PayPal's Stablecoin Ranks Third in Curve Liquidity Pool Size

• Paypal's PYUSD Stablecoin Gains Traction in DeFi Sector
• Details of the FRAXPYUSD Pool
• Functionality of the FRAXPYUSD Pool
• Trading Volume of the FRAXPYUSD Pool
• PayPal's PYUSD in DeFi
• The Future of PYUSD in DeFi

Paypal's PYUSD Stablecoin Gains Traction in DeFi Sector

PayPal's PYUSD, a dollar-pegged stablecoin, is gaining momentum within the decentralized finance (DeFi) landscape. A newly established liquidity pool, which includes PYUSD, on Curve, the automated market maker (AMM) platform, has a total value locked (TVL) of $135 million. This makes it the third largest, following the renowned 3pool.

Details of the FRAXPYUSD Pool

In addition to PYUSD, which is issued by the regulated business Paxos, the so-called FRAXPYUSD pool also comprises Frax$0.997 -0.21% Finance's collateralized algorithmic stablecoin, FRAX. The pool was activated on December 27. A liquidity pool is a repository of two or more cryptocurrencies locked within a smart contract. This helps to simplify the asset exchange process on a decentralized exchange. Curve, a decentralized exchange, is popularly employed by traders to exchange stablecoins. The activity on Curve is often regarded as a reflection of 'whales' or large-scale traders striving to convert one stablecoin to another.

Functionality of the FRAXPYUSD Pool

The FRAXPYUSD pool offers traders who hold FRAX the opportunity to exchange them for PYUSD. The newly obtained coin can then be utilized for purchases and remittances via the PayPal app. At the time of reporting, the pool was imbalanced, with FRAX constituting more than 80% of the total liquidity. FRAX serves as the on-chain liquidity for PYUSD, whilst the latter acts as the offchain fiat ramp, said Sam Kazemian, the founder of Frax Finance.

Trading Volume of the FRAXPYUSD Pool

Since its inception, the pool has recorded an average daily trading volume of $5.5 million. An inquiry has been made to Paxos, the issuer of PYUSD, to gain insights regarding the increasing use of PYUSD in DeFi.

PayPal's PYUSD in DeFi

Launched in August, PayPal's PYUSD is gradually establishing its presence within the DeFi sector. Despite this, it still falls significantly behind industry frontrunners like Tether$1.000 -0.12% and Circle. According to data from Kaiko, PYUSD's daily trading volume peaked at $9 million in December while it currently stands at approximately $4 million. This is considerably lower compared to Tether's USDT which boasts a 24-hour trading volume exceeding $55 billion.

The Future of PYUSD in DeFi

The increasing liquidity in DeFi is encouraging. PayPal seems to be investing resources to broaden the use of the stablecoin for cryptocurrency trading activities, not just for payments within the PayPal app, stated Clara Medalie, research director at Kaiko. Despite this, PayPal is faced with stiff competition from USDT, which currently dominates the majority of all cryptocurrency transactions and liquidity. Circle's USDC is another significant contender on DeFi platforms and it is by far the most liquid, added Medalie. Kazemian has expressed optimism that the FRAXPYUSD pool will expand further, with Frax Finance exploring potential DeFi integration supported by PayPal's payment app.

Edited by Jonathan Stoker