PayPal’s Stablecoin Hits $1B Market Cap as Incentives Boost Activity on Solana

As a seasoned analyst with over two decades of experience in the financial sector, I have witnessed the evolution of digital assets from a distant curiosity to a mainstream investment class. The rapid growth of PayPal’s PYUSD stablecoin has caught my attention, especially its recent surge on the Solana network.

Last week, the market value of PayPal’s stablecoin, PYUSD, exceeded $1 billion, as indicated by CoinMarketCap.

In collaboration with the fintech firm Paxos, PYUSD reached this significant achievement by surpassing its previous supply, which had nearly doubled since June.

Even though the overall crypto market experienced a downturn during the summer lull, the user activity for PYUSD significantly increased. The number of monthly active wallet addresses exceeded 25,000 in July, which is a significant jump from 9,400 in May, as shown by Visa’s stablecoin dashboard, developed with Alluvium.

Last year, many in the crypto world hailed PayPal’s move into stablecoins as a significant milestone, expecting the token to eventually challenge established players like Circle’s USDC and Tether’s USDT. But initial excitement waned when the token struggled to grow on the Ethereum network. However, at the end of May, PYUSD was launched on the Solana network, reviving interest.

As a researcher delving into the dynamic world of cryptocurrencies, I’ve noticed an astonishing growth in the token supply on the Solana platform. Just three months ago, it was zero and now, it stands at a whopping $650 million. Incredibly, this figure surpasses the supply on Ethereum, highlighting Solana’s rapid expansion.

According to Tom Wan, business development and strategy associate at digital asset investment product firm 21.co, incentives have significantly contributed to PYUSD’s recent growth. Moreover, partnerships with Decentralized Finance (DeFi) platforms have also been instrumental in this progress, as he further explained.

Recently, protocols like Kamino, Drift, and Marginfi on the Solana network have increased the incentives for holding PYUSD by offering substantial returns, with annualized yields in the double digits for token holders. Just this past week, Anchorage Digital, a digital asset custody firm, also started providing rewards for institutional PYUSD deposits.

However, concerns linger about how sustainable PYUSD’s growth will be if incentives phase out.

According to David Shuttleworth, a partner at research firm Anagram, it appears that these incentives are not intended to last forever, but rather they are meant as a temporary measure. The goal is to increase the circulation of PYUSD and encourage new users to become active participants within the Solana ecosystem by getting them on-chain.