Ethereum Falls Short For Payment Purposes
Ethereum (ETH) may not be the ideal solution for payments, according to Jose Fernandez da Ponte, PayPal’s Vice President of Blockchain, Crypto, and Digital Currencies (BCDC) unit. Speaking at the Solana Breakpoint 2024 conference, Ponte highlighted Ethereum’s inability to manage a high volume of transactions as a significant reason for PayPal’s decision to launch its dollar-backed stablecoin, PYUSD, on the Solana (SOL) smart contract platform.
Initially introduced on the Ethereum network in August 2023, PYUSD was later launched on Solana in May 2024. The shift was driven by Solana’s capacity to handle “massive amounts of transactions at high speeds with extremely low costs,” making it a more suitable platform for the stablecoin.
Ponte elaborated that an effective payment network must manage at least 1,000 transactions per second (tps), a benchmark that Ethereum struggles to meet consistently. Beyond transaction speed, the benefits of token extensions also made Solana an attractive base for PYUSD. These extensions provide transaction confidentiality and charge management, enhancing the functionality and security of payment systems.
Solana token extensions offer additional features like transfer restrictions and multi-signature approvals, which are instrumental in creating tailored payment flows and automating processes. These enhancements allow for greater customization in managing payments with specific conditions or requirements, making Solana an optimal choice for PYUSD.
Adoption and Market Impact
PYUSD is gaining traction, with two former senior employees at Coinbase launching their crypto exchange, TrueX, using PYUSD as their “preferred token for transactions.” The stablecoin has already achieved a market cap exceeding $730 million, challenging the dominance of other leading stablecoins like USDT and USDC. This rapid adoption underscores the market’s confidence in Solana’s capabilities over Ethereum’s limitations.
Can The ETH Ecosystem Become Retail-Friendly?
Jose’s observations align with the broader industry sentiment. For stablecoins to achieve mainstream use, the underlying network must offer high throughput and low transaction fees. While Ethereum’s Dencun upgrade aims to lower gas fees, it still falls short compared to the minimal fees of networks like Solana and Tron.
There is optimism surrounding Ethereum’s layer-2 scaling solutions, such as Optimism and Arbitrum, which are designed to enhance scalability and reduce transaction costs. Currently, there are 74 Ethereum layer-2 projects, reflecting the strong demand for scalable and affordable solutions. However, concerns about centralization risks persist, as these solutions could potentially allow network operators to control user funds.
At the time of writing, Ethereum trades at $2,540, reflecting a 4.2% increase over the past 24 hours. The market continues to watch closely as Ethereum evolves to meet the demands of a growing digital economy.
Advertisement Banner
