The Rise of USDC: Consolidation of DeFi's Dominance as USDT's Share May Fall Below 50%

Recently, an industry analyst pointed out that the market share of USDT in the Ethereum network's stablecoin market may fall below 50% for the first time. At the same time, USDC is rapidly becoming the dominant stablecoin on Ethereum, largely due to its increasingly important role in Decentralized Finance (DeFi).

Data shows that over half of the USDC supply has entered smart contracts, amounting to approximately $12.5 billion. Although this percentage is lower than that of DAI, USDC is far ahead in terms of dollar value. It is worth noting that DAI's collateral also includes other assets. Currently, USDC has become the most popular stablecoin choice in the Decentralized Finance ecosystem.

In the DeFi space, several major lending protocols account for a large portion of the USDC supply. Among these protocols, the uses of USDC vary. Some are used to support the price stability of other stablecoins, while others are deposited by users to earn yields.

Recently, a newly established company announced that it will provide traditional financial institutions with a channel to enter the Decentralized Finance market. The company collaborates with multiple parties, allowing banks and fintech companies to exchange USD for USDC and deploy it at a fixed interest rate on DeFi platforms. This initiative simplifies the process for traditional financial institutions to participate in DeFi, abstracting complex operations such as private key management and cryptocurrency exchange.

With the launch of similar projects and the development of related APIs, it is expected that more USD liquidity will flow into the DeFi ecosystem. While this may dilute the returns for existing users, it is also hoped to promote the widespread adoption of DeFi lending protocols and alleviate the long-standing shortage of USD liquidity.

However, the development of Decentralized Finance has also brought new challenges: how to strike a balance between relying on centralized stablecoins and pursuing decentralization. Although centralized stablecoins provide necessary liquidity and price stability for Decentralized Finance, this is not a long-term solution.

Decentralized stablecoins like DAI provide some possibilities to address this issue, but their market share remains limited. Interestingly, DAI's own stability mechanism is increasingly reliant on centralized stablecoins like USDC.

Currently, although there is not yet a decentralized stablecoin project that can completely replace centralized solutions, the industry is actively exploring various new design concepts. Some of the most innovative ideas even propose completely breaking free from dependence on the US dollar.

In any case, decentralized stablecoins represented by DAI remain one of the important cornerstones for the healthy development of the DeFi ecosystem. With technological advancements and market maturation, we have reason to expect more innovative solutions to emerge, driving DeFi towards a more decentralized and inclusive direction.