Ethereum Is Not The Best Solution For Payments, Says PayPal’s Head Of Crypto — Here’s Why

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As a seasoned analyst with over two decades of experience in the tech and finance industries, I have witnessed the rapid evolution of blockchain technology and its various applications. The recent statement by PayPal’s Vice President of BCDC unit, Jose Fernandez da Ponte, sheds light on the ongoing competition among blockchain networks, particularly Ethereum (ETH) and Solana (SOL).

From my perspective as a researcher, it’s been suggested by Jose Fernandez da Ponte, Vice President of the Blockchain, Crypto, and Digital Currencies (BCDC) unit at PayPal, that Ethereum (ETH) may not be the optimal choice for payment solutions.

Ethereum Falls Short For Payment Purposes

At the Solana Breakpoint 2024 conference, Ponte emphasized that Ethereum’s inability to manage large transaction volumes was a significant factor behind PayPal’s decision to debut its dollar-backed stablecoin, PYUSD, on the rival smart contract platform Solana (SOL).

Initially, PayPal introduced the PYUSD stablecoin on the Ethereum network in August 2023. Yet, by May 2024, the company shifted the stablecoin to the Solana blockchain, making it the preferred choice due to its efficiency in handling large numbers of transactions quickly and at minimal cost.

Ethereum Is Not The Best Solution For Payments, Says PayPal’s Head Of Crypto — Here’s Why

Ponte clarified that for a payment system to work effectively, it should process at least 1,000 operations every second, which is a benchmark that the Ethereum network often fails to maintain on a regular basis.

According to Ponte, it’s not just the fast transaction speed and network capacity that makes Solana an attractive foundation for PayPal’s stablecoin PYUSD, but also the advantage of token extensions on Solana.

When considering our next blockchain, we found Solana particularly appealing due to its strong focus on maintaining transaction privacy and handling fees effectively, coupled with its advanced Token Extension features.

If you’re new to this, Solana token extensions provide additional capabilities to tokens, allowing for functionalities such as setting approval limits for transfers and requiring multiple signatures for approvals.

These improvements are beneficial in financial transaction systems since they enable developers to create tailored payment procedures, automate specific tasks, and boost transaction security through added protective measures. For the customized management of transactions with unique conditions or prerequisites, token extensions provide a personalization option for PYUSD.

Significantly, two ex-high-ranking employees from Coinbase have recently debuted their own cryptocurrency exchange, TrueX. This platform plans to predominantly utilize PYUSD for transactions. It’s worth noting that PYUSD has already achieved a market capitalization of more than $730 million and is poised to potentially erode the dominance of established stablecoins like USDT and USDC in the market.

Can The ETH Ecosystem Become Retail-Friendly?

Jose’s comments are hardly unexpected, considering the situation. To make stablecoins widely accepted, the underlying system should have high transaction speed and low costs. Although Ethereum’s Denyum upgrade aimed to drastically cut gas fees, it still lags behind networks like Solana, Tron, and others in terms of affordability.

There’s optimism surrounding the effectiveness of Ethereum layer-2 scaling options like Optimism, Arbitrum, and others. At this moment, there are a combined 74 Ethereum layer-2 projects in existence, which underscores the high demand for scalable solutions that can reduce transaction fees for Ethereum users.

Conversely, one issue that arises with several layer-2 scaling solutions is their centralized structure, which raises concerns. A recent analysis suggests that this centralization could give network administrators the power to manage user assets. Currently, Ethereum is valued at $2,540 per token, representing a 4.2% increase over the past day.

Ethereum Is Not The Best Solution For Payments, Says PayPal’s Head Of Crypto — Here’s Why

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2024-09-21 13:11