Review of DeFi in June: Stablecoin growth is very stable, but the profitability of the protocol is not satisfactory

Text | Jiang Haibo Editor | Tong Produced by | PANews

The craze for cryptocurrencies in this round of bull market reached its peak in May. The most eye-catching thing at that time was undoubtedly various Meme tokens. The influx of countless new users caused a surge in the prices of various altcoins. In addition to attractive icons and various emoticons, the key factor for the success of Meme tokens represented by "Zoo" is the seemingly low price. The SHIB community created a simple but effective slogan "Eat zero", which means the movement to eliminate zero. Every zero removed represents a tenfold increase. Even CCTV reported that SHIB rose 280,000 times in half a year.

The cryptocurrency market continued to be sluggish after the correction in May and continued into June. The various indicators in DeFi continued to be affected. Although BTC fell less in June, DeFi tokens generally fell sharply. In this case, the overall performance of the stablecoin market exceeded investors' expectations.

Stablecoin data: USDC, BUSD, and DAI have grown significantly, while USDT has slowed down

According to CoinMarketCap data, as of June 30, the eight stablecoins with the highest circulation and their quantities were USDT 62.5 billion, USDC 25.2 billion, BUSD 10.1 billion, DAI 5.4 billion, UST 1.91 billion, TUSD 1.5 billion, PAX 840 million, and HUSD 570 million.

Compared with a month ago, the circulation of USDT, USDC, BUSD, DAI, and TUSD increased by 650 million, 2.53 billion, 1.43 billion, 730 million, and 380 million, respectively, while the circulation of UST, PAX, and HUSD decreased by 43 million, 290 million, and 300 million, respectively. Among them, the circulation of USDC, BUSD, and DAI increased significantly; while the circulation of USDT, which has the largest circulation, only increased by 650 million, which was much slower than the increase of 10.8 billion in circulation in May. This may be because USDT did not "print money" in June, and the increase in circulation came from the issuance of USDT in the USDT treasury.

MakerDAO PSM accounts for 12.35% of USDC issuance

USDC has become the main stablecoin in DeFi platforms because it is relatively compliant. According to data from blockchain browsers, the largest number of USDCs are staked in MakerDAO PSM (anchored stablecoin module), at 3.05 billion. Compound, Aave, and 3Crv Pool have staked 1.78 billion, 1.1 billion, and 750 million USDCs, respectively. USDC can also provide faster support for new blockchain platforms. For example, Solana has begun to issue native USDCs, and the USDCs staked in the cross-chain bridge between Polygon and Ethereum have reached 1.19 billion.

Because of the support of Binance, such as liquidity mining on BSC and reduction of transaction fees on Binance Exchange, BUSD's circulation volume has also increased significantly, and its market value has risen to the eleventh place among all cryptocurrencies.

As a stablecoin generated by excess collateral in MakerDAO, DAI has maintained good growth in the bear market, indicating that the market still has a large demand for DAI. Dai Stats data shows that USDC accounts for more than half of DAI's collateral, reaching 55.8%, which stems from the composability of MakerDAO.

Stablecoin Protocol

Curve

Curve is the largest stablecoin exchange protocol and the DeFi protocol with the largest amount of locked assets. As of July 5, Curve, including Factory Pools (which helps other assets integrate with pools such as 3Crv), has a total of $9.8 billion in locked assets, most of which are stablecoins, with only a small amount of BTC and ETH derivatives.

Many users have sold some of their cryptocurrencies in the bull market and instead held a large amount of stablecoin assets. As the underlying DeFi protocol, Curve can earn income through transactions. Stablecoins deposited in other DeFi protocols may eventually flow to Curve. The most typical examples are Yearn and Convex. Staking CRV can increase the mining multiple and determine the distribution of CRV tokens. Convex and Yearn's competition for staking CRV also allows Curve to reap the benefits.

According to statistics from DeBank, the transaction volume in Curve did not increase in June, which means that the increase in the amount of staked tokens in Curve did not increase Curve's profitability.

MakerDAO

As mentioned earlier, the stablecoins in MakerDAO continue to hit new highs, currently reaching $5.4 billion. However, MakerDAO's profits have not increased as a result, but have declined significantly recently.

First of all, most of the current stablecoins are issued by anchoring USDC in the stablecoin module, and the stability fee for this part is only 0.1%.

In addition, the stability fee rate of ETH-A, which is an important source of income for MakerDAO, has also been reduced from 5.5% to 3.5%. The stability fees of various other collaterals were also reduced in June, such as WBTC-A from 4.5% to 3.5%, ETH-B from 10% to 9%, LINK-A from 5% to 4%, and YFI-A from 5.5% to 4%.

According to data from Block Analitica, the amount of DAI generated with ETH-A as collateral has also dropped from 1.65 billion at the beginning of June to 1.42 billion now.

