PayPal has concluded an extended period of careful consideration, advancement, and setbacks to unveil its newly established stablecoin tied to the US dollar.
The stablecoin, called PayPal USD (PYUSD), facilitates users in engaging in activities such as “purchasing, vending, retaining, and transferring” the token using the payment processor’s interface.
Although these functionalities may seem somewhat ordinary, as they resemble the capabilities of a conventional checking account or an active PayPal account containing US dollars, they mark a significant milestone after the company’s extensive two-year journey.
This move not only has the potential to propel Ethereum into mainstream acceptance but also raises concerns within the community regarding the potential implications for decentralization and individual authority over assets.
I just read the PayPal USD terms of service.
– full KYC
– custody by Paxos
– tied to your PayPal login
– PayPal can reverse any transaction
– claimed to be fully backed by actual USDAll the censorship capabilities of a CBDC, but launched by big tech instead of the gov’t.
— Sasha Hodder (@sashahodler) August 7, 2023
PayPal Stablecoin Raises Alarms Over Centralization Features
Sarah Hodder, an expert in digital asset law, has drawn attention on X to the stark similarities between PayPal’s stablecoin and a central bank digital currency that could potentially facilitate censorship.
PayPal stablecoin PYUSD. Source: The Verge
This observation has ignited concerns among various smart contract auditors, who have pointed out specific functions within the PYUSD’s smart contract, such as “freezefunds” and “wipefrozenfunds.” These functions, according to auditors, exemplify vulnerabilities associated with centralized control in Solidity contracts.
The new Paypal USD stablecoin has an “assetProtection” role which can wipe your balance in two transactions (first `freeze`, then `wipeFrozenAddress`)
In smart contract security we call this a “centralisation attack vector” pic.twitter.com/RsmqvsnKvi
— pashov (@pashovkrum) August 7, 2023
Chris Blec, a prominent cryptocurrency researcher, has echoed these apprehensions, suggesting that PayPal might exploit these contentious functions whenever deemed necessary.
PYUSD was officially introduced on August 7 and is issued by Paxos Trust Co., recognized for its involvement with Binance USD (BUSD).
Utilizing the Ethereum platform, PYUSD is tailored for digital transactions and Web3 applications, with the company revealing plans for its availability to customers within the US in the near future.
Bitcoin (BTC) is currently trading at $29,159. Chart: TradingView.Com
Debates Emerge Over Ethereum Choice Amid Transaction Costs
Critics have raised doubts about the firm’s decision, citing the potentially steep expenses linked to Ethereum transactions. Expressing skepticism, David Phelps, an advocate for web3 technologies, highlighted the strategic aspect of PayPal’s stablecoin launch on the mainnet of Ethereum, rather than opting for more cost-effective solutions like various rollups, each priced at a mere two cents.
paypal launching a stablecoin on mainnet eth—rather than literally dozens of rollups that cost 2 cents they could have used instead—is honestly a brilliant way to ensure their own exorbitant fees look like an inconsequential speck next to the gas
— david phelps 🐮🏰🃏🐘 (@divine_economy) August 7, 2023
Phelps suggested that this move could serve as a shrewd maneuver by PayPal to downplay its own significant fees by juxtaposing them with the substantial gas costs associated with Ethereum.
In a notable gesture, PayPal itself seemed to acknowledge the potential for elevated fees beyond its own platform, hinting at an awareness of the challenges posed by Ethereum’s transaction costs.
“Quick heads up on buying PYUSD though – you might find different prices and fees when you buy it outside of PayPal,” the company explained.
Featured image from e5Leader.com