For many years, PayPal has been a leading online transaction facilitator and platform where users can send and receive money using digital wallets across the world.
The introduction of cryptocurrencies and decentralised platforms motivated many payment gateways, exchanges and wallets to launch new products and services that align with these trends.
However, PayPal stood its ground as a non-crypto digital wallet operator until 2020. PayPal recently joined the herd of decentralised projects and Web 3.0 platforms by adding cryptocurrencies to their payment methods.
In 2023, PayPal achieved a milestone in Web 3.0 services by launching its first cryptocurrency, PYUSD stablecoin, to lead the company’s decentralised ecosystem.
In this article, we will take a look at how PYUSD will affect the stablecoins market and what it means to the existing coins like USDC or USDT.
PayPal launched its first cryptocurrency in the summer of 2023 – PYUSD, a stablecoin fixed by a 1:1 ratio against the USD as collateral.
Some consider PayPal’s arrival to Web 3.0 is delayed because many platforms and companies have already onboarded in the decentralised world, while PayPal continued its centralised system.
In 2020, the company started by adding Bitcoin to the currency options for the U.S. wallets only, followed by another extension to include ETH, LTC, and BCH. However, these offerings are exclusive to U.S. wallet holders.
PayPal continued its ventures in a decentralised economy by investing in blockchain improvements to enhance its cryptocurrency transactions between PayPal wallet holders and across other platforms and digital wallets.
In August 2023, the company announced PYUSD stablecoin to be the first cryptocurrency and a critical milestone in decentralisation. This release is essential because it witnesses the first tangible transformation from a centralised platform to a decentralised one alongside its wallet and payment gateways.
The company stated that the stablecoin is 1:1 pegged with the US Dollar, which means that 1 PYUSD = $1, ensuring simplicity and avoiding volatility that characterises the majority of cryptocurrencies.
The cryptocurrency is backed by substantial cash holdings and treasury bills to ensure its stability and reliability. PYUSD is minted with ERC-20 protocol and operates on the Ethereum blockchain, which is the most used ecosystem to create and manage crypto projects and digital assets.
PYUSD use cases will include transacting in cryptocurrencies across different platforms and blockchains and the centralised payment method for the decentralised PayPal ecosystem to receive and hold digital money.
Current Stablecoin Competitors
PYUSD is going to face rivalry from existing stablecoins that have been in the market for many years and proved their usability. Therefore, it may face challenges before it gains the market’s approval and confidence.
However, it seems that PayPal waited all this time to plan a better adoption strategy and power its crypto with a robust system, learning from the existing failures and lessons. TerraUSD was one stablecoin that attracted some traction before it went downhill with the Luna crash.
Let’s take a look at the currency market conditions as it stands.
Tether has been a commonly used stablecoin since its introduction in 2014, which currently ranks 3rd in top cryptocurrencies at over $83 billion market cap, beating many cryptos that have volatile value and provide trading utility.
UDST is pegged against the dollar in a similar mechanism to the PYUSD token and is used by several platforms and exchanges as a major payment method. Therefore, it will create a challenge for PYUSD to prove its position in the market.
USDC – USD Coin is the second-famous stablecoin and the sixth cryptocurrency in the overall ranking, with north of $25 billion market capitalisation. USDC coin is minted using ERC-20 on the Ethereum blockchain, which makes it one of the most reliable tokens.
The same founding entity also created EURC, a Euro-backed stablecoin, leading the company’s stakes and attracting many crypto enthusiasts.
USDC powers several crypto transactions and Web 3.0 operations across different networks like Avalance, Tron and Polygon.
PayPal’s latest introduction will definitely redefine forces in the stablecoin market. PYUSD is pegged by a 1:1 ratio with the US Dollar, ensuring stability and mitigating price volatility to offer various use cases across blockchain networks and Web 3.0 projects.
However, it is going to face challenges from currently adopted stablecoins like USDC and USDT. However, PYUSD count on the robust system and security structure of PayPal as a leading online payment facilitator.