Before talking about this topic, let’s briefly talk about stablecoins. There are two main types of stablecoins, one is decentralized, smart contracts based on public chain design, mainly algorithmic stablecoins, and the other is based on centralized institutions Issued, such as what we will talk about today, USDT issued by TEDA, and USDC issued by Coinbase and Circle.
Many people will have a question here, what are the functions of these stable coins, isn’t the blockchain pursuing decentralization? Why do we need stablecoins issued by these centralized institutions? Isn't this against the concept of decentralization?
In fact, the development of things will always be a gradual process, just like when our country entered socialism, it was found that it was impossible to achieve comprehensive socialism due to the constraints of the current productivity, so there was characteristic socialism.
Based on the core concept of the blockchain, decentralized stablecoins will definitely be standard in the currency circle in the future, but now due to the liquidity of the entire digital currency market, the stability of decentralized stablecoins is very poor, so it is not Not suitable for mass adoption.
What is the role of stablecoins in the currency circle?
To circulate digital currency in the market, it must be traded. At present, it is forbidden to buy digital currency with fiat currency in the exchange. That is to say, you cannot recharge RMB on the exchange, and you cannot use the recharged RMB to trade. purchased digital currency.
So now there is a middleman, that is, OTC. Let’s not talk about security issues, and the transaction efficiency is also very low. We can imagine a scenario. When you want to buy 10,000 yuan of bitcoin, the market price of bitcoin at this time is 200,000 a piece, you just transferred the money, due to market fluctuations, the bitcoin becomes 220,000 yuan, then OTC can Find an excuse to return the money to you instead of selling bitcoin to you.
Because there is no law to protect your rights and interests, and now that digital currencies have developed to the present, there are already thousands of digital currencies that can be purchased. It is obviously inappropriate to use this method. On Huobi, only the top few mainstream ones can Purchasing in this way, then other currencies can only form transaction pairs with USDT.
The emergence of stable currency can not only bypass the policy risks of countries buying digital currency with legal currency, but also greatly improve the circulation efficiency of digital currency. In view of the current monopoly position of USDT in the market, some people call USDT the "Federal Reserve of the Currency Circle".
Here is a point of knowledge, why the Fed is so awesome. After World War II, the Bretton Woods monetary system was established under the leadership of the United States. This meeting anchored the US dollar to gold and stipulated that 1 ounce of gold was equivalent to 35 US dollars, so that Let the U.S. dollar become the world currency, binding the world's economy and the reputation of the U.S. dollar together. Although this short-term is of great benefit to promoting the riddled world after World War II, it has been developed for so many years, especially the recent U.S. dollar Reputation has already caused doubts in countries all over the world, so I won't talk about it.
In the currency circle, the stable currency USDT is currently somewhat similar to the status of the U.S. dollar, and can be freely exchanged with other digital currencies, which greatly improves the bypassing of supervision and liquidity of digital currencies.
The rise of USDT and USDC
USDT was issued by TEDA in 2014. With its first-mover advantage and the historical opportunity of China’s crackdown on digital currencies in 13 years, it has risen rapidly. Now almost all exchanges in the world have trading pairs composed of USDT and other digital currencies. In contrast, USDC is much less. You can open Huobi to see that the only trading pairs with USDC are Bitcoin and Ethereum, and the transaction volume is pitifully small. In the centralized exchange, USDT has formed an absolute monopoly position.
USDC was officially issued by the Center Alliance jointly founded by Coinbase and Circle. The specific time was in October 2018. Compared with USDT, it is a complete junior, but its biggest label from the beginning is compliance and transparency. Among them, Circle is The world's first company to obtain the New York State BitLicense license, and has since successively obtained payment licenses from the UK and the European Union. Coinbase is the cryptocurrency exchange that has obtained the most regulatory licenses in the world.
Moreover, USDC is regularly checked and disclosed by Grant Thornton LLP, a top five accounting service company, so that users can clearly know whether the USDC currently in hand has sufficient US dollars as collateral. It is also easier to be accepted by regulators. Although USDC has been unable to challenge USDT due to users' usage habits after going online, it seems that all this has quietly changed until this year's bull market.
USDC’s counterattack, can USDT’s dominance be maintained?
The stablecoin market has developed rapidly this year, growing from US$28 billion at the beginning of the year to US$108.1 billion today, so we can see news about the issuance of these stablecoins from time to time. Because USDC has regular audits by formal and credible audit institutions, everyone has a reason I believe that USDC has a 1:1 reserve with the US dollar, while USDT lacks transparency in this area. Many people are suspecting that TEDA is printing money without collateral.
It is precisely in view of this that we can find a phenomenon that traditional centralized exchanges are the largest places to use USDT. First, because there are very few trading pairs with USDC in centralized exchanges, everyone opens Huobi, Binance, etc. It can be seen from similar exchanges. On the other hand, centralized exchanges are simple to operate and have almost no threshold. In this way, USDT can occupy a dominant position all year round.
And this year, we can clearly see that many old leeks have been able to operate DEFI and use DEX, and they have begun to question the security of USDT. In addition, USDC is far better than USDT in terms of compliance, so they I am more willing to exchange the USDT in my hand for USDC. In some DEFI projects, I have also begun to set the preferred stable currency as USDC. This is undoubtedly eroding the USDT market step by step.
Some data can be used as evidence. The current total circulation of USDT is 64.3 billion US dollars. Although the circulation is nearly three times higher than that at the beginning of the year, the proportion of the total circulation of stablecoins has dropped from 75% at the beginning of the year to 58%. This shows that the overall dominance of USDT in the stablecoin industry is declining; on the other hand, the old leeks in the currency circle, that is, those users who know how to operate DEFI, began to replace USDT with USDC. With the development of the blockchain, new leeks continue to With learning, the user base of USDC will expand accordingly.
Another set of data shows that in the field of DEFI, USDC has surpassed USDT to become the mainstream. The data is as follows, the USDC lock-up amount in the Uniswap fund pool is 3.34 billion US dollars, and the USDT is only 1.66 billion US dollars. In terms of trading volume, the trading volume of USDC trading pairs reached 6.02 billion US dollars, and the trading volume of USDT trading pairs was 1.85 billion US dollars. The former is more than three times that of the latter.
And in the next few months, USDC will also be issued on 10 blockchain networks including Avalanche, Celo, Flow, Hedera, Kava, Nervos, Polkadot, Stacks, Tezos and Tron, continuously expanding the usage scenarios of USDC.
The current situation of TEDA is not good, but it may be a good thing for the market. This can force TEDA to be transparent and allow more convincing audit companies to participate in the audit. If TEDA is really a pit, then in USDC Under strong pressure, Thunderstorm is not impossible, so friends who hold a large amount of USDT can properly replace some other stable coins.
a thought
Although USDT has been criticized for its compliance, but on the other hand, will USDC, which is praised by mainstream American institutions and even regulatory agencies, have a back door? In terms of the core concept of blockchain decentralization, will USDC be a A knife in the heart, after all, the most convenient way to deposit and withdraw money is the stable currency. USDC embraces supervision with great fanfare. Will the fruit of victory that countless people have fought for in the blockchain for so many years, finally be directly collected by the regulators?
Author: V Ke Baiyuan
A practical financial writer who went from nothing to a real "get"
