Yield farming fuels 623% growth in DAI supply to nearly $1B

Demand for Ethereum-based stablecoins exploded during the third-quarter DeFi bubble, with DAI's supply growing by more than 600% and USDC expanding 200%. 330 Total views.

Decentralized finance's explosive third-quarter brought significant growth to Ethereum-compatible stablecoins.

According to crypto market data aggregator Messari, the supply of MakerDAO's DAI stablecoin grew by 623% in Q3 2020, pushing the token's value above $1 for four consecutive months.

Since starting July with a market cap of nearly $130 million, DAI's supply has expanded to more than $940 million today.

DAI is created when Ether holders deposit their ETH into the MakerDAO protocol, allowing them to create the stablecoin using Ether as collateral.

DAI is an ERC-20 token and can then be used on the Ethereum network to generate interest or 'yield' using DeFi protocols.

Messari attributes much of DAI's recent growth to the launch of four significant liquidity mining programs in the DeFi sector, including a change to Compound's yield distribution that bolstered DAI rewards on June 30, the launch of Yearn Finance farming on July 18, Curve's launch on Aug. 13, and the launch of yield farming for Uniswap's UNI token on September 16.

Messari estimates that 65% of DAI's entire supply is currently being supplied to DeFi protocols for yield farming.

USDC is the second stablecoin to grow by more than $1 billion in a single quarter, after Tether.

Messari estimates the capitalization of the combined stablecoin sector grew by $8.2 billion in Q3 - more than that of the previous four quarters combined.