Analyze the internal logic of Paypal stablecoin payment and the evolution towards Mass Adoption

Author: Will Awang

On May 31, 2024, PayPal announced that its stablecoin PayPal USD (PYUSD) was on the Solana block The chain is online. This is another major milestone since Paypal first launched PYUSD on the Ethereum mainnet in August last year. It not only provides its users with a new and efficient payment method, but also provides an important reference for the future trends of the entire payment industry.

In the process of writing Web3 payment research report and communicating with industry companies, I have been thinking about a question: Is stablecoin payment really necessary? Just as PYUSD was launched on Solana, Paypal gave an answer about payment freedom from a very pragmatic perspective:

"People want to pay as they want, and the current payment network cannot meet the demand. Crypto If it can meet the needs and is practical, then as a financial technology company committed to promoting payment innovation, we will launch a stable currency payment solution to meet people's current payment needs."

## Therefore, this article will try to analyze the internal logic of Paypal turning its attention to Crypto, the stablecoin payment solution launched by Solana on the launch of PYUSD, and the evolution of PYUSD towards Mass Adoption. I hope it can be a reference for the industry and welcome exchanges and discussions.

1. Why Paypal turned its attention to Crypto

As the world's leading payment company, PayPal has more than twenty years of global payment experience. In the past two decades, with the mature development of e-commerce, PayPal has not only built itself into a beacon of trust, providing users with trust endorsement for transactions, but also realized the large-scale development of Internet digital payment networks (Digital Payments). Widespread application.

Paypal’s original intention has never changed—to promote payment innovation and allow everyone to pay according to their own wishes.

But so far, payments innovation has been built on the same basic financial trajectory as the rise of the internet. While the industry has strived to provide global, instant, and seamless transactions, reality often shows the downside:

Settlement times for online payments remain long (in the U.S., the average 2 to 3 days), markets, banks and service providers need to be open on working days, further extending settlement times; employers have difficulty paying an increasingly distributed workforce; an increasingly globalized population has difficulty making cross-border remittances cheaply and efficiently; Businesses feel this friction most often, while consumers are still left waiting in a payment environment that they believe should be fast.

Simply put, people today are not able to pay the way they want.

That’s why Paypal turned its attention to Crypto, and the answer is simple: it fills a need and is practical.

Cryptocurrency and blockchain technology can bring people closer to realizing their payment aspirations: fast, cheap, global payments. This new next-generation financial/payment infrastructure can help PayPal better serve its 40 million users, allowing everyone to pay as they wish.

So, more than a decade after the emergence of cryptocurrency and blockchain technology, PayPal once again arrives at a critical moment in the history of payments, a moment that, like the Internet in the early 2000s, is full of potential and opportunities.

Just like Paypal brought payments online before, Paypal is now bringing payments on-chain.

##(flywheeldefi.com/article/paypal-steps-on-chain-with-pyusd)

2. The global payment dilemma needs to be improved

Current payment channels and information transfer protocols (such as ACH, SEPA and SWIFT) constitute a global payment network. They enable us to conduct large-scale transactions across geographies and time zones, and ensure relatively smooth payments. But at the same time, current payment technology will also force us to make a trade-off between 1) payment settlement speed, and 2) cost-effectiveness, such as:

• The transfer will incur fees, and each transfer intermediary needs to have prior cooperation arrangements and liquidity requirements;

• The cross-time zone operation time limit of each party (work daily) and batch processing, which means that payments may need to wait several days for settlement;

• The net settlement arrangement is difficult to meet small-amount, high-frequency transactions needs.

However, for adults, we don’t make a choice, we want both-

that is, efficient settlement at a low cost.

People want to pay more easily. Businesses want to pay their suppliers without having to worry about settlement times; individuals want to send money to family members far away without paying high fees and waiting days. Today's financial infrastructure cannot quickly meet people's needs for fast transactions. Paypal does not want users to lose value while waiting.

Today,

Cryptocurrency and blockchain technology provide a new payment channel that can simplify the payment settlement process, making payments fast, cheap and easy to access.

Thus, we need to use cryptocurrency and blockchain payment technology solutions to solve the legacy problems of traditional payments: 1) slow settlement time; 2) high transaction costs; and 3) Incompatibility with regions (Under-banked and Unbanked) that the current financial system cannot cover globally.

3. Paypal’s stablecoin payment solution

（Payment giant Paypal’s stablecoin is expected to lead the crypto industry to the mainstream)

Definition of Stablecoin: The price of most cryptocurrencies fluctuates greatly and is not suitable for payment. For example, Bitcoin may have a large amplitude within a day. Stablecoins are cryptocurrencies that aim to solve this problem by maintaining a stable value, often pegged 1:1 to fiat currencies such as the U.S. dollar. Stablecoins offer the best of both worlds: they maintain low day-to-day volatility while delivering the benefits of blockchain – efficient, cost-effective, and globally accessible.

