Demand for Ethereum-based stablecoins exploded during the third-quarter DeFi bubble, with DAI’s supply growing by more than 600% and USDC expanding 200%.
According to crypto market data aggregator Messari, the supply of MakerDAO’s DAI stablecoin grew by 623% in Q3 2020, pushing the token’s value above $1 for four consecutive months.
Since starting July with a market cap of nearly $130 million, DAI’s supply has expanded to more than $940 million today.
DAI is created when Ether holders deposit their ETH into the MakerDAO protocol, allowing them to create the stablecoin using Ether as collateral. DAI is an ERC-20 token and can then be used on the Ethereum network to generate interest or ‘yield’ using DeFi protocols.
Messari attributes much of DAI’s recent growth to the launch of four significant liquidity mining programs in the DeFi sector, including a change to Compound’s (COMP) yield distribution that bolstered DAI rewards on June 30, the launch of Yearn Finance (YFI) farming on July 18, Curve’s (CRV) launch on Aug. 13, and the launch of yield farming for Uniswap’s UNI token on September 16.
Messari estimates that 65% of DAI’s entire supply is currently being supplied to DeFi protocols for yield farming.
Demand for Circle’s USD Coin (USDC) similarly exploded in the third quarter, with USDC’s market cap tripling from $928 million on July 1 to $2.79 billion today. USDC is the second stablecoin to grow by more than $1 billion in a single quarter, after Tether (USDT).
Data published by Flipside Crypto indicated a surge in demand for USDC among DeFi users following Curve’s launch — with USDC’s market cap growing by 150% since the platform went live.
Messari estimates the capitalization of the combined stablecoin sector grew by $8.2 billion in Q3 — more than that of the previous four quarters combined. Of the sector’s $20 billion capitalization, the firm estimates 75% has been issued on Ethereum