Created and operated by the Winklevoss brothers, Gemini is one of the top cryptocurrency exchanges in the U.S.
The New York-based exchange has made a name for itself to date in serving as a user-friendly and very secure fiat-to-crypto on-ramp. Notably, though, the exchange has also been treading deeper where many of its centralized exchange peers haven’t yet: Ethereum’s decentralized finance (DeFi) ecosystem.
There’s a standing debate in the crypteconomy as to whether decentralized exchanges like Uniswap will end up totally dominating centralized exchanges like Gemini over the long run. Whatever happens along the way, the DeFi – CeFi relationship hardly needs to be zero-sum if recent developments around Gemini are any indication.
GUSD Grows in DeFi
Launched in September 2018 and issued on the Ethereum blockchain as an ERC-20 token, Gemini Dollar (GUSD) is Gemini’s native stablecoin.
For GUSD, then, the big advantage in being an Ethereum token is that the asset can be put directly into use in DeFi, which is precisely what we’ve seen happening more and more in the sector.
For example, that dynamic was on full display this week when Gemini co-founder Cameron Winklevoss highlighted how the GUSD / ETH trading pair on the decentralized exchange Uniswap had achieved its first $1 million worth of liquidity. (Note: Uniswap relies on 50/50-weighted liquidity pools, which liquidity providers (LPs) can provide liquidity to earn trading fees).
— Cameron Winklevoss (@cameron) November 18, 2020
Of course, this is still a small amount of liquidity relatively speaking. But it’s not bad for GUSD, which currently accounts for around 0.05%, or $12.8 million, of the wider stablecoin economy’s $23.8 billion market cap.
And beyond numbers, the rise of GUSD in DeFi means Gemini is notably positioning itself as a trailblazer.
“It’s really great to see centralized trading and custody platforms such as Gemini starting to embrace the decentralized finance movement,” Uniswap creator Hayden Adams said in response to Winklevoss’s shoutout.
Modest DeFi Proposals
GUSD isn’t just getting attention when it comes to Uniswap, either.
In recent months, the Winklevoss brothers have prioritized onboarding Gemini’s stablecoin as a supported asset and collateral type in DeFi’s blooming borrowing and lending protocols. These projects have surged this year because they make it easy for users to put their crypto to work, e.g. earning yield by lending Dai or buying more ETH by borrowing against ETH collateral.
That said, getting onboarded into these protocols has led to a “who’s who” situation in DeFi in which assets stand to gain considerably more attention and adoption over time if they get accepted into the top protocols, which embrace new assets per community governance votes.
That’s why recently we’ve seen Gemini’s leadership personally submit GUSD onboarding proposals to the governance systems of DeFi’s reigning lending protocols, including Maker, Compound, and Aave. The main pitch was that GUSD could help diversify these projects’ risk profiles by adding another independent stablecoin option to their already accepted assets.
— Tyler Winklevoss (@tyler) August 31, 2020
Additionally, earlier this year Gemini proposed that decentralized stablecoin Curve should create a GUSD pool, which the project has since done.
As for GUSD’s fate with the aforementioned lending protocols, things are looking promising. Last month the Aave community signaled its general support for onboarding GUSD in a community sentiment poll, while the Maker community is currently voting to finalize the addition of GUSD to its signature Multi-Collateral Dai (MCD) system.
Taken altogether, the growing embrace of GUSD in DeFi will cement Gemini’s position as a first-mover centralized exchange when it comes to experimenting with decentralized services to enhance their own. As Gemini continues to break ground here, look for other centralized exchanges to start exploring how they can make their own direct inroads into DeFi.