Velocity of Stablecoins, Lido on Polygon

JUL 27, 2022 • 4 Min Read

Amey Dandawate + 1 other

Disclosure: Delphi Ventures and members of our team are invested in LDO. Members of our team are also invested in MATIC. These statements are intended to disclose any conflict of interest and should not be misconstrued as a recommendation to purchase any token. This content is for informational purposes only and you should not make decisions based solely on it. This is not investment advice.

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🚨 In Case You Missed It

  • FTX keeps hunting for bear market acquisitions; in talks to acquire or invest in Bithumb, one of South Korea’s biggest crypto exchanges.
  • Cathie Wood’s Ark Invest sells more than 1.4 million shares of Coinbase; stock closes down 21% valuing the entire company at $13.8 billion.
  • AntPool to invest $10 million to support applications on Ethereum Classic, as Ethereum prepares to ditch proof-of-work.
  • EU banking regulator is worried about shortage of crypto talent to enforce regulations; CFTC poaches Pantera Capital’s legal counsel.
  • Kraken under investigation by US Treasury for violating sanctions by potentially allowing users in Iran to trade crypto.

📊 Token Velocity of Decentralized Stablecoins Drops

  • Token velocity for stablecoins aims to measure the frequency at which the stablecoins are spent or exchanged. It is calculated as total volume divided by outstanding supply.
  • Since the beginning of this year, DAI has seen the highest token velocity among all major decentralized stablecoins. This means that DAI has consistently recorded higher volumes relative to its outstanding supply, and may indicate users’ preference of using DAI as a medium of exchange to settle transactions.
  • Surprisingly, FEI recorded a peak in token velocity near the end of last year, reaching 0.156 on December 22nd.
  • More recently, velocity for all stablecoins has dipped, as total volumes have decreased. 30-day average velocity for DAI currently stands at 0.046, down from 0.09 on June 1st. During the same period, 30-day average volume for DAI has decreased by 47% from $581 million to $306 million.
  • Other decentralized stablecoins have recorded similar volume and velocity profiles. For example, 30-day average velocity for LUSD currently stands at 0.015, down from 0.031 on June 1st. During the same period, 30-day average volume for LUSD has decreased by 78% from $11.9 million to $2.5 million.
  • For more on stablecoins, Delphi members can read our Delphi Pro report here.

Lido on Polygon

  • Lido issues liquid staking derivatives for ETH 2.0, and allows users to passively earn ETH staking rewards. Users are not required to deposit the minimum required 32 ETH or operate any staking infrastructure.
  • When using Lido to stake ETH on the Ethereum Beacon Chain, users will receive a token (stETH) which represents their staked ETH on a 1:1 basis. Rewards are reflected in the exchange rate between stETH and ETH.
  • The DAO-controlled smart contract stakes these tokens using elected staking providers. As user funds are controlled by the DAO, staking providers never have direct access to user assets.
  • Lido on Polygon
    • Yield calculations for Lido on Polygon are provided here. To access Lido on Polygon, you’ll need to configure your MetaMask to run Polygon Network using this guide.
    • When staking with Lido on Polygon, users receive stMATIC tokens as soon as they submit MATIC. Lido will calculate the current stMATIC/MATIC exchange ratio and send the correct amount to the user.
    • MATIC tokens are then delegated across Polygon validators that are part of Lido on Polygon. Currently, users can earn upto 9% APR on deposited MATIC.
  • stMATIC
    • stMATIC is an ERC-20 token that represents MATIC tokens staked with Lido. The amount of tokens in the user’s wallet does not change, even as the staking rewards accrue.
    • stMATIC will be integrated across a variety of DeFi applications on Ethereum and Polygon.
  • Fees – Validation rewards that Lido on Polygon receives is split into four parts:
    • 90% of all the rewards get re-staked with the Lido on Polygon validators.
    • The remaining 10% gets split into 3 parts:
      • 25% goes to the DAO.
      • 50% gets split up across all the operators.
      • 25% goes to insurance.
    • All fees are distributed in the form of MATIC. The fee percentage is set by the Lido DAO, and stored on-chain
  • For more information, Delphi members can read the full Delphi Insights report here.

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Amey Dandawate + 1 other