Comment by yieldcrv | Hacker News Reader

Comment by yieldcrv | Hacker News Reader

> It's the PayPal dollars hosted on crypto databases that are the safer of the two, if not along every dimension, at least in terms of the degree to which customers are protected by: 1) the quality of underlying assets; 2) their seniority (or ranking relative to other creditors); and 3) transparency.

I like the pressure that crypto infrastructure builds within. The general discrimination against crypto on the regulatory front creates these outcomes that are better than the other custodial system, and ironically more in line with bitcoin’s original anti-leverage ethos.

What’s missing are consumers that are discerning because there are a lot of ineligible and poorly managed crypto offerings.

So the regulators are helping, the criticism against crypto is helping, but the organizations offering well designed and well managed products are not what people gravitate towards.

Paypal USD’s design is okay, in comparison to their fiat offering, but only due to regulators creating more difficult requirements for crypto. It is anti-fragility in action and something crypto enthusiasts have always appreciated about crypto: how it gets more resilient under pressure and can adapt.

Paypal USD as a stablecoin is unremarkable and has the same arbitrary fund freeze capabilities that Paypal always had, but it’s fungibility and addition to the stablecoin space is an improvement.

Only because New York State makes them back their stablecoin with good assets.

The real question is, if you have PayPal stablecoins, do you have the keys, or does PayPal? Can PayPal take your crypto money away or freeze it, as they routinely do with Paypal-controlled accounts? That's what really matters.

On their website: "Although Paxos has the ability and the right to freeze all USD Stablecoins tokens, including PYUSD, Paxos would only deploy such ability in very limited circumstances. Paxos will report such incidents to law enforcement and/or regulators in a timeline manner, and will freeze certain PYUSD"

So at least it's honest.

  > Although Paxos has the ability and the right to freeze all USD Stablecoins tokens

Having the technical ability does not actual grant to them the right, I believe.

Thats exactly what I wrote. A parallel stricter regulatory regime makes it better than the incumbent financial regulatory regime. The irony here is that NYDFS made this regime 10 years ago when there were only small players in crypto, and it was intended to freeze them out of operating, with high requirements. Now, those same actors are big players and additional big players are still entering.

Yes Paypal can freeze PaypalUSD on an address level.

They can freeze it, but on the blockchain. As far as I understand, people can observe how much freezing happens overall, from the blockchain. This is superior feature IMO. There are tons of "paypal froze my money" all over the internet, but it is next to impossible to verify how much that is actually happening. With blockchain-based stablecoins we should know precisely the percentages of money being freezed.

Would they need to freeze it on the chain? As they hold the keys, they are acting as custodian and can do their own freezing.

I kind of assumed that you can self-custody paypalusd. Otherwise, what would be the point?

Of course self-custody is a bit misleading as they are any way IOU notes.

You can withdraw Paypal USD and self custody it onchain, and use it with the same flexibility as any ERC20 token.

But this token does have code to freeze your balance of itself, an action controllable by the token contract administrators, which is Paypal.

this is seen in other similarly structured stablecoins.

but the fungibility of being an erc20 token means offloading it is very easy too, there would therefore be no limitations on transfer amounts, no delay in having liquidity based on the time of day or day of the week. No need to rely on Paypal’s interest in redeeming the token for cash again, as you could just swap them onchain for something else more liquid or more speculative the instant you wanted.

Interesting, thank you

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