This blog is cross posted from the CENTRE Consortium.
More than $50 million in USD Coin (USDC) has been borrowed this year across top platforms, an achievement that highlights the power of DeFi and the benefits of stablecoins.
USDC has reached $50 million in loans originated this year across DeFi platforms Compound, Dharma, and dYdX, according to data from Loan Scan, the most by far of any fiat-backed stablecoin. About 1 in 10 loans originated this year on these platforms has been denominated in USDC. On the flipside, over $146M in USDC has been supplied as collateral across those platforms.
Customers use stablecoins like USDC, Dai, and others for a variety of reasons, including to easily move value across crypto exchanges and to lend and borrow. Investors choose to lend USDC because they can generally earn a lot of interest — sometimes more than 10% annually, depending on the platform and other market factors. (You can see the current interest rates available for USDC and other assets across a range of DeFi platforms by clicking here or here.)
Investors borrow USDC for a variety of reasons. They can use ETH (or some other crypto asset) to collateralize a USDC loan using one of the available DeFi lending platforms, and use the borrowed USDC to buy other crypto assets. Subject to factors such as liquidity and available rates, this enables them to benefit from the wide availability and liquidity of USDC markets.
Customers can also borrow USDC because they know it can be redeemed for $1 — so borrowing USDC is similar to borrowing digital cash. For example, say someone wants to purchase a car worth $10,000 but they don’t want to sell their crypto to pay for it.
Instead, they can use their crypto as collateral for a $10,000 USDC loan, redeem the USDC to their bank account, and buy the car. They then repay their USDC loan and recover their crypto collateral at the end of the term. In fact, I recently did just this to purchase a new SUV for my family. Read about my experience on Twitter.
I expect the amount of USDC in DeFi to continue to grow in the weeks and months ahead organically. It will also grow because Coinbase recently launched the USDC Bootstrap Fund to support developers building DeFi protocols by investing USDC directly in the protocol.
About the CENTRE Consortium
The CENTRE Consortium is a joint venture co-founded by Circle and Coinbase aimed at establishing a standard for fiat on the internet and providing a governance framework and network for the global, mainstream adoption of fiat stablecoins. CENTRE is open for broader membership and is growing its support for fiat stablecoins beyond the US dollar. Learn more here.
About USD Coin (USDC)
Launched in September 2018, USDC is a fully collateralized US dollar stablecoin — meaning it’s backed 1:1 with US dollars. Learn more here.