Paypal's stable coin (PYUSD) is not getting the credit it deserves

PayPal has launched its US dollar-backed stablecoin, PayPal USD (PYUSD). It's bringing crypto-native representation of fiat money to its global user base of 400+ mil. people while adding credibility to crypto finance.

I mean, just a few weeks back PayPal has launched its US dollar-backed stablecoin, PayPal USD (PYUSD) and I feel it's not getting enough credit for the credibility boost it provides to crypto space. I was super happy to see this happening because stable coins always felt to me like "that blockchain-magic" my parents could find useful and could understand.

Turns out my parents have long forgotten my explanation of stablecoins and their magic potential, and so did many of my friends. Hence, here I am with the new reminder of stablecoins magic potential. 😇

So, what is a stablecoin?

Well, it's digital money linked directly to a real-world currency, like the US dollar, at a 1:1 ratio. This means that one unit of the stablecoin (in this case, one PayPal USD or PYUSD) is equal to one US dollar.

The great thing about this is that the value of your money doesn't fluctuate. When we talk about PYUSD, we're talking about a digital dollar that has all the benefits of being part of the exciting world of blockchain technology.

PYUSD is pegged 1:1 with the dollar and offers a permissionless and “crypto-native” representation of fiat money for global use cases.

Permissionless is what?

Permissionless means you don't need a banker or banking app to approve your money transfer. And nobody, not even your bank, can tell you that you can't send your money to someone at any point in time.  (wiki link)

Stablecoin magic

One additional, and maybe the biggest, benefit of stablecoins is that they can connect different types of systems together. Think of it like this: In some systems, both people involved in a transaction need to have an account in that system. It's like needing a bank account to transfer money to another bank account.

But with stablecoins, it's like having a key that can open any door. You can use them across different networks and platforms, like moving money from a PayPal account to a digital wallet on another network or to your bank account. This makes everything more connected and easier to use for everyone.

It removes roadblocks and lets more people participate in the financial world. Plus, it makes integrating with different payment methods a breeze. When PayPal introduced PYUSD, it opened a gateway into the world of cryptocurrencies for its users.

Stablecoins competition

Some crypto enthusiasts may not see the benefit of PYUSD compared to other stablecoin options like USDC from Circle. However, the real value of PYUSD lies in the massive user base of PayPal and its regulated status. This ensures that PYUSD will always maintain its 1:1 value with the US dollar, providing a safe and accessible option for users to explore the world of digital assets.

To understand how big of a deal this is, let’s first reiterate that many call US dollar stablecoins the “killer app” that blockchain technology was destined to create. While Bitcoin is roughly $575 billion asset (with 10 years head start), stablecoins, collectively, are closing the gap with around $125 billion in assets, but until today, stablecoins have been issued and marketed by small garage companies and DeFi applications, all of whom pale in comparison to PayPal, which boasts 400+ million active users.

I think you get the point. Let me just share some basic technical details on PYUSD:

  • Paypal has decided to launch PYUSD on Ethereum’s mainnet and not on scaling solutions like Arbitrum, Optimism (where e.g. USDC is available natively). Interesting option but they opted for security first.
  • Paxos Trust Company will issue the stablecoin. You may know Paxo from the issuance of Pax Dollar (USDP) or Binance USD (BUSD). Paxos will custody the dollar reserves, which will be held in U.S. Treasuries and similar cash equivalents. It means Paypal can actually make some money of its PYUSD reserves if interest rates stay high :)

If you already use PayPal’s services, then you'll be able to get PYUSD and transfer it to external wallets in a seemingly easy way and that's the entry point for my parents! I'm excited!

Let's see if I can make it happen...