PUBLISHED May 08, 2022
The stablecoin market is doing quite well, with a market capitalization of $166 billion and a daily trading volume of $72 billion.
In January, PayPal confirmed that it explored launching its own stablecoin after a developer noticed that its iOS app code hinted at the existence of a PayPal coin. Although PayPal clarified that the code was linked to a recent hackathon, it would be interesting to map the potential influence a PayPal stablecoin would have on the industry.
Standardize crypto payment gateways
Paypal is a force to be reckoned with. From a disruptive idea to becoming a multi-billion dollar company, it has become part of our lexicon. His interest in cryptocurrencies was an inevitable step in his next stage of evolution. This step helps build trust, adoption, and inclusion in the overall crypto landscape. However, the question remains, does a regulated cryptocurrency deserve to be called crypto, or is it just a digital currency?
A traditional financial company entering the cryptocurrency segment and launching its own virtual currency clearly differs from a crypto-native company launching a stablecoin. Traditional financial institutions serve customers who are not necessarily familiar with cryptocurrency wallets or liquidity in this space. Developer Steve Moser has uncovered evidence of the company’s exploration to establish a stablecoin in the PayPal app. The hidden code and visuals illustrate the progression of what is considered a PayPal coin. According to the code, such a coin would be backed by the US dollar.
“Cryptocurrencies should be borderless, decentralized and anonymous,” said Jawad Nayyar, co-founder and chief vision officer of DAO PropTech, a real estate technology company enabling every Pakistani to begin their journey to home ownership. “If a financial organization such as PayPal were to enter this sphere, it would not be considered a traditional cryptocurrency, but rather a digital currency.”
He said the cryptocurrency space is quite nascent and in dire need of widespread adoption. He added that an organization such as PayPal entering this space could be the ultimate stepping stone needed to achieve the ultimate goal.
However, unless a cryptocurrency violates the basic rules of it, it will leave too much power in the hands of the individual or organization controlling that cryptocurrency. Therefore, it will fail to contain the essence of a cryptocurrency.
The stablecoin market is mostly dominated by fiat-backed stablecoins like Tether, USD Coin, and Binance USD, algorithmic stablecoins like Terra’s UST have performed extremely well, projecting a market capitalization of over $10 billion of dollars. Given the growth Terra has shown over the past year in the DeFi sector with almost $18 billion in total value locked, it is very unlikely that the Paypal stablecoin will be a direct competitor.
“Terra’s UST is in a class of its own as it stabilizes the coins by achieving a 1:1 peg with the USD without any central involvement,” Nayyar said. “I believe we would end up with algorithmic stablecoins eventually anyway. The journey can only be made easier with the inclusion of an established name, not to mention the benefits that come with increased competition. Paypal’s entry into the race will therefore have a somewhat symbiotic impact on Terra.
Industry insiders have speculated that PayPal may consider launching its own stablecoin as a way to transact cheaper and therefore lower fees on its platform.
“Paypal supports over 375 million daily users and 30 million merchants on its platform,” said Haroon Baig, an independent crypto researcher and investor. “Given the utility and decentralization provided by cryptocurrencies, it is possible that Paypal could significantly reduce fees on its platform, promote cheaper transactions and invite more businesses to its platform. .”
Blockchain-based payment networks, such as Ripple, are already seeing the direct benefits of using blockchain technology with their higher throughput and fast execution at a fraction of the cost.
“Cryptocurrency transaction costs are just the computing power needed to validate transactions,” Nayyar said. “The Bitcoin network uses a Proof-of-Work consensus mechanism, while the Ethereum network uses a Proof-of-Work consensus mechanism plus a Proof-of-Stake consensus mechanism to validate transactions. We need a decentralized consensus mechanism to complete the essence of a pure cryptocurrency. If a cryptocurrency does not meet this, it may even be simply called a digital currency.
PayPal allows users in certain regions to buy, sell, and hold cryptocurrencies while making those cryptoassets available as a form of payment. Given that there are antitrust cases around the world in which Meta, Google, Amazon and Apple offer their own services to users rather than those of their application ecosystem, it is likely that PayPal will strengthen its own offer to users at as different financial gateways are introduced. These gateways will be cryptocurrencies, while others will only be digital payment methods. Generally, the number of transactions on the PayPal platform will increase.
“Creating another stablecoin is no longer a breakthrough innovation,” Nayyar said. “For Paypal to truly generate a meaningful impact, it needs to invest in R&D to democratize the monetary system, including but not limited to powering a platform where others can launch their own decentralized cryptocurrencies. Moreover, it should support its currency with tangible assets and not just with credit. Otherwise, it might just be a cheeky step from a corporate giant jumping on the bandwagon.
Stablecoins were introduced to be independent from the volatility of the cryptocurrency market, but have the same characteristics and utilities. The Paypal stablecoin could be the right cup of tea for consumers, businesses, and regulators who were hesitant to embrace the industry at first. Additionally, retail investors could finally have a less volatile asset aside from real estate-backed tokens once the stablecoin launches.
Regulators, the market and the beginnings of the stablecoin
Although PayPal has asserted that it will work with relevant regulators on its stablecoin if and when it moves forward with the business, it will still face hurdles due to the scope of its operations. The reason everyone is saying that stablecoins will face difficulties is because PayPal will have to work more efficiently and aggressively.
Since it is primarily a financial transaction company, its funds from transactions will mean that it will have to keep connecting as many tokens and chains as possible, this will ultimately help build a fast, smart, effective and 100%. Automated cross-chain variables along the way.
“It could then act as a gateway for mass cryptocurrency acceptance,” Nayyar said. “This may blow up the crypto sub-sector as venture capital will start flowing into this relatively new sector.”
Stablecoin issuers in particular have faced introspection not only from regulated entities, but also from the cryptocurrency community, which regularly pushes them to be so open and transparent about hardening their stablecoins. PayPal will come under increased scrutiny if it launches a stablecoin, so it’s time to wait and see why PayPal is jumping on a ship whose paddles are new to them.
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Can PayPal Coin Change The Cryptographic Landscape? – Tech Tribune France
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