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News broke on the morning of October 21, 2020, that PayPal would be granting its users the ability to buy, sell, and hold bitcoin in its app.
The PayPal stock price rose 4.65% on the news, and the price of bitcoin continued to rise from $ 11,400 to $ 12,700 at noon.
There is no denying that PayPal is a monster in the mobile and digital payment processing space. Since lockdowns resulting from the spread of COVID-19, consumers and businesses are making cash transactions less often and paying for goods with 1s and 0s more often from their mobile devices. It makes sense that PayPal would allow its users to buy and own the world’s first digital and decentralized global currency (for some enthusiasts, the only one in the world): bitcoin.
But what does PayPal bring to the table for Bitcoin that Jack Dorsey’s company – Square – doesn’t already have with its fast-growing financial app Cash App? Cash App has been offering bitcoin to customers since the summer of 2019, and the platform has seen incredible growth.
“Cash App alone generated $ 1.2 billion in revenue and $ 281 million in gross profit in the second quarter, an increase of 361% and 167% year-over-year, respectively.” , according to ZDNet. “In total, Cash App generated $ 54 million in transaction-based revenue during the quarter.”
Additionally, Cash App’s parent company Square announced on October 8, 2020 that it had allocated around 2% of its balance sheet cash to bitcoin – a total investment of $ 50 million or 4,708 bitcoins at an average price. of approximately $ 10,620. This investment has grown by over 15% since October 8 and is worth over $ 57 million at the time of writing.
Still, Cash App is nothing compared to PayPal, as it only has 30 million active users, or roughly 10 percent of PayPal’s monthly customer base.
But that’s not the only difference between Cash App and PayPal.
The most notable difference in the Bitcoin offerings of the two companies is in the users of PayPal.inability to withdraw bitcoins from their PayPal account to another bitcoin wallet. CashApp, on the other hand, allows its users to withdraw their bitcoin, and Cash App even covers the network fees of the withdrawal by aggregating transactions. Of course, in accordance with US financial law, Cash App is required to obtain information about its users (including your name, SSN, photo of your driver’s license, etc.). But once Cash App has this information, it allows them to freely withdraw and process their bitcoins. PayPal’s announcement did not include support for this “feature”. You can buy bitcoin, hold it, and sell it in their app, that’s it.
To many, this may not seem like a very significant difference. They may even prefer to keep bitcoins in their PayPal account. Clearly, PayPal has a trusted consumer base: over 300 million people trust its services every month. So, it would be safe to assume that his customers will trust him to keep their bitcoin for them.
For many Bitcoiners, however, this is an unbearable difference. The word ‘unbearable’ might not even be strong enough – let me explain:
Bitcoin’s central thesis (as stated in Satoshi Nakamoto’s infamous white paper), and the whole reason for Bitcoin’s decentralized proof-of-work consensus mechanism, is give the owner of bitcoin sovereign control over their funds. The word ‘immutable’ is attributed to Bitcoin for this reason – if you want to transact with your bitcoin, no one can stop or ‘mute’ your transaction. This is an incredible feature, unique to Bitcoin.
Thus, the fact that PayPal does not allow its customers to withdraw their bitcoin is totally unethical Bitcoin. Bitcoiners will balk and likely attack this fact – much like a swarm of hornets shields its queen from all bad actors potentially aimed at tainting the purity of the hive’s lineage.
Will PayPal follow Square’s lead and allocate a percentage of its $ 10 billion in cash on hand to bitcoin? It seems logical that it holds a reserve of the aggregate assets that it now aims to hold for its clients. Time will tell, as all eyes remain on consumer access to bitcoin following this news release.
It can be safely concluded that PayPal offering its more than 300 million customers bitcoin is a bullish event. As it is often said, “There will never be more than 21 million bitcoins.” As exposure to bitcoin increases, so does the demand for bitcoin.
This is a guest article by Adam Ortolf. The opinions expressed are entirely his own and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.