A gust of optimism has billowed through the crypto space following Ripple Labs’ key victory over the U.S. Securities and Exchange Commission (SEC) in July 2023. Expectedly, traditional financial (TradFi) institutions swiftly constellated around the enticing allure of the crypto-sphere. A noteworthy testament to this renewed interest was PayPal’s inauguration of its proprietary stablecoin, PYUSD, backed by the U.S. dollar.
Yet, affronted crypto enthusiasts view PayPal’s milestone through skeptical lenses of both principle and technicality.
Technically, PayPal’s PYUSD exhibits numerous vulnerabilities and issues when coders poke into the backdrop of its smart contract. Leaving these red flags unaddressed not only threatens PYUSD with possible instability but also sets a bad precedent for future TradFi-crypto intersections.
Moreover, PYUSD has been denounced as a closed-circuit financial operation, serving as an exclusive medium between PayPal and consumers. Such a scheme might seem innocuous; however, given PayPal’s opaque past marked by allegations of unexplained account closures, assets interventions, and censorship, apprehensions for the crypto-freethinking fourishing in PYUSD’s shadow aren’t unfounded.
Zooming into the PYUSD’s code, it uncovers vulnerabilities that could freeze, or in a worst-case scenario, even wipe out balances if exploited. This could pose significant adoption hindrances, inciting a deep-seated doubt in the stablecoin’s reliability.
Moreover, PYUSD features a “blacklist function,” a standard mechanism in stalwarts like Circle’s USDC and Tether’s USDT. However, PayPal’s implementation has a troubling twist. Its “wipeFrozenAddress” function doesn’t merely lock the funds but permanently exterminates them from the total token supply. It’s akin to casting dollar bills into an incinerator leaving a debtor with no restoration recourse.
Perplexingly, PYUSD also imbues PayPal’s voluntary “pause” function over its transfers and trades, which could potentially govern a vast-value wipeout. Imagine living in fear that your physical dollars could become valueless at the behest of a centralized authority.
These very centralization flaws overshadow its utility as a decentralized entity and paint PYUSD as a mere digitized traditional fiat currency.
In spite of its initial stumblings, PayPal’s entry does act as a signal flare, illuminating the increasingly positive future for DeFi and wider crypto. Short-term echoes of its entrance could launch an influx of exchanges and projects eager to capitalize on its vast client base.
However, the long-term view paints a hesitative picture, with PYUSD’s adoption potentially suffering due to PayPal’s tarnished track record.
Lastly, PYUSD’s centralized features are stirring up concerns in the crypto community, with some viewing it as a step backward, contrasting the very ethos of cryptocurrency. It stands as an exemplar of how not to intertwine paths between TradFi and the crypto realm.
For PYUSD’s longevity, a thorough addressing of these centralization concerns would prove to be an essential step to forge a resilient future.
Source: Coindesk
