On May 31, 2024, PayPal announced that its stablecoin, PayPal USD (PYUSD), is now live on the Solana blockchain. This marks another significant milestone following PayPal’s initial launch of PYUSD on the Ethereum mainnet in August of last year. This move not only provides users with a new and efficient payment method but also offers an important reference point for future trends in the payment industry.

Previously, while writing reports on Web3 payments and discussing with industry companies, a persistent question has been: Are stablecoin payments really necessary? With the launch of PYUSD on Solana, PayPal has provided a pragmatic answer regarding payment freedom:

“People want to pay as they wish, but the current payment networks are inadequate. Crypto can meet these needs and is practical. Therefore, as a fintech company committed to promoting payment innovation, we are introducing a stablecoin payment solution to meet people’s current desire for flexible payments.”

This article will attempt to analyze PayPal’s rationale for turning to crypto, the stablecoin payment solution launched with PYUSD on Solana, and the evolution toward mass adoption of PYUSD. We hope to provide industry insights and welcome further discussion and exchange.

1. Why Has PayPal Turned Its Attention to Crypto?

As a global leader in payments, PayPal has over twenty years of global payment experience. Over these two decades, alongside the maturation of e-commerce, PayPal has not only established itself as a beacon of trust, providing transactional assurance for users but has also facilitated the widespread adoption of internet digital payment networks (Digital Payments).

PayPal’s original intention has always remained the same—to promote payment innovation and enable everyone to pay as they wish. However, up until now, payment innovations have been built on the same basic financial infrastructure that emerged with the rise of the internet. Although the industry has been striving to provide global, instant, and seamless transactions, the reality often falls short:

Online payment settlement times are still long (averaging 2-3 days in the US), with markets, banks, and service providers needing business days to operate, further extending settlement times. Employers find it difficult to pay an increasingly distributed workforce. The increasingly global population struggles to make cross-border remittances efficiently and cost-effectively. Businesses frequently experience this friction, and consumers often face long waits in what they perceive should be a quick payment environment.

In short, people today cannot pay in the ways they want. This is why PayPal has turned its attention to crypto; the answer is simple: it meets the needs and is practical.

Cryptocurrency and blockchain technology bring people closer to achieving their payment desires: fast, inexpensive, and global payments. This new generation of financial/payment infrastructure can help PayPal better serve its 40 million users, enabling everyone to pay as they wish.

Therefore, more than a decade after the emergence of cryptocurrency and blockchain technology, PayPal has once again arrived at a critical moment in payment history, similar to the early 2000s internet era, full of potential and opportunity. Just as PayPal previously brought payments online, it is now bringing payments on-chain.

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

2. The Global Payment Dilemma Needs Improvement

The current payment pathways and information transmission protocols (such as ACH, SEPA, and SWIFT) form the global payment network. They enable us to conduct large-scale transactions across regions and time zones, ensuring relatively smooth payments. However, current payment technologies force us to trade off between 1) payment settlement speed and 2) cost-effectiveness. For example:

• The movement of funds incurs fees, and there must be prearranged cooperation and liquidity requirements among the intermediaries.
• The operating hours (business days) and batch processing across time zones mean that payments may take several days to settle.
• Net settlement arrangements struggle to meet the demands of small, high-frequency transactions.

However, for adults, we do not choose between the two; we want both—efficient settlements at low costs.

People want to pay more easily. Businesses want to pay suppliers without worrying about settlement times. Individuals want to remit money to distant family members without high fees and long waits. Today’s financial infrastructure cannot quickly meet the need for rapid transactions, and PayPal does not want users to lose value in this waiting process.

Today, cryptocurrency and blockchain technology offer a new payment pathway that can simplify the payment settlement process, making payments fast, inexpensive, and easily accessible.

Therefore, we need to leverage cryptocurrency and blockchain payment technology solutions to address the legacy issues of traditional payments: 1) slow settlement times; 2) high transaction costs; and 3) incompatibility with underbanked and unbanked regions worldwide that the current financial system cannot cover.

3. PayPal’s Stablecoin Payment Solution

(PayPal’s stablecoin has the potential to lead the cryptocurrency industry into the mainstream)

Stablecoins are cryptocurrencies designed to maintain a stable value, typically pegged 1:1 to a fiat currency like the US dollar. Unlike many cryptocurrencies that exhibit significant price fluctuations, making them unsuitable for everyday payments (e.g., Bitcoin’s large intra-day swings), stablecoins aim to resolve this issue by providing stability. They offer the dual advantage of low daily volatility and the benefits of blockchain technology—efficiency, cost-effectiveness, and global accessibility.

PayPal’s stablecoin, PYUSD, represents a new payment solution designed to achieve next-generation financial technology innovation. Built on PayPal’s extensive experience in the payments industry and leveraging the high-performance Solana blockchain, PYUSD enables efficient real-time settlements, reduces transaction costs, ensures high security, and supports truly global payments.

