Is Tether good for Ethereum? DEX volume surges
Validation is the highest form of flattery
As the market searches for narratives for ETH’s sudden rise over the past 72 hours, rising gas fees and high network usage have been cited as the likely culprit. Both of these can be attributed to the stablecoin behemoth Tether’s migration over to an ERC20 token standard.
ERC20 Tether has been around for a while but its usage shot up in August, and according to Santiment, Tether accounted for more than 40% of all ERC20 transactions over the past week. Its rise has been swift:
Tether’s continued legal uncertainty is a cause for concern, but its success – $4.1bn in circulation – is a testament to the power of a borderless cryptocurrency for trade and normal business operations. And Tether’s rise has been independent of ethereum’s – it launched on the Omni blockchain and gained wide acceptance because of its relationship with Bitfinex and other Asian-based exchanges. It's not switching to Ethereum for strategic reasons, but functional ones.
During the post-Steve Jobs I, pre Steve Jobs II era at Apple in the 1990s, Macintosh computers relied on a networking protocol known as AppleTalk to communicate with each other. Like most things at Apple, this was confined to its own ecosystem.
The rise of the internet made TCP/IP the most widely used networking protocol and the existence of AppleTalk obsolete. Macintosh computers needed TCP/IP to connect to the internet and they could also use TCP/IP to communicate with other computers, so what's the need for AppleTalk? Eventually, AppleTalk piggy-backed on TCP/IP before being phased out completely in 2009. RIP.
Apple, now a $1 trillion dollar company, did not let AppleTalk’s demise affect its rise. Apple builds hardware and software that complement each other – not networking protocols.
NO! Tether is not Apple. Tether is not Apple. Tether is not Apple. But, Tether is a company with a profitable product that is abandoning an internal initiative in favor of a neutral industry standard (Ethereum). Everyone that uses Tether – exchanges, traders, investors, developers – is intimately familiar with holding and trading ERC20 tokens, and the ecosystem around the network that supports the transfer of those tokens is developing quickly.
But, ETH = TCP/IP? Just as TCP/IP popularity made it an easy integration, so too is true with Ethereum as a financial transaction network. Over the last 30 days, Tether has paid $549k in network fees (gas) on the Ethereum network, according to ETH Gas Station. Rather than run an internal database or its own blockchain with lower fees, the security and ubiquity of Ethereum justify the costs for Tether, an endorsement of Ethereum's value.
Tether’s dominance on Ethereum is proof of Ethereum’s value in securing financial transactions, just as was demonstrated last week, when Santander settled both sides of a $20m bond trade on Ethereum.
Tether’s role in DeFi and the crypto space more broadly is still unclear. It was recently voted by Compound community members to be the next asset (along with MKR) added to the Compound protocol.
Home court advantage. Just as Tether’s early success has led to its continued dominance as the overall stablecoin market has soared, DeFi applications are heavily tilted towards Dai and USDC. If Compound sees heavy flows of USDT, then others apps may also add the token. But you shouldn’t expect to see anything like the alphabet soup of Dai innovation (cDai, rDai, etc).
The stablecoin wars are far from over, but it feels like, regardless of the outcome, ethereum will win.
Tweet of the Week: Whales in Compound Vote
Timur Badretdinov breaks down the latest Compound community vote on assets to add to the protocol. The on-chain voting method gives voting power proportionate to the amount of interest an ETH address has earned on Compound. Timur shows how just three whales tilted the balance MKR and Tether.
Number of the Week: 24 hr DEX trading volume
The 24hr trading volume as of Wednesday morning GMT time, according to @DexWars. ETH's bull run has led to a near double of the daily turnover the last few months. Uniswap ($1.5m) and Kyber ($1.4m) led the way.
Odds and Ends
Zero to DeFi - Beginner's guide to earning passive income via Compound Link
ConsenSys Announces Codefi Project to Boost DeFi Adoption Link
Perpetual Powers of Tau hopes to increase zkSNARK circuit usage Link
ETHBerlin winner Cherry Swap is building interest rate swaps for Compound Link
KyberSwap unveils fiat on-ramp through MakerDAO-backed company Link
Bloxroute releases results of its Ethereum miner research Link
Thoughts and Prognostications
Why Ethereum’s Churn is Normal & the Chinese Bamboo Tree Analogy [Mougayar]
*almost* Trustless Project Fundraising - Lockdrops, DeFi & DAICO’s [Axia Labs]
ETH has achieved a monetary premium through DeFi protocols [Synthetix CEO]
Early Bitcoin core dev “pleasantly surprised” at DeFi ease of use [Gavin Andresen]
How Chinese digital currency handles blackouts and anonymity [JP Koning]
The Visa payments network started 61 years ago with an airdrop [a16z]
Number of the Week: Bitcoin and ETH fees
Aided by Tether's rise, Ethereum has overtaken Bitcoin in daily transaction fees, according to Coinmetrics. In response to higher usage, Ethereum miners have proposed raising gas limits for each block akin to increasing the block size.
Listen of the Week: The internet and crypto comparisons
Marc Andreesen last month with a16z Crypto GP, Katie Haun, at the a16z Crypto Regulatory Summit. Comparisons to the internet are surely overdone by the community, but the Netscape co-founder has the perspective to comment with authority on the similarities and differences.