent as the business says. Tether has been litigating various lawsuits alleging that it failed to back its currency with collateralized reserves adequately. Tether has refused to comment on the cases. However, Chief Technology Officer Paolo Ardoino described Tether as the “most reliable and liquid stablecoin.”
At Least Some of its Competitors Dispute This Notion
Cash and equivalents and other assets and deferred revenue from loans made by Tether to third parties support Tether’s USDT stablecoin. These may include linked organizations from time to time.
Even though Tether’s first and only advantage aided its overall dominance, traders are rapidly moving to other stablecoins for cash flow. Even in Asia, which has traditionally driven demand for USDT.
According to Hessert, Paxos’ stablecoins, which include the Paxos standard token (PAX), Binance USD (BUSD), and Huobi (HUSD), have all been certified by regulators and are fully backed by US dollars on a one-to-one basis.
According to CoinGecko data, the total stablecoin supply nearly doubled in the third quarter from the second. The entire market valuation of stablecoins also exceeded $20 billion at press time. That is still far less than what is found in traditional finance. It further gives many in the stablecoin space hope for a takeover of Tether.
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