PayPal’s recent launch of PYUSD, an Ethereum-based stablecoin, has generated mixed reactions within the crypto community. While some view it as a significant step towards mainstream adoption for Ethereum, others express concerns about the potential implications for decentralization and personal control of assets.
PYUSD, also known as PayPal USD, was introduced on August 7 and is issued by Paxos Trust Co., the same firm behind Binance USD (BUSD). Built on Ethereum and designed for digital payments and Web3, the stablecoin is expected to be made available to United States customers in the near future.
Ethereum enthusiasts such as Anthony Sassano and Ryan Sean Adams see the arrival of PYUSD as a major boost for Ethereum adoption. They believe that this ERC-20 stablecoin could propel Ethereum closer to becoming the money layer of the internet. While Ethereum currently boasts a daily active user count ranging from 300,000 to 400,000, the integration of PayPal’s stablecoin could potentially onboard over 5% of the world’s 8 billion population onto the Ethereum platform.
Martin Koppelmann, the CEO and co-founder of Gnosis, points out an additional advantage of launching PYUSD on Ethereum’s base layer. By doing so, it enables Ethereum layer-2s to interact with the stablecoin, potentially expanding its reach and functionality.
The wider adoption of cryptocurrencies by established institutions is often seen as a positive development. The entrance of PayPal and its stablecoin into the crypto space injects new life into the traditional payments system. Patrick McHenry, chair of the United States House Committee on Financial Services, believes that stablecoins like PYUSD hold promise as a pillar of our 21st-century payments system.
Despite the positive outlook, there are individuals who remain skeptical about PayPal’s new stablecoin. Smart contract auditors have raised concerns regarding certain functions within PYUSD’s smart contract. They argue that the presence of “freezefunds” and “wipefrozenfunds” functions can be seen as textbook examples of centralization attack vectors in Solidity contracts. Such concerns are echoed by cryptocurrency researcher Chris Blec, who speculates that PayPal may utilize these controversial functions when necessary.
Digital asset lawyer Sarah Hodder draws parallels between PayPal’s stablecoin and a censorship-enabled central bank digital currency. Another smart contract auditor highlights the fact that PayPal retains the ability to modify PYUSD’s smart contract at any time, raising concerns about control and potential censorship.
Blockchain engineer Patrick Collins takes a more neutral stance, suggesting that while PayPal’s PYUSD has the potential to be groundbreaking, certain engineering choices have been suboptimal. For example, the decision to use an outdated version of Solidity and making the contract upgradeable might not be the most efficient or secure approach.
Anthony Sassano emphasizes that despite PYUSD’s centralized nature, Ethereum users have the freedom to decide whether to use the stablecoin or not. This notion of choice aligns with the fundamental principles of decentralization and user autonomy, allowing individuals to exercise control over their own assets.
PayPal has announced that the rollout of PYUSD to customers will occur in the coming weeks. As for Ethereum, the price of ETH remains relatively stable, currently priced at $1,825, with only minor fluctuations observed since PayPal’s announcement.
The introduction of PayPal’s Ethereum-based stablecoin PYUSD has generated both excitement and concern within the crypto community. While it marks a significant advancement in Ethereum adoption and holds promise for mainstream acceptance, the presence of certain centralized control mechanisms raises valid concerns about the broader implications for decentralization and personal control of assets. As the crypto landscape continues to evolve, it is crucial to assess and address these concerns to ensure the long-term sustainability and viability of cryptocurrencies and decentralized systems.