PayPals PYUSD-Introduction Setback
The payment giant PayPal recently announced the launch of its Ethereum-based stablecoin PYUSD. However, since its official launch on August 7, 2023, the stablecoin continues to struggle with its introduction and has failed to gain significant traction among crypto investors.
Despite PayPal boasting a user base of over 350 million worldwide, on-chain data from Nansen has shown that only a small percentage of its users are currently using and holding PYUSD in self-custodied wallets.
“On the surface, there seems to be a lack of demand for PYUSD among crypto users when there are other alternatives available,” Nansen reported.
However, the lack of enthusiasm could be attributed to the limited utility of the stablecoin and its inability to earn interest, as highlighted by a former Twitter user in a post on August 26, 2023.
“Nobody wants to mint $pyUSD because there isn’t much you can do with it, and it doesn’t generate any interest,” the user stated.
Additionally, the holdings of PYUSD in crypto exchange wallets are low, accounting for only around 7% of the total supply of the stablecoin. This percentage includes balances on centralized exchanges such as Kraken, Crypto.com, and Gate.io.
Despite high expectations in the crypto industry following the release of the stablecoin, which was expected to promote wider adoption and make cryptocurrencies accessible to the masses for the first time, PYUSD has failed to meet expectations. Smart-money investors seem content to bypass the stablecoin altogether.
The largest holder of the stablecoin has less than $10,000 worth of PYUSD, having sold approximately three meme coins to purchase the stablecoin. Without contracts or exchanges, no more than ten holders have balances exceeding $1,000.
According to Coinmarketcap, PYUSD has a total supply of 43 million PYUSD tokens, with pools on decentralized exchanges such as Uniswap. However, the PYUSD/USDC and PYUSD/wETH pools on Uniswap only hold 50,000 PYUSD tokens each.
PYUSD has faced criticism due to its excessive centralization, as most of its total supply is stored on centralized exchanges, making it difficult to expand circulation.
Despite the high total supply, the total number of stablecoin holders, according to Etherscan, was only 324 at the time of writing this article.
Expectations for Ethereum as the Stablecoin’s Platform
According to Nikolaos Panigirtzoglou, an analyst at JP Morgan, after the first week of PayPal’s stablecoin launch, Ethereum did not benefit from PYUSD in terms of increased network activity, increased Total Value Locked (TVL), or improved utility as a stablecoin/DeFi platform.
Crypto experts and enthusiasts have also criticized PayPal’s choice of Ethereum for its stablecoin, citing the blockchain’s high transaction fees.
“The transaction fees for using PYUSD will be ridiculous, which will negatively impact its usage,” said Jayendra Jog, co-founder of Sei Network.
He further added, “To improve the user experience, PayPal either needs to subsidize transaction costs or support PYUSD on other networks with lower gas fees.”
In conclusion, PayPal’s PYUSD stablecoin has faced setbacks in its introduction, failing to garner significant interest from crypto investors. The limited utility of the stablecoin and its association with high transaction fees on the Ethereum blockchain have contributed to this lackluster response.
