Solana stablecoin race heats up with Sky deployment

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Sky, the longtime Ethereum DeFi giant formerly known as MakerDAO, is weighing a deployment of its native tokens on Solana, its co-founder Rune Christensen detailed in a forum post.

Christensen has long admired Solana, and even proposed moving MakerDAO to a fork of the Solana codebase last year. It seems to be opportunistic timing for Christensen as Sky tries to boost adoption of its decentralized stablecoins while Solana DeFi comes off a period of rapid growth. 

And the pending deployment also sets the stage for what could be a battle between a few stablecoin giants competing to absorb liquidity in a DeFi ecosystem that appears to have more room to grow.

Sky launched as MakerDAO in 2015 and created the DAI stablecoin in 2017. The decentralized stablecoin and the lending and borrowing protocols it’s plugged into became an early DeFi success story, and DAI is still the third-largest stablecoin by market capitalization, trailing USDT and USDC. DAI is now known as USDS following Maker’s rebrand roughly a month ago. 

These days, Sky’s most-used product is its peg stability module, which helps maintain USDS’ peg in part by taking in USDC and issuing USDS. Locking DAI in Sky’s Aave-like Spark protocol to receive elevated yields via sDAI (now known as sUSDS) is also popular. 

To grow the PSM and Spark, Sky is now looking to Solana, where it will launch USDS and yield-bearing sUSDS. The deployment would take place via the Wormhole bridge for now as Sky prepares Solana SkyLink, which will be a native launch of Sky on Solana. 

Solana is the “rare” venue for stablecoins that is “sizable” and “looks susceptible to disruption,” longtime Maker and Sky participant PaperImperium told me in a direct message. 

Solana’s stablecoin market capitalization — which, size-wise, is sandwiched between Ethereum layer-2s Arbitrum and Base — is 68% USDC, according to DeFiLlama. This dominance was closer to 75% before PayPal’s PYUSD stablecoin began a Solana liquidity incentive program that earned it roughly 9% of Solana’s stablecoin market.

Sky looks primed to follow a similar route to PYUSD. In a text, Christensen said Sky would run a liquidity incentive program meant to make USDS and sUSDS “liquid on Dexes.” The co-founder added that this could look similar to PYUSD’s incentives program in the short term, but once SkyLink makes Sky natively accessible on Solana, the stablecoin will offer more features. 

“Solana is a growing DeFi ecosystem that’s still missing a major decentralized stablecoin with built-in rewards,” Christensen said.

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