PYUSD is a blockchain-based tool for storing stable value pegged 1:1 to the US dollar, addressing challenges in the global payment industry. Eligible US users can buy, sell, send, receive PYUSD, and use it for payments within PayPal’s ecosystem, leveraging its benefits for seamless transactions:

• Within the PayPal and Venmo ecosystems, users can seamlessly purchase and transfer PYUSD, facilitating smooth deposits and withdrawals.
• PYUSD can be used as a payment method for online transactions with millions of PayPal merchants worldwide. Additionally, PYUSD supports cross-border peer-to-peer (P2P) payments on Xoom, PayPal’s international money transfer tool.
• Outside of the PayPal ecosystem, PYUSD can be utilized on cryptocurrency exchanges like Crypto.com and wallets such as Phantom.
• PYUSD offers various innovative applications, such as serving as a rapid and low-cost financing tool for ventures like Mesh and other risk investments.

PYUSD is building a genuine stablecoin business scenario, offering mainstream consumers and merchants the frictionless and trustworthy payment experience they expect.

4. The Evolutionary Path of PayPal’s Stablecoin Payment Towards Mass Adoption

Based on PayPal’s nearly 20 years of global payment compliance experience and PYUSD’s highest compliance standards, the combination of PayPal + PYUSD can upgrade previous stablecoin transactions to true stablecoin payments that we truly need.

From its inception, PayPal’s responsibility has been not only to facilitate payments but also to introduce and propagate a new technology—digital payments—that has now become ubiquitous in our lives. This successful experience can provide valuable guidance and innovative insights for the launch of PYUSD stablecoin payments. Specifically, PayPal divides the evolution of Mass Adoption into three stages:

• Awareness;
• Payment utility (Utility);
• Ubiquity.

4.1 Concept Introduction Brings Cognitive Awakening (Awareness Through Introduction).

As previously mentioned, payments are ubiquitous and deeply ingrained in habits and practices, so transformation needs to be gradual and stable; such changes do not happen overnight. Introducing a new payment method is both a behavioral and a technological or financial transformation.

The first step towards Mass Adoption is cognitive awakening—simply introducing people to the fact that a new technology exists. At this stage, early adopters are the target audience, namely cryptocurrency holders—a group representing about 15% of the global population and relatively easy to reach. This is why PayPal launched PYUSD on Ethereum by late 2023, ensuring early adopters become aware.

Today, launching PYUSD on Solana, the second-largest blockchain by market capitalization known for its high performance, covers the most proactive and engaged community within the crypto ecosystem, signaling to the world that “PYUSD is here.”

Furthermore, integrating PYUSD with PayPal and Venmo applications reaches over 100 million users in the United States alone. Future efforts will involve expanding PYUSD’s influence beyond the PayPal ecosystem through collaborations with cryptocurrency exchanges and payment partners.

From its past successes, PayPal understands that achieving widespread acceptance of a new payment mechanism requires a cognitive awakening as the essential first step.

4.2 Integration Achieves Payment Utility (Utility Through Integration).

The next step in adopting new payment technologies is achieving payment utility—transforming initial cognitive awareness into practical payment utility in daily life, much like how PayPal initially leveraged eBay to establish itself as a trusted platform for secure transactions between strangers.

Today, people demand payments that are fast and inexpensive. While PayPal’s launch of PYUSD on the Ethereum mainnet provided significant visibility, it didn’t fully meet all the standards required for PYUSD to fulfill its mission as a digital business payment tool—efficient, cost-effective, and globally accessible.

Therefore, PYUSD has shifted to Solana to achieve payment utility.

（PayPal launches USD stablecoin on Solana: a new chapter in blockchain payments）

Solana is a high-performance blockchain network designed for finance, payments, loyalty programs, and more, and is one of the most widely adopted blockchains. In the fourth quarter of 2023, it averaged 40.7 million transactions per day with 2,500 active developers in its ecosystem. Furthermore, its blockchain’s openness, programmability, and composability offer significant space and network effects.

Solana brings PYUSD much faster settlement speeds, lower transaction costs, greater scalability, and global network support compared to other blockchains. By leveraging Solana’s advantages, users can truly achieve payment utility when using PYUSD:

• Real-time Settlement: Most PYUSD transactions settle efficiently within seconds.
• Low Transaction Costs: Transactions on the Solana blockchain cost just a few cents, regardless of the transaction amount.
• Transaction Finality: Merchants do not need to worry about customers canceling payments due to insufficient funds or other reasons.
• 24/7 Availability: Transactions are available round the clock, 365 days a year.
• Interoperability: PYUSD can be used outside the PayPal ecosystem, enabling interoperability with other gateways, networks, and wallets.
• Programmability and Composability: PYUSD is developed on the widely adopted SPL token standard. This means any product supporting this standard automatically supports PYUSD. Developers have the freedom to experiment and build both within and outside the PayPal ecosystem. Consumers, merchants, and institutions can enjoy a wide range of third-party developer experiences, utilizing PYUSD for payment and financial use cases.
• Large PayPal User Base: PYUSD is available to existing eligible U.S. PayPal customers.

Therefore, launching PYUSD on Solana will contribute to the long-term adoption of stablecoin payments. This process will transition PYUSD from the cognitive awareness stage to practical payment utility.

