Yesterday, the news about crypto payments on PayPal swept through the community. Many crypto-related news outlets quoted undisclosed sources saying that PayPal’s cryptocurrency payments roll-out is just a matter of time. Yet, the alleged adoption goes even deeper. The same sources claim that Venmo, the company owned by PayPal, is introducing cryptocurrency payments to its users as well.
Despite the fact that information is still very vague, a “well-placed industry source” stated:
“My understanding is that they are going to allow buys and sells of crypto directly from PayPal and Venmo. They are going to have some sort of a built-in wallet functionality so you can store it there.”
While these two sentences sound like they were said by somebody completely unfamiliar with the subject and not a well-placed source, the same entity shared that the payment processing giant “would be working with multiple exchanges to source liquidity.”
Another alleged source stated to the same publication that PayPal will be allowing buying and selling cryptocurrencies in their native application. Moreover, this is supposed to happen “in the next three months, maybe sooner.”
This is Not PayPal’s First Cryptocurrency Venture
As a reminder, PayPal was among the companies joining forces around Facebook to launch the stablecoin Libra in 2019. However, even before things started cooking, PayPal withdrew from the project. Nevertheless, they didn’t close the door and explained their stance at the time by saying:
“We remain supportive of Libra’s aspirations and look forward to continued dialogue on ways to work together in the future. Facebook has been a longstanding and valued strategic partner to PayPal, and we will continue to partner with and support Facebook in various capacities.”
Furthermore, PayPal has been in a close business relationship with the biggest Nort American cryptocurrency exchange, Coinbase, since 2016. Coinbase users are, since then, able to deposit and withdraw their funds to and from the exchange to their PayPal accounts. Therefore, we can conclude that PayPal has always been somewhat related to cryptocurrencies. At least as a partner of an exchange.
At the beginning of 2020, PayPal started its Blockchain Research Group by posting a job opening. With PayPal’s funding, 6 months could just be enough to develop a system for crypto transactions. Yet, we’ll just have to wait and see if there is any truth to these claims.
How Significant Would it Be?
Those familiar with PayPal are well aware of the number of users this company provides service for. For those who have been living under the rock for the last decade, let’s say that PayPal has 325 million users around the globe.
If the information shared by the media is correct, this would be an enormous exposure for cryptocurrencies. PayPal rolling out crypto support would be a huge step towards the all-encompassing adoption of digital assets. It takes one established financial giant who will be the first for many similar service providers to start replicating their role model. Before we know it, we might even be able to shop literally everywhere online with cryptocurrencies.
Needless to say, this would drive the prices of top cryptocurrencies through the roof once again as more skeptical individuals would realize that there is “something to it” since PayPal accepts it.
Can Bitcoin Handle PayPal?
If PayPal’s cryptocurrency support becomes a reality, there is one crucial question we have to ask – can Bitcoin’s blockchain handle the additional traffic?
PayPal processes approximately 190 transactions per second (TPS) on average. On the other hand, the biggest cryptocurrency is only able to process 7 TPS. With all the exposure crypto is supposed to receive from PayPal, Bitcoin is definitely going to struggle with the traffic.
What happens when Bitcoin can’t process all those transactions?
The answer is very simple and we had the chance to see the results of something similar during the bull run of 2017. Bitcoin’s transactions become extremely slow and even insanely expensive.
For example, at the end of 2017, the BTC network was so congested that the average fee was above $50 at one point. The chart below shows that, even without PayPal and its horde of users, Bitcoin was simply too inefficient to deal with the problem it was supposed to solve.
In the meantime, not much has changed. The already infamous lightning network is still far from being usable by an average person. Furthermore, the first cryptocurrency didn’t get such a drastic blockchain makeover to change fundamentally. Therefore, it will be interesting if the long-awaited support by the financial giant will bring positive or negative feedback from new users.
Who knows, maybe PayPal’s developers did a miracle with lightning network and are just waiting for the right moment to implement it in the world-famous PayPal application.
Do you think BTC can handle the stress? Let us know in the comments section below. We appreciate your opinion!
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