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Sky Protocol’s flagship stablecoin, $USDS, officially launched on Solana. With $USDS now live on the network, the stablecoin aims to enhance lending, borrowing, and trading across Solana’s leading DeFi platforms.
Sky Protocol sees the launch of $USDS as the first step in its broader strategy to enhance Solana’s DeFi liquidity and TVL, which are crucial metrics for the success and growth of the blockchain. As part of its goal, Sky aims to introduce new ways for users to engage with lending, borrowing, and trading, building on Solana’s reputation for fast and low-cost transactions.
According to DefiLlama data, Solana’s TVL has surged from $1.4 billion at the start of the year to over $10.44 billion.
Rewards and Incentives for Early Adopters
In order to encourage the adoption of $USDS, Sky Protocol is offering significant rewards for early adopters and liquidity providers. For example, users of Kamino Finance can earn up to 200,000 USDS weekly for providing liquidity to USDC/USDS pairs, while stablecoin liquidity providers will be eligible for an additional 100,000 USDS weekly.
In addition to Kamino Finance, Sky has partnered with Drift Protocol, Save Finance, and other prominent DeFi projects on Solana, with over 300,000 USDS to be distributed weekly across these platforms.
This strategy mirrors similar initiatives by other stablecoin issuers, such as PayPal’s PYUSD, which also deployed liquidity incentives to foster growth on Solana. However, unlike PayPal’s PYUSD, which has seen liquidity ebb after initial incentives expired, Sky’s long-term success will depend on whether the incentives can sustain consistent engagement within the Solana ecosystem.
Wormhole’s Role in USDS Multichain Expansion
A key feature of $USDS is its multichain functionality, powered by Wormhole’s Native Token Transfer (NTT). This integration enables $USDS to operate seamlessly across both Solana and Ethereum, ensuring a unified supply of the stablecoin across both blockchains without the need for wrapped tokens.
Wormhole’s NTT technology also supports the cross-chain bridge for Sky’s governance token, SKY, facilitating its transfer between Solana and Ethereum. This cross-chain interoperability makes $USDS more accessible to a wider audience, promoting its use across different DeFi ecosystems.
Sky Protocol’s plan to introduce SkyLink, a cross-chain bridge for USDS and its savings version, sUSDS, will further expand the stablecoin’s usability across various blockchains.
Sky’s Journey and the DeFi Landscape
$USDS is a rebrand of Dai (DAI), one of the oldest stablecoins in the market, which is pegged to the US dollar. After Sky Protocol rebranded from Maker last August, the move led to some confusion within the community, particularly over the name change. However, despite a proposal to revert to the original name, Sky Protocol decided to retain its new branding, and it is now focusing on positioning $USDS as a leading stablecoin in the DeFi space.
Sky’s rebrand and the launch of $USDS come at a time when Solana’s stablecoin market share is still relatively small, with the network holding just 2% of the stablecoin market compared to Ethereum’s 51%, according to DefiLlama.
The stablecoin market continues to grow rapidly, with a global transaction volume exceeding $22 trillion YTD as of the end of September, according to Coinbase’s Q3 earnings report. As the third-largest stablecoin by market capitalization, $USDS is now competing with major players like Tether’s USDT and Circle’s USDC, which together account for over 90% of the stablecoin market.