PYUSD's market value surpasses $1 billion, rising to the 6th position among stablecoins. Will PayPal ignite the crypto market?

Author: Bubble

Editor: Frank

1. PYUSD Becomes the Sixth Largest Stablecoin Globally

The dollar stablecoin PYUSD, issued by global payment giant PayPal, has surpassed a market capitalization of 1 billion USD.

At the beginning of 2024, the market capitalization of PYUSD was only 234 million USD, but by August 27, it had exceeded 1 billion USD. In just over 7 months, the market capitalization of PYUSD grew by 327%, showing a rapid growth rate.

What does a 1 billion USD market cap mean in the stablecoin market?

According to data from the defillama platform, in the ranking of stablecoin market capitalizations, PYUSD ranks sixth, following stablecoins like USDE and FDUSD.

Given the recent growth rate, it is not impossible for PYUSD to enter the top 3 stablecoins by market capitalization by the end of this year.

2. The Growth of PYUSD Comes from Real Monetary Subsidies

From the growth trend data of PYUSD, its market capitalization increase mainly comes from the last two months. What factors led to the explosive growth of PYUSD's market capitalization in these two months?

From a timeline perspective, the last two months coincided with the period when PYUSD on the Solana chain rapidly grew after its issuance.

The reason for this rapid growth in PYUSD's market capitalization is primarily due to the high incentive strategy recently launched on the Solana public chain, meaning that the rapid growth of PYUSD comes from real monetary subsidies and the expansion of application scenarios.

For example, the annualized yield (APY) for staking PYUSD in the Solana ecosystem staking project Kamino can currently reach over 10%.

Additionally, the staking annualized yield (APY) for PYUSD on the marginfi platform also exceeds 10%.

If we estimate based on the current on-chain TVL and APY of PYUSD, the incentive activities require PYUSD to pay users interest of up to several million dollars each month.

Who pays this huge interest?

Some believe it is the Solana Foundation, as they strive to promote the development of the SOL public chain ecosystem and can do their best to bring PYUSD to issue on the Solana public chain, but this is not the case.

Relevant personnel from the Solana Foundation and Kyle, managing partner of Multicoin, have both clearly stated that the Solana Foundation did not pay any incentive funds, so the interest expenses for this PYUSD incentive activity must come from the issuer, PayPal.

Such a high APY yield has allowed PYUSD on the Solana public chain to surpass Ethereum's public chain in mid-August, becoming the largest public chain issuance platform for the PYUSD stablecoin.

3. Reasons for PYUSD Choosing the Solana Public Chain

Currently, PYUSD is only issued on the Ethereum and Solana public chains. PYUSD began issuing on Ethereum in August last year and started on the Solana public chain on May 31 of this year. Although the Solana public chain was 9 months late, the Solana version of PYUSD now accounts for 63.61%, nearly double the market share of the Ethereum version of PYUSD.

The choice of Solana as the primary public chain issuance platform for PYUSD is mainly related to the advantages of the Solana public chain, such as very low gas fees and transaction confirmation speeds that are much faster than those of the Ethereum public chain. Additionally, the Solana public chain offers many scalable features suitable for today's Web2 business environment.

For example, compared to the Ethereum public chain, PayPal introduced some new features when deploying PYUSD on Solana to provide a better user experience.

These features include confidential transfers (merchants can choose the confidentiality of transaction amounts), transfer hooks (similar to plugins), and memo fields (users can add transaction information when making payments).

These features not only enhance the user experience but also align better with the current payment scenarios in the business environment, facilitating the large-scale commercial application of PYUSD.

In fact, the stablecoin PYUSD has a relatively deep connection with the Solana public chain.

According to reports, PayPal had prepared to collaborate with FTX in 2022 to issue PYUSD on Solana first. The two parties had signed a cooperation agreement, but it was subsequently paused due to the FTX collapse.

4. Strategic Significance of PayPal Issuing Stablecoins

With the continuous development of blockchain technology and the advancement of global compliance for cryptocurrencies, Web3 payments will be a major trend in the future. It will bring people closer to realizing their payment desires: fast, cheap, and global payments will be the new generation of financial/payment infrastructure. Payment platforms can leverage stablecoin payment functions to allow everyone to make payments according to their wishes.

Moreover, in the cryptocurrency ecosystem, issuing stablecoins is a highly profitable business, with returns far exceeding those of most cryptocurrency trading platforms. The issuer of the USDT stablecoin, Tether, earns more from USDT issuance in a year than many tech giants, leading to an increasing number of financial giants entering the crypto stablecoin space, with PayPal being one of them.

As a global payment giant, PayPal already holds a significant market share in the Web2 payment sector. The issuance of PYUSD by PayPal is not only driven by the potential for high profits from stablecoins but also by strategic positioning. As a payment giant, PayPal aims to expand its market share in the Web2 payment sector while also increasing its influence in the Web3 payment sector, where it has currently gained an advantage.

Unlike stablecoin issuers like Tether, PayPal is already a massive business empire in the Web2 world, with a global user base of 400 million. PayPal currently supports 200 countries and 25 currencies, with a wide range of commercial application scenarios.

PayPal can leverage its resource advantages to rapidly expand the application scenarios of the stablecoin PYUSD, such as e-commerce payments, which has a significant driving effect on PayPal's efforts to capture the Web3 payment market. Furthermore, the widespread application of the PYUSD stablecoin can also promote the large-scale application of blockchain technology.

Currently, PYUSD is only issued on the Ethereum and Solana public chains, but it will be issued on more public chains in the future.

Blockchain technology has been around for over a decade, and cryptocurrency payments have reached a critical historical moment, filled with potential and opportunities, much like the internet in 2000.

As a global payment giant, PayPal is poised to bring payments onto the blockchain, leading the way into a new era of blockchain payments.