Ethereum Is Not The Best Solution For Payments, Says PayPal’s Head Of Crypto — Here’s Why

Ethereum (ETH) is not the best solution for payments, said Jose Fernandes da Ponte, vice president of Blockchain, Crypto and Digital Currencies (BCDC) at PayPal.

Ethereum is not suitable for payment purposes.

to talk At the Solana Breakpoint 2024 conference, Ponte drew attention to Ethereum’s inability to handle large transaction volumes as a key reason why PayPal chose to launch its dollar-backed stablecoin, PYUSD, on rival smart contract platform Solana (SOL).

PayPal first introduced the PYUSD stablecoin in August 2023 on the Ethereum network. However, in May 2024, the company launched the stablecoin on the Solana blockchain, cementing it as the preferred network due to its ability to process “Massive transaction volumes at high speeds and very low costs.

Ponte explained that a functional payment network must be able to handle at least 1,000 transactions per second (tps), a number that Ethereum has consistently struggled to achieve.

Ponti added that the speed of transactions, or data transfer rates, on the network, as well as the benefits of token extensions, made Solana an attractive substrate for PayPal’s dollar-backed stablecoin PYUSD. Ponti said:

There is transaction confidentiality and transaction management fees. Therefore, Solana was an easy choice when we were looking for the next chain, especially because of the Token Extension capabilities.

For those who don’t know, Solana token extensions add additional functionality to tokens, enabling features like transfer restrictions and multi-signature approvals.

These enhancements are useful in payment systems because they allow developers to implement custom payment flows, automate certain processes, and add layers of security to transactions. Token extensions provide the option to customize PYUSD in managing payments with specific terms or requirements.

It is worth noting that two former senior employees of Coinbase have recently joined It was launched. TrueX cryptocurrency exchange, which will use PYUSD as its “preferred token for transactions.” Unsurprisingly, PYUSD has already amassed a market cap of over $730 million and is likely to continue to eat into the market share of leading stablecoins like USDT and USDC.

Can ETH become retail friendly?

Jose’s words certainly come as no surprise, given the context. For stablecoins to become mainstream, the underlying network needs to have a strong throughput and reasonable transaction fees. Although Ethereum’s Duncan coin He is ascending This move aims to significantly reduce the gas fees charged by the network, which is nothing compared to the small fees charged by networks like Solana, Tron, and others.

There is hope for the success of Ethereum Layer 2 scaling solutions like Optimism, Arbitrum, etc. Currently, there are a total of 74 Ethereum Layer 2 projects, refers to Strong demand for solutions that can help Ethereum scale with reasonable transaction fees.

But on the flip side, there are concerns about the centralized nature of many Layer 2 scaling solutions. A recent report noted that It has been placed. The risk of centralization is that network operators could gain control over user funds. Ethereum is trading at $2,540 at press time, up 4.2% in the past 24 hours.