Amid markets going volatile in 2020, stablecoins — cryptocurrencies that are pegged to a certain value like $1 USD or maintain stable floating prices — have been veering toward breakout success.
That continued ascension was readily apparent on Tuesday, May 12th, when the combined market capitalization of stablecoin tokens crossed the $10 billion USD mark for the first time ever.
It’s an arbitrary milestone, of course, but it does show that stablecoins are starting to gain widespread traction across the crypto ecosystem. Moreover, that traction has been incredibly fast in recent months.
Indeed, the combined market cap of stablecoins only crossed $7 billion for the first time a few weeks ago. In rather short order, then, that market cap has jumped over 40% to $10 billion. There’s no signs the growth in this sector will slow anytime soon, either.
The Top Contenders
Right now, the ever controversial Tether stablecoin makes up roughly 86% of the total stablecoin supply, thus giving USDT a market cap of around $8.6 billion.
After Tether, the competition isn’t even close.
- The second-largest stablecoin at the time of this article’s writing is USDC, which clocks in at over 7% of the total stablecoin supply.
- The CENTRE-backed token has exploded in popularity since March, when mainstream and crypto markets saw historical sell-offs.
- Beyond USDC, the Paxos (PAX) token is over 2%
- Binance USD (BUSD) is just shy of 2%
- MakerDAO’s Dai and its predecessor Sai are at 1% combined
- And the crypto exchange Gemini’s Gemini dollar (GUSD) is around 0.1%.
What will be interesting to watch is how these standings look in 5 or 10 years. The top cryptocurrencies in the cryptoeconomy have shifted over time, and there’s no reason to think this same dynamic won’t happen to stablecoins, too.
Can Tether maintain its dominance, or will it eventually give way to more decentralized solutions? Only time will tell for now. Whatever happens, though, a $20 billion stablecoin market cap seems decidedly in reach in the foreseeable future.
A New Challenger Approaches
The MakerDAO lending dApp has been Ethereum’s biggest DeFi project to date, and its also given rise to one of Ethereum’s early stablecoin darlings, the Dai.
Before last fall, users could only use ether (ETH) as collateral in order to draw out automated Dai loans through Maker. That all changed in November, when Maker rolled out the Multi-Collateral Dai (MCD) system, which allows multiple collateral types to back Dai loans.
Post-MCD, the original Dai transitioned to “Sai,” a reference to Maker’s original Single-Collateral Dai (SCD) system, and was set to be phased out in favor of the new Dai offering. That phase out completed on May 12th, 2020, when MakerDAO completed its SCD shutdown.
Yet some have been frustrated with MakerDAO’s embrace of non-permissionless assets like USDC and WBTC in recent weeks. There’s still demand in the space for a more simplistic SCD-like system that avoids the complexities brought by relying on multiple crypto collateral types. That’s where the MetaCoin project comes in.
Introduced back in February by MolochDAO founder and SpankChain CEO Ameen Soleimani, MetaCoin was proposed as a more conservative option than the Dai.
“The goal of such a system isn’t be to usurp DAI’s position as the de facto decentralized stablecoin, but rather to create a safe alternative for those who have different risk preferences,” Soleimani said at the time.
Since then, the minds at Reflexer Labs have taken up the challenge by working on reflex bonds, which are like stablecoins without pegs. Users will be able to deposit ETH in exchange for a reflex bond that is like a more stable version of that ETH. Such a reflex bond can then be used as collateral to draw out MetaCoin’s planned COIN stablecoin.
This model provides a fresh new approach, and it shows that innovation and variety are booming in the stablecoin sector.
