The announcement has been made since 2021. PayPal then promised to turn to cryptos by launching its own stablecoin, PayPal USD (PYUSD). Long delayed for regulatory issues and due to investigations involving PayPal partner Paxos, the launch of PYUSD finally took place on August 7, 2023. Guess on which network the launch was made! Ethereum, of course. PYUSD is an ERC20 token. Ethereum has thus just integrated the digital payment company to the 430 million active accounts in the world and 26 million merchants in the world. Once again, Ethereum deposits its signature and imposes itself in the crypto universe. Can we already say that Ethereum is officially the new monetary layer of the internet? Let’s take a closer look.
The giant PayPal hosted on the Ethereum blockchain: implications
Knowing that more and more players in traditional finance are embracing cryptocurrencies is a rather satisfying observation for a crypto investor.
PayPal has thus just integrated into the Ethereum network. The company intends to take advantage of the speed of transactions specific to blockchain technology, reduced transaction costs and the programmability of the Blockchain protocol. The news has received a very favorable echo in the crypto community which is delighted to see the industry going from strength to strength.
Indeed, PayPal is more than 430 million active accounts in several countries around the world. It is also 26 million merchants offering digital payment services in various countries around the world. And that’s not all. PayPal is currently used for nearly 70% of transactions made on the Ebay platform.
With this integration, the PYUSD stablecoin now becomes a gateway for nearly $51.8 billion (70% of transactions on Ebay). Moreover, considering that Ebay customers and suppliers using cryptocurrencies now have additional options to carry out their operations on the platform, a higher turnover is to be expected.
Ethereum, now essential for monetary applications
For some crypto watchers, Ethereum has just unlocked another level of authority in the crypto market and in the world of decentralization.
Ryan Sean Adams, a crypto investor and entrepreneur, says in a comment on the announcement, “PayPal has 430 million active accounts. Sleep on it if you want. Ethereum is becoming the monetary layer of the internet “.
It is important to specify that the PYUSD is an ERC20 token. In simple language, it is a token interchangeable with other tokens. It can therefore be used to purchase other cryptocurrencies supported by the Ethereum infrastructure. As such, its adoption by the various exchanges will therefore be rather rapid.
For Nikolaos Panigirtzoglou, chief strategy officer at financial giant JP Morgan, the Ethereum infrastructure will make PYUSD accessible to external developers of DeFi apps and Web3 apps and wallets.
It will thus be used to facilitate payments in the virtual spaces of the Ethereum ecosystem. This will drive many other developers to turn to Ethereum infrastructure for their DeFi projects. Other companies will also be tempted to choose Ethereum for their stablecoins.
This means that the activity of the Ethereum network will see a noticeable growth after this new integration of PYUSD. Needless to say. The usefulness of the network for DeFi and Web3 applications will be significantly improved.
PYUSD: a new competitor for USDT?
The situation is clear. PYUSD comes to make ETH more popular. But the question is: how much? Indeed, in the realm of stablecoins, where Tether has long reigned, is PYUSD becoming a strong contender? For the moment, this is not yet the case.
Even if the PYUSD has the potential, given the fall of the USDT, it will have to go a long way to compare itself to stablecoins the USDT or even the USDC.
Indeed, while PYUSD is currently only available to US users, Tether CTO Paolo Ardoino says “Tether is mostly focused on emerging markets and developing countries.”
On the other hand, there is a double issue of high transaction fees and network saturation. On Ethereum, gas fees are usually so high that below a certain amount, transactions become too expensive.
Knowing that PayPal users will need excellent fluidity to use PYUSD extensively in their day-to-day operations, there are concerns that Ethereum’s saturation will not make it much easier for them.
PayPal integration on Ethereum: Concerns over centralization and control
While Ethereum’s feat of bringing the global payments giant onto its network continues to garner praise from all quarters, there have been a few critical voices raised about the true purpose of PYUSD.
Indeed, members of the crypto community have raised a number of concerns. The first relates to the question of the centralization of the PYUSD. Indeed, the PYUSD stablecoin backed by the US dollar will be heavily controlled by the issuing company.
The latter reserves the right, for example, to freeze or cancel any transaction hidden in the PYUSD smart contracts. Obviously, this will be done under legal and regulatory cover. Other observers are wondering about the compatibility of PYUSD with smart contracts.
With the programmability that smart contracts offer, developers of the centralized stablecoin can push users to spend by using time limits or rules to control or condition the use of money. Thus, we can for example set up rules which indicate a certain number of authorized destinations for transfers.
This type of operation, which perfectly corresponds to the desires of regulators and the American government, goes against the rules of decentralization which constitute the very foundation of crypto technology.
In any case, this does not prevent the network from now on positioning itself as the new monetary layer of the Internet. For the moment, we are waiting to see the performance of the PYUSD in the coming weeks.
Receive a digest of news in the world of cryptocurrencies by subscribing to our new service of daily and weekly so you don’t miss any of the essential Tremplin.io!
