Although stablecoins are a relatively new invention in the cryptocurrency space, they have become quite popular among those who use cryptocurrencies for payments. The most preferred of them all is Tether’s USDT which a Messari researcher says may have the potential to replace Bitcoin as the dominant currency on public blockchains.
Its number of daily transactions keeps growing rapidly and has almost reached that of Bitcoin. USDT’s monetary base grew by $2.4 billion to exceed $8 billion. In Q2, it grew by another $3.8 billion, bringing its total base to over $12 billion. USDT contributed the most to the total transaction volume of stablecoins so far as it is very popular, probably because it was the first to be created.
$144 billion worth of stablecoin transactions settled in Q2
Stablecoins are cryptocurrencies pegged to fiat currencies such as the USD, which give them significant stability and reduced volatility associated with cryptocurrencies. As a result, merchants find them more attractive for day-to-transactions instead of Bitcoin for instance. A large percentage of transactions are currently carried out using different stablecoins and the annual transaction volume has seen consistent growth since 2016.
In Q2 of 2020 alone, $144 billion worth of transactions were carried out using these stablecoins. In addition, they account for 40% of all cryptocurrency transactions in the last few months. This new trend of interest in stablecoins may not be stopping soon because of the growth of decentralized finance, also known as DeFi.
Stablecoins driving transaction volume on Ethereum
The second-largest cryptocurrency by market cap, Ethereum is known as the platform for decentralized finance. It holds 65% of all issued stablecoins and accounts for 85% of all transactions involving stablecoins. Ethereum’s daily settlement value recently surpassed that of Bitcoin and this growth coincides with the booming stablecoin market of which Ethereum holds the biggest share.
DeFi is still experiencing significant growth and the extension of stablecoins is not slowing down either. The two tend to fuel each other, in which case unprecedented growth still awaits the industry. This could place the top stablecoin USDT on the way to becoming the most used digital currency for transactions on public blockchains as early as next year, considering the rate of growth in transaction volume.