Feature Hidden in Paypal Stablecoin Code: Freezing Asset Clearing Address

Author: jk

Stablecoin released by PayPal

On Monday, PayPal launched its newest ERC-20 stablecoin, PYUSD. Like mainstream stablecoins, PYUSD is pegged to the U.S. dollar and can be exchanged 1:1 with the U.S. dollar. It is backed by short-term U.S. treasury bonds, cash and other equivalents. It also publishes monthly reserve reports and is audited by accountants. According to PayPal, this asset is mainly to simplify online virtual transactions and facilitate developers to receive funds directly. This attempt marks the first exploration in this area by a major US financial company.

After the news was made public, PayPal's stock price rose by more than 2%, reaching a peak close to $65; but the next day, the stock price quickly fell from around $65 to $62.65, and is now at $62.79.

Shares of PayPal on Monday. Source: Google Finance

According to PayPal's official website, eligible U.S. PayPal customers will be able to:

• Transfer PayPal USD between PayPal and compatible external wallets;
• Use PYUSD for peer-to-peer payment;
• Choose to pay with PayPal USD at checkout;
• Convert between any cryptocurrency supported by PayPal and PayPal USD.

Dan Schulman, President and CEO of PayPal, said: "The shift to digital currency requires a stable instrument that is both digitally native and easily linked to fiat currencies such as the U.S. dollar. We are committed to responsible innovation and compliance, and to our customers. A proven track record of delivering new experiences provides PayPal USD with the necessary foundation to drive growth in digital payments."

Code for PayPal Stablecoin

There has been plenty of talk this week about PYUSD's "commercial influence and impact on existing stablecoins." Here, Odaily Planet Daily wants to further understand PYUSD from the perspective of technical characteristics.

Following the PayPal news, the official Bitcoin Twitter account @Bitcoin posted a message: What do you think of this code in the PayPal stablecoin?

PayPal stablecoin code. Source: Bitcoin Official Twitter

It can be seen that in the highlighted part of the figure, there are two functions: freeze (Freeze) and clear the frozen address (wipeFrozenAddress). In other words, PayPal officials can freeze or unfreeze wallet addresses that the company believes to be malicious through centralized operations, and can also clear all assets in this address. Although the generation of blocks cannot be changed, PayPal can still prohibit certain transactions in a de facto sense or freeze assets in certain addresses through this code.

In other words, centralized institutions can do many operations that were completely impossible on the blockchain before. Even though this authority can avoid many frauds and hacking incidents in the encrypted world, this matter is regarded as a problem in the traditional sense. For violating the decentralized spirit of the blockchain and crypto world.

Similarly, Twitter user @0x Cygaar also posted a tweet revealing more of the centralized operations in PayPal’s stablecoin:

PayPal stablecoin code. Source: @0x Caggar Twitter

"So this PayPal stablecoin contract:

• Written using a very old version of Solidity;
• Allow the owner to suspend all transfers;
• Allow owners to freeze addresses to prevent operations;
• Allow administrators to increase the total supply at will (increase/decrease supply);

At least it is centralized, but still transparent. "

For a long time, the cryptocurrency world has been advocating the principle of decentralization, arguing that digital currency should get rid of the central control in the traditional financial system and realize true freedom and justice.

Taking a closer look at the above functions of PYUSD, it may be reasonable to increase or decrease the maximum supply: if users continue to use more US dollar assets to buy or mint more PYUSD until the scale of the maximum supply is exceeded, then the supply should exist function of addition and subtraction. However, compared with similar compliant stablecoins such as USDC, PayPal's dual identity as an issuer and a trading platform allows it to have related capabilities such as tentative transfers and freezing addresses.

reaction

Related inquiries about PayPal's stablecoin code have caused quite a stir in the encryption world. In the comment section of the two twitter articles mentioned above, many cryptocurrency users expressed their concerns. Many people commented that "this is the operation of a classic Web2 company", and keywords related to supervision and centralization kept appearing.

Twitter user @mdhaf.eth said: "PayPal has long been known for its practice of freezing accounts without user consent (often due to internal policy or external influence). This (PYUSD) may make more people aware of encrypted digital assets , but most don’t think deeply about the code behind it or the ethics of the company. It’s not surprising, but it’s certainly disappointing.”

But at the same time, there was a fair amount of disagreement: User @LawLingo said "This is a common thing. $UDST, $USDC, and $USDD also have this feature. Any acceptance of cryptocurrencies is good . ” She believes that decentralization can only gradually unfold when mass adoption occurs first. After review, Circle wrote in the terms on the official website that under certain circumstances, USDC can refuse to process transactions or suspend users' services, "if we reasonably believe that the transaction is suspicious, may involve fraud or misconduct." However, Circle also clearly wrote, "All transactions through USDC services are irreversible and non-refundable." In contrast, PayPal has significantly greater authority over PYUSD and control over the PayPal platform, and also more centralized.