The rise of USDC challenges the dominance of USDT, while the DeFi ecosystem drives changes in the stablecoin landscape.

Recently, an industry analyst pointed out that in the coming weeks, the supply share of USDT on the Ethereum network may fall below 50% for the first time. Meanwhile, USDC is rapidly rising and is expected to become the dominant stablecoin on Ethereum, mainly due to its increasing importance in Decentralized Finance (DeFi).

Data shows that over 50% of the USDC supply, approximately $12.5 billion, has entered smart contracts. Although this percentage is lower than DAI, in terms of dollar value, USDC is far ahead. Considering that DAI's collateral includes other assets, USDC has now become the most popular stablecoin choice in the DeFi ecosystem.

In the main use cases of USDC, lending protocols play an important role. The three major lending platforms, MakerDAO, Compound, and Aave, collectively hold about 23% of the USDC supply. In MakerDAO, USDC mainly supports the price stability of DAI through the anchoring stable module. In Compound and Aave, users deposit USDC into the protocol to earn returns.

Recently, Compound Labs announced the establishment of a new company, Compound Treasury, which will further promote the application of USDC in the DeFi field. By collaborating with leading cryptocurrency infrastructure providers, Compound Treasury enables emerging banks and fintech companies to convert USD into USDC and deploy it on the Compound platform with a guaranteed interest rate of 4%. This innovative service simplifies the process for traditional financial institutions to participate in Decentralized Finance, eliminating complexities such as private key management, cryptocurrency conversion, and interest rate fluctuations.

With the launch of Compound Treasury and the development of related DeFi APIs, it is expected that more USD liquidity will flow into the DeFi ecosystem. Although this may dilute the yields of existing depositors, it is also expected to promote the widespread adoption of DeFi lending protocols, alleviating the long-standing issue of USD liquidity shortage that has plagued these protocols.

However, with the continuous development of Decentralized Finance, the industry has begun to consider its reliance on centralized stablecoins. Although centralized stablecoins have brought liquidity to DeFi and helped to avoid volatility issues, this is not a long-term solution. In this regard, DAI, as a decentralized stablecoin, offers a possible solution, although its market share is only 8%. Interestingly, the mechanism by which DAI maintains stability is increasingly reliant on USDC.

Currently, although there has not yet been a decentralized stablecoin project that has reached the success level of MakerDAO, the industry is actively exploring various innovative designs, the most notable of which is completely breaking away from dependence on the US dollar. Regardless, decentralized stablecoins represented by DAI remain one of the important cornerstones for the healthy development of the DeFi ecosystem.