Knowledge from blockchain intelligence agency Flipside Crypto present that 50% of DAI, Maker’s decentralized stablecoin, is now on Compound (COMP).
Knowledge from blockchain intelligence agency Flipside Crypto present that 50% of DAI, Maker’s decentralized stablecoin, is now on Compound (COMP). Whereas the determine appears a optimistic issue for COMP’s progress, it reveals a regarding pattern for DAI.
Since June, the quantity of DAI on the Compound Decentralized Finance (DeFi) protocol quickly surged. As of August, almost $800 million value of DAI is on Compound.
Complete worth locked at Compound Finance (USD). Supply: Flipside Crypto
Why it could possibly be a troubling pattern for DAI
DAI is essentially the most dominant decentralized stablecoin within the cryptocurrency market. Not like different widely-utilized stablecoins, like Tether (USDT), DAI is maintained by a peer-to-peer ecosystem.
In accordance with researchers at Flipside Crypto, when such a considerable portion of DAI’s provide is targeting one platform, it could result in liquidity issues. Different customers on different competing platforms may wish to make the most of DAI, however there could possibly be a scarcity of provide out there.
Within the final two months, the DeFi market has added greater than $four billion in worth. That naturally led the demand for many DeFi-related initiatives and companies to surge. Specifically, the urge for food for decentralized stablecoins, like DAI, and oracles noticeably elevated.
Consequently, a big provide of the DAI flocked to dominant DeFi protocols. Present knowledge from DeFi Pulse present that Compound has greater than $790 million in complete worth locked, however the researchers emphasised that the mass influx of DAI into Compound may turn into an issue. They defined:
“DAI is the one crypto-backed stablecoin. It’s meant to be extra decentralized and censorship-resistant than the fiat-collateralized USDC and USDT. However a scarcity of liquidity may translate into uncertainty round utilizing DAI as a decentralized stablecoin in DeFi protocols.”
Flipside Crypto additional defined that many DeFi groups are pissed off about DAI’s restricted liquidity and stability. These liquidity points, that are inherently tough to resolve for any decentralized challenge, is perhaps pushing customers to centralized stablecoins.
The valuations of Tether and USDC have elevated considerably since April. Now, Tether, the most important stablecoin within the international cryptocurrency market, is valued at over $10 billion.
Within the immediate-term, the Maker and DAI ecosystem may handle the difficulty to uphold liquidity. But when no options are introduced, the researchers warned it may harm DAI’s community impact. The researchers famous:
“Already we’re seeing loads of DeFi groups specific frustration over DAI’s lack of liquidity and stability, with many opting to make use of USDC as a substitute. That is prone to harm DAI’s community results in the long term if nothing is finished to handle the difficulty instantly.”
COMP and Maker proceed to thrive
Regardless of the sharp market correction that passed off on August 11, Compound’s COMP token elevated by greater than 41%. Maker, the community which DAI is predicated on, additionally recorded a 20% rise in a single day.
The robust momentum of COMP and Maker are inflicting the costs of their native tokens to repeatedly improve. However the rapidly-increasing demand for each networks include points relating to scaling and liquidity.