Less than a day after its launch, USDS on Solana has already surpassed $89 million in circulating supply. This rapid growth makes it the fastest-growing stablecoin on Solana, outpacing PayPal's PYUSD.
How did this happen? Well, Sky is investing $2 million each month to encourage traders to swap into USDS and use it. According to Rooter, the leader of the borrow and lend protocol Save, they’re also giving away $400,000 worth of USDS every month to those supplying this new stablecoin.
“With Sky offering these strong incentives, it’s no surprise that USDS is growing so quickly,” Rooter said.
Lenders on platforms like Save, Drift, and Kamino are chasing yields over 20%. Why? Because of the rewards Sky is providing. This makes farming USDS competitive with USDC, the most popular stablecoin on Solana.
It’s common for new token issuers to boost initial adoption with incentives. PayPal’s stablecoin benefited from similar strategies, with Rooter mentioning that they spent around $10 million on incentives.
“There’s a formula for onboarding a new stablecoin: start with liquidity, then supply, and finally grow borrowing,” explained Marius Ciubotariu, co-founder of Kamino. They’re giving away hundreds of thousands of dollars in USDS each week to liquidity providers and lenders.
Sky is taking it a step further by incentivizing traders to transfer their funds into Solana using Wormhole, a token bridging service. This is also helping to increase the circulating supply.
However, yield-seeking stablecoin farmers can be unpredictable. The incentives won’t last forever. Once they start to fade, USDS holders might switch back to USDC or other stablecoins, just like what happened with PYUSD, according to Rooter.
“It’s all about making a mark while the incentives are active, gaining brand recognition, or finding integrations,” he added.