Solana traders are quickly embracing the latest stablecoin to join the decentralized finance (DeFi) space: USDS, issued by Sky (formerly MakerDAO).
In less than a day, the circulating supply of USDS on Solana has exceeded $89 million. This strong first-day performance has made USDS, formerly known as DAI, the fastest-growing stablecoin on Solana, far surpassing PayPal's PYUSD.
Key Points
-
The circulating supply of USDS on Solana exceeded $89 million on its first day.
-
Sky spends $2 million a month to incentivize traders to exchange and use USDS.
-
USDS offers a yield of over 20%, competing with the most popular stablecoin on Solana, USDC.
-
Sky further incentivizes traders to move funds to Solana through the Wormhole service.
Sky's rapid growth is almost a foregone conclusion in the DeFi space. Sky spends $2 million a month to incentivize traders to exchange USDS and deploy it, with the anonymous leader of the Save protocol, Rooter, stating that the protocol distributes $400,000 in rewards to USDS suppliers each month.
Rooter noted, "Sky's heavy incentives are not surprising, which is why USDS is growing so quickly."
On platforms like Save, Drift, and Kamino, USDS borrowers are chasing yields of over 20%, thanks to the rewards provided by Sky. This increase in yield makes USDS's farming returns competitive with the most popular stablecoin on Solana, USDC.
New token issuers typically enhance the initial adoption of their assets through incentive payments. PayPal's stablecoin also benefited from high initial yields. Rooter mentioned that the project's spending is around $10 million.
Marius Ciubotariu, co-founder of Kamino, stated, "There is now a formula for introducing new stablecoins: first liquidity, then supply, and finally growth in lending." Kamino provides hundreds of thousands of USDS weekly to liquidity providers and borrowers.
Sky goes a step further by incentivizing traders to move funds to Solana through the Wormhole token bridging service, further increasing the circulating supply.
Yield-chasing stablecoin farmers are often fickle, and free capital won't last forever. When incentives begin to wane, USDS converters may redeem back to USDC or other stablecoins, just as they do with PYUSD. Rooter stated, "The key is to establish connections during the incentive period, gain brand recognition, or integrate."