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USDC and DAI are grabbing top spots in DeFi while Tether still holds dominance

Photo of: Dennis Ramos
by Dennis Ramos

Tether has exceeded $16 billion in its market cap dominating the stablecoin circulation, but catching up with it are its rivals which are small in stature, but are no less in this huge DeFi space. The biggest metric of measurement of growth of Decentralized Finance is the total value locked. In terms of TVL, six of the most popular and highly pursued DeFi protocols include  Compound, Maker, Uniswap, Curve, Aave, and Balancer. Among the stablecoins, USDC rules the pack followers by DAI which is the native stablecoin to MakerDAO. 

As per the data compiled by Flipside Crypto, as of October 19th, the market caps of USDC and DAI were $2.74 billion and $608 million respectively. But what is important is that despite USDC being the most sought after stablecoin DAI has been able to create a niche for itself and is counted as one of the most preferred stablecoins. 

Jeremy Allaire who is the co-founder of the peer-to-peer payments company Circle believes that the success of USDC is because it had started very early to build strong community partnerships. Also, the fact that the USDCs governing center consortium consists of Circle and Coinbase has been a big enough reason for its success story. He further expanded that USDC is also viewed as a safe and trusted stablecoin by institutional investors. 

Source: Flipside Crypto

Many countries worldwide are accepting cryptocurrency as a mainstream asset but they also want to give shape to regulations surrounding it. For instance, the U.S. Office of the Comptroller of the Currency (OCC) published its first regulatory guidance for stablecoins, in which it clarified that national banks can provide services to stablecoin issuers in the US. 

Allaire stated:

“Having guidelines creates more certainty, which makes mainstream market participants ready and willing to engage in it.”

DAI is decentralized in the sense that it does not have any centralized issuer and also is censorship-resistant. Niklas Kunkel, the head of backend services at MakerDAO has said the DAI’s decentralization core is the reason for its popularity. This is something that no one has competed against. He further stated:

“One advantage you have from a decentralized stablecoin is that everything is completely transparent. “So from a regulatory point of view, this is almost like their dream scenario, right? Because they can see exactly how many dai are in existence and in circulation and they can see in real-time.”

As for Tether, many participants in the market have said that it is not as transparent as it claims. As of now, the company is already filing many lawsuits because there have been fresh allegations that the company is not backing its currency with collateralized reserves. Tether has not given any official statements surrounding the lawsuits as of now. But in an email, its Chief Technology Officer said that Tether is by far the most stable and liquid stablecoin. 

But Walter Hessert, the head of the strategy division at Paxos defers in his arguments: 

“Tether is not fully backed with dollars and there is very little transparency into their reserves. That’s ok for some crypto traders because there are very liquid markets today. However, mainstream investors and institutions prefer stablecoins they can trust.”

But it cannot be denied that one of the biggest advantages of Tether has been its first-mover advantage giving it an early edge over its competitors.