In its ongoing rivalry with Ethereum, Solana has secured a significant partnership with an unexpected ally—PayPal.
On Wednesday, the online payments giant announced that its stablecoin, PayPal USD (PYUSD), is now available on the Solana blockchain network. This move not only enhances Solana’s credibility in the massive $2.6 trillion payments processing market but also sets the stage for significant growth. Projections indicate that this market could reach nearly $5 trillion by 2029, a promising outlook for the Solana-PayPal partnership.
A JPMorgan Chase report previously highlighted that emerging technologies and evolving consumer behaviours could drive global payment flows to $54 trillion.
Duel with Ethereum
With this integration, payPal users gain the flexibility to transact with PYUSD on either the Solana or Ethereum networks through their PayPal accounts and Venmo wallets. This choice underscores the ongoing competition between Solana and Ethereum, with Solana’s faster transaction speeds and lower costs giving it a clear edge.
Sheraz Shere, General Manager of Payments at the Solana Foundation, pointed out that the slower transaction speeds on the Ethereum layer one network present a unique opportunity for Solana. “Many use cases in which Ethereum’s transaction speeds are limited will thrive with PYUSD on Solana, thanks to its faster and cheaper transactions,” Shere confidently stated to DL News, highlighting Solana’s competitive advantage.
According to Solana analytics platform Solscan, Solana processes nearly 2,000 transactions per second, vastly outpacing Ethereum’s average of 15. Additionally, Solana offers lower transaction costs.
A Major Deal for Solana
This partnership is not just a milestone, but a significant leap for Solana. With over 420 million active accounts, PayPal is a dominant player in global payments and has demonstrated agility in adopting new technologies like stablecoins. The alliance with such a major player underscores Solana’s growing influence in the industry.
PayPal is also keen on staying competitive. In December, Visa expanded its stablecoin pilot with Circle, another major stablecoin issuer, to Solana to enhance settlement times.
The Power of Partnerships
Navigating the global payments market requires robust partnerships due to digital transactions’ complexity and regulatory challenges. Stablecoins, which facilitate the conversion of fiat currencies into cryptocurrencies, have quickly become indispensable tools in this landscape.
The industry is racing to develop efficient “rails”—the pathways payments travel from sender to receiver.
Three-Year Collaboration
Over the past three years, engineers from PayPal and Solana have been working hand in hand to seamlessly integrate PYUSD into Solana’s network. A key focus of this collaboration has been Solana’s token extensions feature, which allows issuers to set specific conditions on who can interact with the asset and block unauthorized parties. This feature is particularly crucial for regulated entities like PayPal and Visa, ensuring compliance with authorities such as the US Treasury Department’s Office of Foreign Assets Control.
“Much of the development of token extensions was done in partnership with PayPal to meet their requirements,” Shere explained. “They’re minting the PYUSD token using this extension standard.”
Shere also emphasized PYUSD’s potential in cross-border payments and remittances, highlighting the vast market opportunities. He envisions broader applications within PayPal’s ecosystem, particularly for its merchant base.
“One area of interest is the PayPal merchant base,” said Shere, who has extensive experience in business development from his time at American Express. “PayPal could enable merchants to accept PYUSD by providing them with Solana addresses.”
This strategic collaboration marks a significant step forward in the evolution of digital payments. It leverages PayPal and Solana’s strengths to drive innovation and efficiency in the industry.
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