The Rise of USDC: Changing the Landscape of Stablecoins and New Challenges for the DeFi Ecosystem

Recently, an industry analyst pointed out that in the coming weeks, the market share of USDT in the Ethereum network's stablecoin market may fall below 50% for the first time. Meanwhile, USDC is rapidly rising and is expected to become the dominant stablecoin in the Ethereum ecosystem. This trend is largely attributed to the increasingly important role of USDC in the Decentralized Finance (DeFi) space.

Data shows that over 50% of the USDC supply, approximately $12.5 billion, has entered smart contracts. Although this percentage is lower than DAI, in terms of dollar value, USDC is far ahead. Considering that DAI's collateral also includes other assets, USDC has effectively become the preferred stablecoin in the Decentralized Finance ecosystem.

In the main use cases of USDC, lending protocols play a significant role. The three major lending platforms, MakerDAO, Compound, and Aave, collectively hold about 23% of the USDC supply. Among them, MakerDAO primarily supports the price stability of DAI through its stablecoin anchoring module; while in Compound and Aave, users deposit USDC into the protocols to earn yields.

Recently, Compound Labs announced the establishment of a new entity, Compound Treasury, which provides a simplified channel for traditional financial institutions and fintech companies to exchange USD for USDC at a guaranteed interest rate of 4% and deploy it on the Compound platform through partnerships with leading cryptocurrency infrastructure providers. This innovative initiative is expected to attract more USD liquidity into the Decentralized Finance ecosystem.

However, with the continued development of Decentralized Finance, a key question has emerged: to what extent will the industry continue to rely on centralized stablecoins? While centralized stablecoins have brought much-needed liquidity to DeFi and helped alleviate volatility issues, this is not a long-term solution.

In this regard, DAI, as a decentralized stablecoin, shows some promise. Although its market share is only 8%, it points to a possible development direction for the industry. However, it is worth noting that DAI's own stabilization mechanism is increasingly reliant on USDC.

Currently, although no other decentralized stablecoin project has been able to replicate the success of MakerDAO, there is active exploration of various innovative designs within the industry. Some of the most forward-looking proposals even advocate for completely breaking away 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 industry. With technological advancements and the maturation of the ecosystem, decentralized stablecoins are expected to play an even more important role in the future, driving the entire DeFi industry towards a more decentralized, transparent, and stable direction.