The stablecoin PYUSD launched by PayPal is a new stablecoin payment solution designed to enable the next generation of financial technology innovation. PYUSD is built on PayPal's deep payment industry accumulation and Solana's high-performance blockchain, enabling efficient instant settlement, reduced transaction costs, high security and truly global payments.

PYUSD is a stable value storage tool (1:1 USD exchange) launched by Paypal based on the blockchain. Its emergence will solve the above-mentioned problems in the current global payment industry. question. Eligible U.S. users can buy, sell, send, receive PYUSD, and use it for payment:

• ##Buy and transfer PYUSD within the PayPal and Venmo ecosystems to achieve silk A smooth deposit and withdrawal experience;

• Use PYUSD payment as a payment method for online transactions, such as checkout and payment at millions of PayPal merchants around the world;

• PYUSD Cross-border P2P payment on Xoom (cross-border payment tool);

• on PayPal Outside the ecosystem, PYUSD can be used on cryptocurrency exchanges (such as Crypto.com) and wallets (such as Phantom);

• PYUSD can also be used on a variety of Innovation, for example, PYUSD can be used as a fast, low-cost financing tool for ventures such as Mesh.

PYUSD is building a true stablecoin business scenario, providing an almost frictionless and trustworthy payment experience that mainstream consumers and merchants expect.

4. Paypal’s stablecoin payment evolution towards Mass Adoption

Based on Paypal’s global experience in the past 20 years With payment compliance experience and the highest compliance standards of PYUSD, the combination of PayPal + PYUSD can upgrade the previous stablecoin transactions (Stablecoin Transactions) into the

stablecoin payments (Stablecoin Payments) we really need.

When Paypal was first established, its responsibility was not only to promote the implementation of payment, but also to introduce and spread a new technology - digital payment. Currently, this digital payment method has been integrated into our lives. ,everywhere. This successful experience can provide empirical guidance and novel insights for the launch of PYUSD stablecoin payment. Specifically, Paypal divides the evolution of Mass Adoption into three stages:

• Cognitive Awakening (Awareness);

• Payment Utility;

• Ubiquity.

4.1 Concept introduction brings cognitive awakening (Awareness through Introduction)

As mentioned before, payment is not required It is everywhere and deeply rooted in habits and practices, so the transformation needs to be gradual and stable, and this transformation will not happen overnight. Introducing a new payment method is as much a behavioral shift as it is a technological or financial shift.

The first step toward Mass Adoption is cognitive awakening—that is, simply educating people about the fact that new technology exists.

At this stage, early adopters are the target audience, cryptocurrency holders – a group that makes up about 15% of the global population and is relatively easy to reach. This is why Paypal launched PYUSD on Ethereum in late 2023, ensuring awareness among early adopters.

Now that PYUSD is launched on the Solana high-performance blockchain, which has the second largest market capitalization, it can cover the most active and active people in the crypto ecosystem and let the world know, "PYUSD is really coming. ”

In addition, PYUSD’s integration with PayPal and Venmo apps will bring it more than 100 million U.S. users. In the future, we will continue to work with crypto exchanges and payment partners to expand the influence of PYUSD outside the PayPal ecosystem.

Paypal knows from previous successful experiences that in order to bring a new payment mechanism to the public, ideological awareness is the necessary first step.

4.2 Utility through Integration

The next step in adopting new payment technology is to realize payment utility, which is the original idea Cognitive awakening is transformed into payment utility in real life, just like PayPal's early use of eBay to build PayPal into a platform that provides trusted transactions between two parties who do not know each other.

Today, people need payment that is fast and cheap. While Paypal's launch of PYUSD on the Ethereum mainnet gave it huge visibility, it did not fully meet all the criteria needed for PYUSD to fulfill its mission as a payment tool for digital commerce - efficient, cost-effective, and globally accessible.

Therefore, PYUSD turned to Solana to realize the utility of payments.

(PayPal launches US dollar stablecoin based on Solana: a new chapter in blockchain payments )

Solana is a high-performance blockchain network built for finance, payments, loyalty programs, and more, and is one of the most adopted blockchains. In the fourth quarter of 2023, an average of 40.7 million transactions were processed every day, and 2,500 developers were active in the ecosystem. In addition, the open source, programmable, and composability of its blockchain can also bring huge space and network effects.

Solana brings PYUSD far faster settlement speeds, lower transaction costs, stronger scalability, and global network support than other blockchains. After combining the advantages of Solana, users can truly realize payment utility when using PYUSD:

• Real-time settlement: Most PYUSD transactions are within seconds Achieve efficient settlement;

• Low transaction costs: Transaction costs on the Solana chain are only a few cents, regardless of the transaction amount;

• Transaction finality: Merchants do not have to worry about customers canceling payments due to insufficient funds or other reasons;

• All-weather transactions: 7 /24/365 available 24/7;

• # Interoperability: PYUSD can be used outside of the PayPal ecosystem to achieve interoperability with other gateways, networks and wallets ;

• Programmability and composability: PYUSD is developed on the widely adopted SPL token standard. This means that any product that supports the standard will automatically support PYUSD. Developers are free to experiment and build within and outside the PayPal ecosystem. Consumers, merchants and institutions can enjoy a wide range of third-party developer experiences leveraging PYUSD for payment and financial use cases;

• Paypal’s large user base: PYUSD is available to the existing eligible US PayPal customer base.

