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PayPal's PYUSD Makes Waves in DeFi: FRAXPYUSD Pool Hits $135M in Locked Value

Decentralized finance (DeFi) excitement as a dynamic liquidity pool featuring PayPal's PYUSD stablecoin
By Josefina Dipaolo
January 12, 2024

In a notable development within the decentralized finance (DeFi) landscape, a liquidity pool featuring PayPal's dollar-backed stablecoin, PYUSD, has recently locked an impressive $135 million in total value. This surge suggests a growing interest and adoption of the stablecoin in the dynamic realm of decentralized finance.

The FRAXPYUSD pool, launched on December 27, has quickly become the third-largest pool on the widely-used Curve platform, trailing only behind the renowned 3pool. Comprising PYUSD from regulated entity Paxos and Frax Finance's collateralized algorithmic stablecoin, FRAX, this liquidity pool has sparked attention within the crypto community.

Liquidity pools, acting as reserves of various cryptocurrencies locked in smart contracts, facilitate seamless asset exchanges on decentralized exchanges. Curve, purposefully designed for stablecoin swaps, has become a benchmark for traders seeking efficient conversions between stablecoins, thereby serving as an indicator of interest from substantial investors.

The FRAXPYUSD pool offers a unique avenue for traders to exchange FRAX for PYUSD, opening up possibilities for seamless utilization on the PayPal app, ranging from purchases to remittances. Currently, the pool experiences an imbalance in liquidity, with FRAX dominating over 80% of the total liquidity. Since its inception, the pool has maintained an average daily trading volume of $5.5 million, signaling a lively and dynamic ecosystem.

While PYUSD still trails industry giants like Tether and Circle in adoption, it's steadily finding its place in the evolving DeFi landscape. Despite reaching a peak daily trading volume of $9 million in December, PYUSD has recently stabilized around $4 million. Comparatively, Tether's USDT boasts a 24-hour trading volume exceeding $55 billion.

The growing liquidity in DeFi is a positive indicator of PayPal's commitment to expanding PYUSD's utility beyond conventional payments, emphasizing its potential for crypto trading within the PayPal app. Despite facing competition from established players like USDT and USDC, PYUSD's progress in DeFi is noteworthy.

As the FRAXPYUSD pool continues to gain momentum and the liquidity landscape in DeFi expands, PayPal's PYUSD emerges as a contender in the stablecoin market. The strategic move to introduce its stablecoin, coupled with its vast user base of 420 million, positions PayPal as a potential disruptor in the stablecoin ecosystem. The implications are far-reaching, with the potential for mainstream adoption as users increasingly embrace PYUSD for low-fee transactions. While challenges persist, including skepticism from industry figures like William Quigley, the co-founder of Tether, the stage is set for PayPal's stablecoin to leave a lasting impact on the stablecoin market, particularly within the United States.

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