The launch of PayPal USD (PYUSD) by PayPal and Paxos is welcomed by the crypto community amid traditional finance firms’ entry into the industry. However, decentralization principle of the crypto community took a hit as Paxos can suspend PYUSD’s authorization and transfer functions, as well as freeze or seize assets in security threat cases.
PayPal USD (PYUSD) Gets Mixed Reactions From Crypto Industry
PayPal USD (PYUSD) stablecoin issued by Paxos has centralization and security issues, according to its GitHub account. Paxos can suspend authorization and transfer functions for PYUSD in the event of serious security threat. Paxos can also freeze or seize the assets of anyone when required by the government agencies or departments. The AssetProtectionRole function allows the firm to freeze or wipe balance of any account.
The new Paypal USD stablecoin has an “assetProtection” role which can wipe your balance in two transactions (first `freeze`, then `wipeFrozenAddress`)
In smart contract security we call this a “centralisation attack vector” pic.twitter.com/RsmqvsnKvi
— pashov (@pashovkrum) August 7, 2023
However, Paxos said the freezing of assets will be rare as it will not perform the freeze operation itself. Similarly USDT and USDC stablecoins also have blacklisting mechanism. Centralization risks caused USDT and USDC to face several market cap loss last year as the community moved to other stablecoins.
Moreover, ERC-20 stablecoin PYUSD is written in Solidity v0.4.24, while the latest version is v0.8.21. Some raised serious security concerns due to more documented bugs in the old version such as zero scale, terrible security, and known back doors.
An online poll by Bitcoin on whether the PayPal stablecoin is Good, Bad or Ugly has received mixed reactions. Nearly 49% voted “Good,” while 17% and 34% selecting “Bad” and “Ugly,” respectively.
Jeremy Allaire, CEO of USDC-issuer Circle, also congratulated PayPal and Paxos for the launch of PYUSD. He gives credit to regularity clarity with the Payment Stablecoin Act. “It’s incredibly exciting to see such a significant internet and payments company entering the stablecoin space.”
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