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USDC expands into DeFi, even replacing Terra's UST

 


USDC, the world's second largest stablecoin by market cap, is expanding into five more DeFi protocols, including the two largest Ethereum Layer 2 ecosystems. Also, USDC will replace the collapsed Terra Luna ecosystem stablecoin UST on the Cosmos network.


Stablecoin provider Circle announced on Sept. 28 at the Converge22 conference that it is launching USDC on five new DeFi networks: Arbitrum, Cosmos, NEAR, Optimism, and Polkadot.


According to Circle, the stablecoin is expected to appear in late 2022 for the DeFi platforms Arbitrum One, NEAR, Optimism, and Polkadot and in early 2023 for the DeFi protocol Cosmos.



USDC: What does the cooperation with the DeFi platforms bring?

Joao Reginatto, Vice President of Product at Circle, explained the benefits of Circle and the 5 new DeFi partners working together at the conference. According to Reginatto, USDC will soon offer multichain extensions for 13 ecosystems. This allows “blockchain developers to work on top of USDC” and users “to access greater liquidity and interoperability within the crypto economy at their disposal”.


Post-launch, developers will be able to use Circle APIs for fiat on- and off-ramps to and from USDC in their products. In addition, they then have a programmable wallet infrastructure at their disposal. So the team on Twitter.


Circle currently natively supports USDC for Algorand, Avalanche, Ethereum , Flow, Hedera, Solana, Stellar and TRON.


Arbitrum One and Optimism are the two leading Layer 2 networks with a combined market share of more than 80%. Arbitrum is the market leader with a Total Value Locked (TVL) of $2.42 billion . The TVL of DeFi platform Optimism is $1.44 billion according to data from L2beat.


The NEAR protocol is a low-cost DeFi blockchain with a high data transfer rate. Polkadot is a smart contract and dApp ecosystem competing with Ethereum . Cosmos owns a growing ecosystem of decentralized applications and interoperable chains.


This DeFi network particularly benefits from working with Circle due to the Terra Luna crash.


After Terra Luna Crash: USDC replaces UST

In May 2022, the Terra Luna ecosystem and its stablecoin UST collapsed. In the crash, algorithmic stablecoin USD lost its peg to the US dollar and almost 100% of its value.


Many of Cosmos' DeFi protocols leverage the stablecoin UST. After the crash, these protocols lost large amounts of liquidity. With the collaboration of Circle and Cosmos, new capital will soon flow into the Cosmos ecosystem.


After the crash, Cosmos’ DeFi protocols were already using so-called “Wrapped USDC”, which users previously minted on Ethereum . However, these tokens do not offer the same level of security as the USDC issued by Circle. Circle will mine the first stablecoins directly on the COSMOS network in early 2023. This eliminates the need for a cross-chain bridge, which is a popular attack point for DeFi hackers.


From the COSMOS network it is then also possible to send assets directly to networks connected to the COSMOS ecosystem without a bridge. DeFi trading benefits from this: DYDX, the largest DeFi trading platform by trading volume, is directly connected to the Cosmos chain.


Conversely, USDC is benefiting from a new source of DeFi demand and may be able to further expand its market share.


USDC supply decreases

Over the past 3 months USDC supply has continued to decrease. Since the beginning of July, the supply of the stablecoin has fallen from 56 billion USDC to currently 49 billion USDC. One reason for this is the declining demand for DeFi and crypto products associated with the bear market. Still, USDC remains the second largest stablecoin provider in crypto space.


The supply of the leading stablecoin provider Tether has also fallen sharply. In mid-May of this year, the USDT supply was still 83 billion USDT, but then fell to the current 68 billion USDT.


The total stablecoin market cap currently stands at $151 billion and accounts for 15% of the total crypto market cap. Tether's stablecoin market share is 45%, while Circle has a 32.5% market share. Binance is the third largest stablecoin provider on the market with its stablecoin BUSD and a 14% share.


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