Original title: "Function hidden in Paypal stablecoin code: assets can be frozen and addresses can also be cleared"

Original source: ODAILY Planet Daily

PayPal’s Stablecoin

On Monday, PayPal launched its latest ERC-20 stablecoin, PYUSD. Like mainstream stablecoins, PYUSD is pegged to the U.S. dollar and can be exchanged 1:1 with the U.S. dollar. It is backed by U.S. short-term Treasury bonds, cash and other equivalents, and publishes reserve reports every month, which are audited by accountants. PayPal said that this asset is mainly intended to simplify online virtual transactions and facilitate developers to collect funds directly. This attempt marks the first exploration of this aspect by a major U.S. financial company.

After the news was made public, PayPal’s stock price rose by more than 2%, reaching a high of nearly $65; but the next day, the stock price quickly fell from around $65 to $62.65, and is now trading at $62.79.

PayPal's stock price on Monday. Source: Google Finance

According to PayPal’s official website, eligible US PayPal customers who purchase PayPal USD will be able to:

Transfer PayPal USD between PayPal and compatible external wallets;

Use PYUSD for peer-to-peer payments;

Choose to pay with PayPal USD during checkout;

Convert any cryptocurrency supported by PayPal to and from PayPal USD.

“The shift to digital currencies requires a stablecoin that is both digitally native and easily connected to fiat currencies like the U.S. dollar,” said Dan Schulman, president and CEO of PayPal. “Our commitment to responsible innovation and compliance, and our strong track record of delivering new experiences for our customers, provide the necessary foundation for PayPal USD to drive growth in digital payments.”

PayPal Stablecoin Code

This week, there has been a lot of discussion about PYUSD's "commercial influence and impact on existing stablecoins". Here, Odaily Planet Daily wants to further understand PYUSD from the perspective of technical characteristics.

Following PayPal’s news release, Bitcoin’s official Twitter account @Bitcoin posted a message: What do you think of this code in PayPal’s stablecoin?

PayPal stablecoin code. Source: Bitcoin official Twitter

As you can see, in the highlighted part of the picture, there are two functions: Freeze and wipeFrozenAddress. In other words, PayPal can freeze or unfreeze the wallet address that the company believes to be malicious through centralized operations, and can also clear all assets in this address. Although the generation of blocks cannot be changed, PayPal can still prohibit certain transactions or freeze the assets in certain addresses in a factual sense through this code.

In other words, centralized institutions can perform many operations that were previously impossible on the blockchain. Even though this authority can avoid many frauds and hacking incidents in the crypto world, this is traditionally seen as a violation of the decentralized spirit of the blockchain and the crypto world.

Similarly, Twitter user @0x Cygaar also posted a Twitter post, revealing more about the centralized operations in PayPal’s stablecoin:

PayPal stablecoin code. Source: @0x Caggar Twitter

“So this PayPal stablecoin contract:

Written using a very old version of Solidity;

Allows the owner to suspend all transfers;

Allows owners to freeze addresses to prevent operations;

Allows administrators to increase/decrease supply at will.

At least it’s centralized, but still transparent.”

For a long time, the cryptocurrency world has been advocating the principle of decentralization, believing that digital currency should break away from the central control in the traditional financial system and achieve true freedom and fairness.

Looking at the above functions of PYUSD, it may be reasonable to increase or decrease the maximum supply: if users continue to buy or mint more PYUSD with more US dollar assets until the maximum supply is exceeded, then the supply should have the function of increasing or decreasing. However, compared with similar compliant stablecoins such as USDC, PayPal's dual identity as an issuer and trading platform gives it the ability to temporarily transfer and freeze addresses.

reaction

The review of PayPal’s stablecoin code has caused quite a stir in the crypto world. In the comments section of the two Twitter posts mentioned above, many cryptocurrency users expressed their concerns, and many people commented that “this is the classic operation of a Web2 company.” Keywords related to regulation and centralization kept appearing.

Twitter user @mdhaf.eth said: "PayPal has long been known for freezing accounts without user permission (usually due to internal policies or external influence). This (PYUSD) may make more people aware of crypto digital assets, but most people will not think deeply about the code behind it or the company's ethics. This is not surprising, but it is disappointing."

But at the same time, a considerable number of people expressed different opinions: user @LawLingo said, "This is a common thing. $UDST, $USDC and $ USDD also have this function. Any acceptance of cryptocurrency is good." She believes that large-scale adoption should appear first, and decentralization can be gradually demonstrated. Upon review, Circle wrote in the terms on its official website that in some cases, USDC can refuse to process transactions or suspend user services, "if we reasonably believe that the transaction is suspicious, may involve fraud or misconduct." However, Circle also clearly wrote, "All transactions conducted through the USDC service are irreversible and non-refundable." In comparison, PayPal's authority over PYUSD and control over the PayPal platform are significantly greater and more centralized.

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