Research
March 7, 2024
Stablecoin Usage Across Blockchain Networks
A data-driven look at stablecoin usage across blockchains
Andrew Van Aken
Data Science
A data-driven look at stablecoin usage across blockchains
Stablecoins were one of the defining narratives in crypto in 2023 and something crypto enthusiasts often point to as having found “product/market” fit. While most of the activity and supply is based on Ethereum and Tron, stablecoin supply on layer 2s and high throughput blockchains such as Solana have started to increase. Given the combination of lower fees and the wide range of potential stablecoin use cases, what can we learn from these chains about the activity that takes place and where signs of mainstream adoption could be?
We first evaluated stablecoin circulating supply across selected layer 2s and Solana. After spending most of 2023 in the doldrums, in August 2023 stablecoin supply started to expand and grew from $6.5bn to over $10bn in February 2024. The vast majority of gains come from a combination of Arbitrum and Solana.
Examining which entities hold stablecoins by chain reveals significant differences in how different blockchan networks utilize stablecoins. Arbitrum has over 50% of stablecoins locked in DeFi applications, while 70%+ of stablecoins on Solana reside on wallets associated with centralized exchanges.
The large stablecoin supply on Solana caught our attention. We wanted to investigate what people are doing after they receive stablecoins from exchanges on Solana. To do this, we pulled data for the month of Feb 2024 and excluded intra-exchange transactions. Sorting by entities that received the most stablecoins, we see most transactions occur between different exchanges.
Backpack was the leader in Feb 2024, as customers deposited stablecoins into the exchange to take advantage of an ongoing points program. There is also a significant number of transactions that send stablecoins directly to another centralized exchange after receiving the funds on-chain. At this time, it’s not exactly clear why users are transferring to/from exchanges. One hypothesis is that users could be transferring funds across exchanges in search of a specific asset they’re looking to trade.
Looking at average transaction sizes into entities shows Backpack deposits tend to be smaller than other exchanges, indicating either a more retail composition or users experimenting with the platform. DeFi apps like MarginFi and Drift are also seeing low deposit sizes as users are most likely trying to deposit and be eligible for an airdrop. Given the avg deposit size is relatively small, and Solana transactions are quite cheap, it’s unlikely that market makers are moving significant funds to/from CEXs.
We see very large potential for Backpack going forward. Since the fall of FTX, there has not been an exchange that has supported Solana nearly as openly, creating potential headwinds for onboarding Solana users. Exchanges like Coinbase (launched Base, Optimism rollup) and OKX (Polygon zk) have aligned to different ecosystems and thus have a preference to drive stablecoin adoption on their chain. With Backpack, and the founding team contributing a lot to the Solana ecosystem, we believe its a win/win for both.
Blockchains differ significantly in how stablecoins are used and most stablecoins reside in DeFi and CEXs today. As the stablecoin supply grows, we expect to see more use cases such as payments, remittances and innovative DeFi products. It’s important for foundations and chains to understand where the flow of stablecoins occur, so they can support these entities to drive ecosystem adoption. Chains need clear points of entry for people to onboard to and its important these points of entry our stewards of the chain.
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