PayPal's Stablecoin Has Usability, Gas Fees, and Old Tech Issues

Author: theblock; Compiler: Kate, Marsbit

PayPal said its PYUSD stablecoin allows customers to "buy, sell, hold and transfer" the newly created digital currency.

But** some social media users have questioned PayPal's use of an older version of the programming language in its smart contracts. **

Stablecoins are ERC-20 tokens issued on the Ethereum blockchain, which can make transactions costly due to the high gas fees required to use the protocol.

After at least two years of consideration, development and delays, digital payment giant PayPal has finally launched its own USD stablecoin, allowing users to "buy, sell, hold and transfer" tokens on its platform. That might not sound like much, since it's basically what people can already do with their checking accounts or existing PayPal accounts that hold U.S. dollars.

“What can you do with PayPal USD (PYUSD) on PayPal?” the company asked in an explanation posted on its website. The token can be sent to eligible accounts in the U.S. for free, the company said. It can also be used for online purchases, just like you would with regular dollars or credit cards.

“If you want a change, you can use PYUSD in our conversion function to buy different cryptocurrencies that we support,” the company added.

While PayPal said the stablecoin would be available to eligible U.S. customers starting today, its website did not immediately show an option to buy PYUSD when checked by The Block. Its website requires users to provide a social security number to access encrypted services.

The company said it will allow users to buy PYUSD and then convert the funds into bitcoin and ether using “an exchange rate (including the difference PayPal makes on each purchase and sale).”

Reaction to PayPal Stablecoin

Users on social media have also questioned what the token could be used for and who might want it.

“Who would buy PayPal’s stablecoin?” asked a self-proclaimed smart contract researcher on Twitter, who goes by the handle @ShieldifyAnon, noting that **the payment company’s new stablecoin “uses Old version of Solidity from 2018". **

Other users, including @0xCygaar, a software engineer who often talks about encryption on the social media platform, commented on how PayPal's new token allows "owners to suspend all transfers...freeze addresses to prevent actions taken...(and) administrators at will." Questions such as increasing total supply have been questioned.”

The decision to issue PYUSD on Ethereum raised a lot of eyebrows, with some saying the choice was a watershed moment for the protocol.

"PayPal has 430 million active accounts," said Bankless founder Ryan Sean Adams.

Ethereum Fees

But others have questioned the strategy, arguing that using ethereum for transactions is expensive.

David Phelps, a web3 enthusiast, wrote: "Instead of dozens of stablecoins that cost two cents, PayPal launched a stablecoin on the ethereum mainnet, which they could have used instead. It's honestly a smart way of making sure their own high fees look like an inconsequential blob next to gas."

PayPal itself seems to acknowledge that high sensations are possible outside of its ecosystem as well.

"However, please be aware when purchasing PYUSD, but you may find different prices and fees when you purchase outside of PayPal," it wrote in an explanation about the token.

PayPal Encryption History

PayPal has been active in the crypto space for some time and allows customers to hold cryptocurrencies such as bitcoin, bitcoin cash, ether and litecoin. In its earnings report for the first quarter of this year, the company revealed that it held close to $1 billion in cryptocurrencies for clients.

Users have been able to transfer cryptocurrencies between PayPal and other wallets since last year.

The firm has also invested in blockchain startups, including most recently leading a round in Magic, a digital wallet provider that helps businesses migrate their customers to web3.

PayPal's Stablecoin Journey

The Block reported in 2021 that when PayPal began exploring its own dollar-pegged token, it had already had conversations with some stablecoin protocol developers in the industry.

At that time, the cryptocurrency industry was at a high level, with billions of dollars of new capital pouring into the industry, and a series of disastrous bankruptcies and regulatory actions had not yet occurred. Earlier this year, PayPal hit a snag in its stablecoin ambitions, pausing its own plans amid reports of an investigation into Paxos.

Despite the scrutiny, Paxos remains a partner in PayPal's stablecoin launch. The partnership is a milestone for the industry, the company said on Monday.

** "The World's Safest USD Backed Digital Asset"**

**Paxos wrote: "PYUSD is the first such currency and represents the next phase of the dollar on the blockchain." It has been called "the world's most secure dollar-backed digital asset." **

As expected, the news was not well-received by all crypto enthusiasts, with Blockware Solutions Principal Analyst Joe Burnett being outspoken about the product launch.

“Crypto community cheering for Paypal’s launch of the dollar ‘stablecoin’ shows that they have completely lost their minds,” he wrote. Investing on the chain".

PayPal and Paxos did not immediately respond to questions about The Block's stablecoin launch.