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

Ethereum (ETH) is not the best payment solution, according to PayPal’s Vice President of the Blockchain, Crypto, and Digital Currencies (BCDC) unit, Jose Fernandez da Ponte.

Ethereum Falls Short for Payment Purposes

Speaking at the Solana Breakpoint 2024 conference, Ponte brought attention to Ethereum’s inability to handle large transaction volumes as the main reason PayPal chose to launch its dollar-based stablecoin, PYUSD, on competing smart contract platform Solana ( SOL).

PayPal is launching the PYUSD stablecoin for the first time in August 2023 on the Ethereum network. However, in May 2024, the company launched a stablecoin on the Solana blockchain, cementing it as a popular network due to its ability to process “large quantities of high-speed purchases at very low costs. “

Ponte explained that a viable payment network must be able to handle at least 1,000 transactions per second (tps), a figure that the Ethereum network is constantly striving to achieve.

Ponte added that not only the speed of transactions or network throughput but also the benefit of token extensions made Solana an attractive base layer for PayPal’s dollar-backed stablecoin PYUSD. Ponte says:

There are transaction confidentiality and transaction management fees. Therefore, Solana was an easy choice when looking for the next chain, mainly because of the Token Expansion capabilities.

For those unfamiliar, the Solana token extensions add additional functionality to tokens, enabling features such as transfer limits and multi-signature authorization.

These enhancements are useful for payment systems as they allow developers to implement customized payment flows, automate certain processes, and add layers of transaction security. Token extensions provide a customization option for PYUSD to handle payments with specific conditions or requirements.

Notably, two former top employees at Coinbase recently presented Their crypto exchange, TrueX, will use PYUSD as the “preferred transaction token.” Unsurprisingly, PYUSD has already amassed a market capitalization of over $730 million and is likely to continue to borrow the market share of leading stablecoins such as USDT and USDC.

Could The ETH Ecosystem Be Ready For Trading?

Jose’s words are not surprising, given the context. To make stablecoins mainstream, the underlying network needs to have strong throughput and affordable transaction fees. Although Ethereum’s Dencun improve intended to significantly lower the network’s gas fees, it pales in comparison to the minimal fees charged by networks like Solana, Tron, and others.

There is optimism about the success of Ethereum layer-2 scaling solutions such as Optimism, Arbitrum, and others. Currently, there are 74 Ethereum layer-2 projects, showing strong demand for solutions that can help Ethereum scale with affordable transaction fees.

On the other hand, however, there are concerns about the centrality of these layer-2 scaling solutions. Latest report standing that centralization risks can enable network operators to gain control over users’ funds. Ethereum is trading at $2,540 at press time, up 4.2% over the past 24 hours.