With PYUSD available on Ethereum and Solana, it will attract more developers and ecosystem partners. Combined with the utility of PayPal and Venmo applications, PYUSD will offer users more practical and user-friendly use cases.

4.3 Stablecoin Payments Are Ubiquitous Through Assimilation (Ubiquity through Assimilation)

The final stage of adopting any new payment technology is ubiquity, where the technology seamlessly integrates into everyday life. At this stage, people effortlessly use the new payment technology with little awareness—they simply pay as they please.

PayPal, has made digital payments a way for individuals and businesses in over 200 countries to transfer money securely, reliably, and standardizedly, serving as a P2P, B2B, and B2C payment method that is ubiquitous with the advancement of digital globalization.

5. Use Cases of PYUSD Stablecoin Payments on Solana

Turning dreams into reality, and allowing people to pay as they please, goes beyond mere slogans. Let’s explore some real-world scenarios where PYUSD is making an impact.

5.1 Cross-Border Peer-to-Peer (P2P) Remittances

Today, economic connections between individuals globally are closer than ever. However, cross-border money transfers among individuals represent a large and continuously growing market full of opportunities. Official remittances to low- and middle-income countries reached a volume of $669 billion in 2023 (World Bank data), yet these transfers are not cheap.

With PYUSD, senders can use a Solana wallet to transfer funds directly to recipients, settling almost instantly and at near-zero cost. Even for recipients without a Solana wallet, senders can collaborate with PYUSD payment service providers to reduce the costs of cross-border remittance services. Payment service providers connect PYUSD with local partner banks to access fiat cash networks, enabling recipients to easily convert PYUSD into bank deposits or cash, thereby enjoying near-instant, low-cost global money transfer services.

5.2. Business-to-Business (B2B) Transfers

Due to the complexity of cross-border payments involving multiple intermediaries and international correspondent banking networks, most B2B payments can take several days to settle. Additionally, depending on the method of cross-border fund transfer, payment costs can be high.

By leveraging the programmable features of PYUSD, businesses can build their services to seamlessly create nearly instant, cost-effective cross-border transfer methods with relatively low technical requirements. Teams can also create smart contracts to manage the flow of PYUSD between accounts, enhancing the speed and accuracy of supplier payments (or any other B2B payments governed by contract agreements).

Furthermore, adopting PYUSD for transfers does not necessarily require businesses to hold PYUSD or directly interact with it. Payment service providers can develop B2B payment solutions that offer a fiat currency experience to end users.

5.3. Global Payments (B2C)

PYUSD can significantly reduce the complexity of global payments. Instead of navigating through complex networks involving unique regional bank accounts, different currencies, intermediary banks, and digital wallet rails, PYUSD can be sent to any compatible wallet address.

Furthermore, leveraging PYUSD’s programmable smart contracts allows businesses to automate payment processes more efficiently, potentially enabling real-time payroll payments and other automated transactions.

5.4. Small Transactions

Due to high transaction fees, traditional payment processing systems struggle to support small-value transactions. As a result, platforms handling small transactions often batch payments, which involves complex payment engineering, increases risks and hinders platforms from accepting microtransactions.

However, PYUSD on Solana will enable merchant platforms to effortlessly handle small transactions in near real-time and at low costs. Supporting small transactions opens up various use cases such as tipping, in-game purchases, and paying small fees to content creators based on views or reads.

5.5. Web3 Payment

Many Web3 merchants, such as NFT markets and blockchain-based gaming platforms, lack connectivity to traditional fiat bank accounts and require robust, non-custodial payment solutions. PYUSD + PayPal can meet these needs effectively.

6. Writing at the End

PayPal’s Senior Vice President of Blockchain, Cryptocurrency, and Digital Currencies, Jose Fernandez da Ponte, stated: “The creation of PayPal USD aims to revolutionize commerce once again by providing a fast, simple, and inexpensive payment method for the next wave of digital economy development. Offering PYUSD on the Solana blockchain further realizes our goal of creating a stable-value digital currency designed specifically for business and payments.”

Since its launch on Ethereum last year, PYUSD has operated relatively quietly, primarily within PayPal’s Super App. With its recent launch on Solana, whether it’s breaking new ground or diving deeper into exploration, one thing is clear: a potential killer app for Web3 has arrived, and it’s payments!

As we discussed in our previous Web3 payment research report, the greatest opportunity for cryptocurrencies may not lie in viewing them solely as currencies, but rather as a new set of payment methods. Payments bear the significant mission of bridging the gap between the on-chain cryptocurrency ecosystem and the off-chain fiat currency system. Through tokenization enabled by blockchain technology, traditional monetary systems gain new value, overcoming previous barriers that seemed insurmountable. This transformation could potentially forever change the global economy.

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1. This article is reproduced from TechFlow, the original title is “Analysis of the internal logic of Paypal stable currency payment and the evolution towards Mass Adoption”, the copyright belongs to the original author [Will 阿望], if you have any objection to the reprint, please contact Gate Learn Team, the team will handle it as soon as possible according to relevant procedures.

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