PayPal, a pioneer in online payments since 1998, has been actively exploring crypto in recent years. Following the introduction of crypto buying, selling, and holding capabilities in 2020, and the ability to use crypto for purchases in 2021, PayPal has taken a significant step further with the launch of its own stablecoin: PayPal USD (PYUSD). 

Let’s unpack what PYUSD is, how it works, how it differs from other stablecoins, and how you can use it. 

What Exactly Is PayPal USD?

PayPal USD (PYUSD) is a stablecoin cryptocurrency issued by Paxos. A stablecoin is a type of cryptocurrency that maintains a consistent value (unlike most tokens that are volatile), typically by tracking the price of a fiat currency, such as the US Dollar. 

In the case of PYUSD, each token is backed by one US dollar in reserves. These reserves consist of assets like US dollar bank deposits, US Treasuries, and US Treasury reverse repurchase agreements, all held in custody by Paxos.

PYUSD aims to bridge the gap between traditional finance and decentralized finance (DeFi). It allows users to easily buy and sell PYUSD for USD within the PayPal ecosystem.

Since its launch, PYUSD has been integrated into several prominent DeFi protocols, such as Curve and Aave, expanding its utility within the decentralized finance ecosystem.

How Does PYUSD Work?

PYUSD operates on the Ethereum blockchain. As an ERC-20 token, it can be integrated with various decentralized applications (dApps) within the ecosystem.   

Issuance and Backing

Each PYUSD token is backed by one US dollar in reserves. These reserves typically consist of US dollar bank deposits, US Treasuries, and other high-quality assets. Paxos always maintains a 1:1 reserve ratio, ensuring that there are sufficient assets to back every PYUSD token in circulation.

Approved entities can acquire PYUSD directly from Paxos by depositing USD. Paxos then issues the corresponding number of PYUSD tokens and holds the equivalent USD value in reserves.

Other users can buy and sell PYUSD through platforms like PayPal, Venmo, and various decentralized exchanges (DEXs) on the Ethereum network.

How Can I Use PYUSD?

PYUSD offers a range of use cases, both within and beyond the PayPal ecosystem.

• Everyday Transactions: PYUSD can be used for online shopping at merchants that accept PayPal. You can also send and receive money from friends and family within the PayPal network using PYUSD.
• Cross-Border Payments: PYUSD significantly enhances the efficiency of cross-border transactions by bypassing intermediaries like banks. 
• DeFi Integration: PYUSD integrates with the broader Ethereum ecosystem. Users can transfer PYUSD to any Ethereum-compatible wallet, which enables them to participate in various DeFi activities, such as earning interest on their PYUSD holdings through lending platforms like Curve or putting their PYUSD as collateral for borrowing on Aave.

PayPal doesn’t charge fees for PYUSD transactions within its ecosystem. However, you have to pay network fees for converting PYUSD to other cryptocurrencies, trading it on secondary markets, and all actions within DeFi applications. Ethereum fees can fluctuate significantly based on network demand.

PYUSD vs Other Stablecoins 

PYUSD enters a market dominated by established stablecoins like Tether (USDT) and USD Coin (USDC). While all three are ERC-20 tokens pegged 1:1 to the US dollar, PYUSD currently has a more limited scope compared to its competitors. USDT and USDC boast wider compatibility across various blockchains, including Polygon, Optimism, ZK-Sync, and Celo, offering greater flexibility for users.

However, PayPal's vast user base of over 426 million active accounts presents a significant advantage for PYUSD. Integration within the PayPal ecosystem allows users to easily transact with PYUSD and manage their stablecoin holdings. 

On top of that, PayPal aims to enhance user trust by prioritizing security. Unlike some stablecoin issuers with limited disclosures, PayPal is committed to transparency – it undergoes regular audits and publishes monthly reserve reports by Paxos Trust Company. 

PYUSD Market Performance 

PYUSD is the seventh-largest stablecoin on the market, only rivaled by USDT, USDC, USDe, DAI, FDUSD, and USDD. It has a market cap of $505 million and a $27 million 24-hour trading volume. All the 505.86 million total tokens are now in circulation. 

Conclusion 

PYUSD is a significant milestone in PayPal's foray into the crypto space. As a stablecoin pegged to the US dollar and issued on the Ethereum blockchain, PYUSD offers a bridge between traditional finance and DeFi.

While PYUSD faces competition from established players like USDT and USDC, it benefits from PayPal's extensive user base and provides an accessible entry point for individuals to explore the world of stablecoins.

Buy PYUSD now on Tothemoon and join the PayPal revolution. Experience the power of stablecoins with a trusted and reliable partner.

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