According to official disclosure, although MakerDAO's liquidity reserves hit a record high, MakerDAO's net income in June was US$9.37 million, a 60% month-on-month decrease from US$23.29 million in May, and liquidation fees decreased by 88% from May.

With DAI issuance hitting a new high, the reduction in MakerDAO revenue means that the overall stability fee rate is lower. The opportunities to gain profits in a bear market are reduced overall, and lowering the stability fee rate will help stimulate users to continue using DAI.

Convex

Convex Finance is a typical project that relies on large-scale DeFi protocols. It solves the liquidity problem of veCRV in Curve, and the current locked assets have reached 4.33 billion US dollars. In Curve mining, you can obtain veCRV with a maximum lock-up of four years by staking CRV. To achieve a maximum mining speed of 2.5 times, the required veCRV will also change with the overall staking amount. If too much CRV is staked, it may be wasted when idle, and too little staking cannot reach a high multiple.

Through Convex, CRV can be converted into crvCRV in one direction. By staking crvCRV and staking in Curve through Convex, you can get accelerated returns. Compared with staking directly in Curve, CVXCRV in Convex has liquidity and can be sold in the secondary market when not needed, and you can also get Convex's platform currency CVX rewards.

In contrast, algorithmic stablecoin projects are still risky. AMPL often maintains deflation near a price below $1. Fei Protocol has been integrated with other projects and has voted to exchange 10,000 stETH for staking income on Eth2. Iron Finance on Polygon has developed to a maximum lock-up volume of more than $2 billion, but due to a run, the governance token TITAN directly returned to zero.

Let’s take a look at the various data in DeFi.

DeFi net locked value falls below $60 billion

Due to the overall decline of cryptocurrencies, most of the data in DeFi will passively decline. According to DeBank data, the sum of the net locked-in amounts in Ethereum, BSC, xDai, Polygon, Fantom, and Heco dropped from $60.8 billion to $56.9 billion, a decrease of 6.4%.

Among them, Curve's locked-in amount increased from $5.37 billion to $8.43 billion, ranking first. The locked-in amount of Aave V2 dropped from $8.56 billion to $7.89 billion, and the locked-in amount of Aave on Polygon also dropped significantly, from $3.57 billion to $2.1 billion. In a bear market, the demand for stablecoins increases, while the income from other currencies may not be enough to cover the risk of falling token prices.

The transaction volume of decentralized exchanges has declined significantly

The trading volume of decentralized exchanges (DEX) has also declined significantly. The trading volume in June was $109.5 billion, and the trading volume in May was $253.2 billion, a decrease of 56.4% from the previous month. The daily trading volume of DEX fluctuates greatly. In addition to Uniswap and Pancakeswap, Mdex's trading volume often topped the list in early June.

Mortgage lending volume is stable with a slight decline

The total borrowing volume of decentralized lending platforms dropped from $16.5 billion to $16 billion, a decrease of 3%. However, Aave V2 and Maker, which have the highest total borrowing volume, both increased, and their combined share increased from about 60% to 70%. Compound's total borrowing volume dropped from $5.11 billion to $3.72 billion, a decrease of 27.2%.

Stablecoins are growing steadily

As mentioned above, by the end of June, the eight largest USD stablecoins in circulation, USDT, USDC, BUSD, DAI, UST, TUSD, PAX, and HUSD, had issued a total of $107.9 billion in stablecoins, a 5% increase from a month ago. The issuance of USDC, BUSD, and DAI increased significantly, but the issuance rate of USDT, the largest in circulation, declined significantly.

The increase in some data comes from the composability of DeFi, such as a large amount of USDC being pledged to MakerDAO to generate DAI; Convex TVL increased, but was eventually deposited in Curve, and the profitability of Curve and MakerDAO did not increase as a result.

BTC-pegged coins continue to grow

BTC-pegged coins are also one of the few areas of sustained growth in DeFi, with the issuance volume increasing from 185,711 to 259,747, an increase of 39.9%. Because the statistics are about the number of BTC, which has nothing to do with the price, the statistical results are not affected by the price. Currently, other blockchain platforms other than Ethereum are not counted, and in fact other platforms have also issued a large number of anchored coins, such as BTCB on BSC.

Conclusion

In the case of a sluggish market, the locked amount, DEX trading volume, and the borrowing volume of decentralized platforms have all declined as asset prices have fallen, but stablecoins and BTC-pegged coins are still growing. Unlike other categories, the statistical results of these two are not affected by prices.

The issuance of major stablecoins, including USDT, USDC, BUSD, and DAI, is growing, but the growth rate of USDT is slowing down. The data of stablecoin DeFi protocols is very impressive, with Curve's lock-up volume approaching 10 billion US dollars, and the issuance of DAI in MakerDAO reaching a new high of 5.4 billion. However, due to the sluggish transaction volume in Curve, the reduction of MakerDAO's stability fee and the main collateral being USDC in the anchored stablecoin module, their profitability has not increased due to these data.