Stablecoins Are the Backbone of the Crypto Ecosystem

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Welcome to the Onchain Lense newsletter.

A place where we analyse critical onchain metrics for different blockchain networks, sectors and protocols.

The newsletter will be published on all weekdays, with insights from different crypto ecosystems.

This is the first article, and today, we are looking into the onchain activity of stablecoins.

The market cap for stablecoins is around $161 billion across hundreds of assets. The top five stablecoins represent more than 95% of that market, and all are pegged to the value of one US dollar.

Stablecoins interact with blockchain networks and transfer value in a peer-to-peer environment without exposure to individual assets' volatility. There are three main types of stablecoins: fiat-backed, crypto-backed, and algorithmic stablecoins. Fiat currency stablecoins of national currencies like the US Dollar, Euro, and the British Pound are the most popular.

Following is a list of the top 5 stablecoins and their supply as of today:

The most crucial use of stablecoins is to provide a store of value and a medium of exchange in the highly volatile crypto ecosystem. Following are some of the most popular use cases for stablecoins:

• Remittance: Faster and cheaper alternative to traditional remittance services.

• Risk Management: Hedging against high market volatility and holding value.

• Fiat Gateway: A bridge between traditional fiat currencies and cryptocurrencies.

• Decentralised Finance: Backbone of the DeFi ecosystem, enabling liquidity for lending, borrowing, and other financial services.

The chart below shows the monthly onchain volume of all stablecoins on Ethereum. It sums up the USD value of all transactions grouped by tokens. DAI, USDC and USDT, the top three assets, settle most of this value. The monthly volume hit an all-time high of $1.18 trillion in April 2024. The second-best number is $945 billion in November 2022, at the peak of a previous bull market.

So, stablecoins are a critical component of the crypto industry, and their movement often dictates the direction of markets. Stablecoins can also be categorised as the first type of real-world asset being tokenised. It brough the features of fiat currencies onchain and enabled fast, cheap transactions while providing complete transparency and ushering in the age of DeFi.