The introduction of the new Ethereum-based stablecoin, PayPal USD (PYUSD), has been seen as bittersweet news for the crypto community. The introduction of the stablecoin can find its place in mainstream adoption. However, not everyone is convinced about PayPal’s new stablecoin.
Several smart contract auditors believe it could spell trouble for decentralization and personal control of assets.
A Stablecoin with Centralization and Security Issues.
According to its GitHub account, PYUSD stablecoin, issued by Paxos, has centralization and security issues. Paxos has the ability to suspend authorization and transfer functions for PYUSD in the event of serious security threats.
Additionally, Paxos has the ability to freeze or seize the assets of anyone when required by any government agencies or departments. The AssetProtectionRole function allows the firm to freeze and wipe the balance of any account.
The ‘freezefunds’ and ‘wipefrozenfunds’ functions are deemed to be textbook examples of centralization attack vectors in Solidity contracts.
There is the belief that PayPal’s stablecoin has features that resemble that of a censorship-enabled central bank digital currency. In addition, there is also the fear that PayPal can change PYUSD’s smart contract at any time.
However, Paxos said that the freezing of assets would be rare. This is because the smart contract will not perform the freeze operation. They cite an example of USDT and USDC, two stablecoins that have a blacklisting mechanism.
Even though, let us not forget that USDT and USDC received a backlash last year due to centralization risks, causing the community to move to other stablecoins.
Besides, ERC-20 stablecoin PYUSD is written in Solidity v0.4.24, while the latest version is v0.8.21. Some documented bugs in the old version include zero scale, terrible security, and known back doors.
PayPal’s PYUSD launch could have been epic. However, some of their engineering choices are not suboptimal, including an outdated version of Solidity to program the contract, making it upgradeable and not gas efficient.
While PayPal’s stablecoin is centralized, Ethereum users still have the choice to use it or not.
Vincent Munene is a freelance writer and a great blockchain enthusiast. Blockchain has changed his life in terms of financial freedom and in return, he likes to educate people and keep them up to date on everything blockchain. He is a Biochemist by profession and also loves to play the piano.