PayPal has announced the expansion of its stablecoin, PayPal USD (PYUSD), to the Solana blockchain, marking its first move outside the Ethereum ecosystem.
Lower Transaction Costs
In a statement on May 28, PayPal confirmed that PYUSD is now available on the Solana network, allowing users to conduct transactions at lower costs. This initiative aims to increase the use of PYUSD for small and everyday purchases.
Solana can handle up to 65,000 transactions per second at a cost of just $0.0025 per transaction. This is significantly more efficient than Ethereum, which can only process 15 transactions per second with fees ranging from $1 to $50 during peak times. As a result, transactions on Solana can be completed within a minute, while on Ethereum, they can take several minutes.
"Making PYUSD available on the Solana blockchain furthers our mission to provide a stable-value digital currency designed for commerce and payments," said Jose Fernandez da Ponte, senior vice president of blockchain at PayPal.
PayPal and Venmo users will benefit from a blockchain-agnostic experience, with PYUSD balances unified regardless of the network the assets are on.
Growth of the Solana Network
The Solana network has become the most used blockchain for stablecoin transfers in recent years. According to analysis platform Artemis, stablecoin transfer volume on Solana reached $1.5 trillion in the past year, significantly higher than Ethereum's $885 billion during the same period.
Despite its growth, Solana faces challenges, such as recurring network outages. The latest outage occurred on February 9, when transactions were halted for nearly five hours. To improve reliability and scalability, an upgrade called Firedancer is set to be released in the coming months.
Stability of Stablecoins
Stablecoins are cryptocurrencies designed to maintain a constant value by being pegged to a more stable reserve, usually a fiat currency like the US dollar.
PayPal launched its stablecoin in August 2023 in partnership with Paxos Trust Company. Initially issued on Ethereum as an ERC-20 token, the stablecoin is backed by US dollar deposits, short-term treasury bills, and cash equivalents.
Data from DefiLlama shows that Tether currently holds nearly 70% of the stablecoin market with a market capitalization of around $111 billion, while PYUSD is currently valued at $272.96 million.