# Therefore, launching PYUSD on Solana will help the long-term adoption of stablecoin payments. In this process, PYUSD is moved from the cognitive awakening stage to the actual payment utility stage.

With the launch of PYUSD on Ethereum and Solana, it will bring more developers and ecological partners to participate, and combined with the practicality of PayPal and Venmo applications, PYUSD will be Provide users with more practical, user-friendly use cases.

4.3 Ubiquity through Assimilation

The final stage of adopting any new payment technology is Ubiquity through Assimilation Ubiquity is characterized by the seamless integration of technology into everyday life. At this stage, people are able to use new payment technologies effortlessly and without confusion—people are just paying as they please.

For PayPal, it makes digital payments a way for people in more than 200 countries to send money to each other and businesses, as a safe, reliable, standardized P2P, B2B and B2C payment methods are becoming ubiquitous with the development of digital globalization.

5. PYUSD Stablecoin Payment Use Case on Solana

Let dreams come true and allow people to pay as they wish, just by shouting slogans no. Let’s take a look at some implementation scenarios of PYUSD.

5.1 Cross-border peer-to-peer transfer and remittance (P2P)

Nowadays, on a global scale, Economic ties between the two countries are closer than ever. However, moving money between individuals across borders is a large and growing market filled with opportunities. Fiat transfers and remittances to low- and middle-income countries will reach 669 billion in 2023 (World Bank data), but cross-border transfers and remittances are not cheap.

With PYUSD, payers can send money directly to recipients using the Solana wallet, with transfers settling almost instantly and at near-zero cost.

Even for recipients who do not have a Solana wallet, payers can save costs on cross-border transfer remittance services by partnering with PYUSD’s payment service provider. Payment service providers connect to the fiat currency cash network through PYUSD's local partner banks, allowing recipients to easily convert PYUSD into bank deposits or cash, thereby enjoying near-instant, low-cost global transfer and remittance services.

5.2. Business-to-Business Transfer (B2B)

Due to the complexity of cross-border payments, there are multiple intermediaries and cross-country agents. Banking networks, most B2B payments can take days to settle. And, depending on how you move funds across borders, payment fees can be high.

By leveraging the programmable nature of PYUSD, businesses can build their own services to seamlessly create near-instant, cost-effective ways to transfer money across borders with relatively low technical requirements. Teams can also create smart contracts to manage the flow of PYUSD between accounts. This improves the speed and accuracy of supplier payments (or any other B2B payment governed by a contractual agreement).

Additionally, using PYUSD for transfers does not necessarily require businesses to own PYUSD or even interact with PYUSD. Payment service providers can build B2B payment products to provide a fiat experience to end users.

5.3. Global Payments (B2C)

PYUSD can significantly reduce the complexity of global payments. Instead of having to go through a complex network of unique regional bank accounts, different currencies, correspondent banks, and digital wallet tracks, PYUSD can be paid to any compatible wallet address. Additionally, programmable smart contracts using PYUSD can enable corporate payers to automate payment processes more efficiently and even pay wages in real time.

5.4. Small-amount transactions

Due to high transaction fees, traditional payment processing systems are difficult to support small-amount transactions. As a result, platforms that handle small-value transactions often process payments in batches, which involves complex payment engineering, increases risk, and prevents platforms from accepting microtransactions.

However, PYUSD on Solana will enable merchant platforms to easily process small transactions in near real-time and at low cost. Microtransactions enable a variety of use cases, such as tips, in-game purchases, and small payments to content creators per read or view.

5.5. Web3 Payments

Many Web3 merchants (such as NFT marketplaces and blockchain-based gaming platforms) lack access to traditional fiat bank accounts Connectivity requires a powerful, non-volatile payment solution, and PYUSD + Paypal delivers.

6. Write at the end

Jose Fernandez da Ponte, Senior Vice President of PayPal Blockchain, Cryptocurrency and Digital Currency Group said: " PayPal USD was created to once again revolutionize commerce by providing a fast, easy, and cheap way to pay for the next evolution of the digital economy. Offering PYUSD on the Solana blockchain furthers our goal of enabling one. A digital currency with stable value designed for commerce and payment. "

We can see that PYUSD has been tepid since its launch on Ethereum last year, more so in Paypal's Supper. Run in App. Solana is launched this time, whether you want to break out of the circle or plan to explore further. There is no doubt that the killer application of Web3 may have arrived, it is payment!

As we previously said in the Web3 Payment Research Report:The biggest opportunity for cryptocurrency may not be to treat it as a cryptocurrency, but to treat it as a cryptocurrency. for a new set of payment methods.

Payment carries the important mission of opening up the on-chain cryptocurrency system and the off-chain legal currency system. After the tokenization transformation of blockchain technology, it will give new meaning to the traditional currency system. value, overcoming previously impossible boundaries, and the world economy may change forever.

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