In a symbolic move that highlighted the progress cryptoassets have made in recent years, PayPal announced last week that it would make cryptoassets such as Bitcoin and Ethereum available to its 346 million users. This is an important step for the space, and will both increase awareness and further, it’s legitimacy. However for those in the know, the service proposed by PayPal is less robust than players already operating in the space. The DeFi first firm which aims to build the financial services infrastructure for the global digital economy of Web 3.0, provides a service through which users can purchase, store, and trade their cryptoassets. Here we examine the differences between PayPal’s emergent offering and crypto native operations such as PlasmaPay.
Not your keys, not your funds
PayPal’s service is very clear that users “will not be provided with a private key”. This was backed up by recent reports from both Sign Key and Satoshi Labs which discourage PayPal for transacting BTC. This is because you never truly own any cryptoassets held on PayPal. This has a number of important ramifications of which users should be aware.
Firstly, it means that users are forced to trust that PayPal actually has the cryptoassets stated, and that the company will continue to operate. While PayPal is of course a large institution with a lengthy track record, this does not make it invulnerable. There is a long history of financial services companies going out of business and being unable to provide full restitution to their account holders.
PlasmaPay, meanwhile, is a non-custodial service. This means that users hold their own keys at all times. If PlasmaPay goes out of business, then user funds are still safe, because each user holds their funds at all times.
Secondly, because users don’t control their private keys, they have to abide by all PayPal rules and restrictions. The most pressing for most people is that the cryptoassets held…