Solana's PYUSD Supply Declines Amid DeFi Incentive Wind-Down

According to Blockworks, Solana's supply of PayPal's stablecoin, PYUSD, has significantly decreased after previously surpassing Ethereum's supply. The stablecoin's supply on Solana, which once exceeded $660 million, has now fallen to around $320 million, marking a decline of approximately 50% in about a month. In contrast, Ethereum currently holds a supply of $377 million PYUSD. This reduction in supply coincides with the gradual winding down of liquidity incentive programs by DeFi protocols such as Kamino. These programs had previously boosted yields for PYUSD holders, attracting yield farmers who have since moved on to other opportunities. This shift raises questions about the long-term value of these incentive investments. PayPal's PYUSD is issued by Paxos, which has aimed to draw liquidity away from the USDT-USDC stablecoin duopoly by partnering with Trident Digital for liquidity programs. After PYUSD's launch on Solana earlier this year, Trident Digital implemented liquidity incentives on various Solana DeFi platforms to temporarily increase yields and capture liquidity. These incentives involved distributing funds to DeFi protocols, which then passed them on to users as a fraction of the platforms' PYUSD supply, subject to gradually lifted caps and declining yields. At its peak, $350 million in PYUSD on Solana was earning an 18% yield on Kamino. Currently, the annual percentage yield (APY) has decreased to 9.24%, which, while still significant, appears insufficient to retain some investors. It remains unclear whether the incentives originated from PayPal or the Solana Foundation, as both organizations did not respond to requests for comment. The effectiveness of these liquidity incentives is debatable. Kilian Boshoff, chief commercial officer of Swell, commented that