PYUSD Continues To Gain Popularity And Usage Within DeFi

The PayPal stablecoin PYUSD is rapidly gaining traction in the DeFi sector. A newly introduced liquidity pool on the automated market maker (AMM) platform Curve, featuring PYUSD, has reached a total value locked (TVL) of $135 million. This pool, named FRAXPYUSD, was launched on December 27th, 2023, and includes FRAX algorithmic stablecoin alongside PYUSD.

Liquidity pools involve multiple cryptocurrencies locked in a smart contract, enabling decentralized exchange of assets. Curve, a popular decentralized exchange, is utilized by traders for stablecoin swaps, and its activity is indicative of significant transactions.

Getting Involved With Stablecoins

Traders using the FRAXPYUSD pool can exchange FRAX for PYUSD and then use the acquired coin on PayPal for various transactions. Currently, the pool exhibits an imbalance, with FRAX constituting over 80% of the total liquidity. According to Sam Kazemian, founder of Frax Finance, FRAX acts as on-chain liquidity for PYUSD, serving as a bridge between on-chain and off-chain transactions. Since its inception, the pool has averaged a daily trading volume of $5.5 million.

Despite being introduced in August, PYUSD is gradually making inroads into DeFi, although it trails behind leaders Tether and Circle. December data by Kaiko reveals that the daily trading volume of PYUSD reached $9 million but has recently stabilized around $4 million, significantly lower than the daily trading volume of Tether which exceeded $55 billion.

The Expansion Continues

Analysts note the positive growth in DeFi liquidity but highlight the competition by USDT and USDC, with PayPal seemingly investing in expanding the utility of PYUSD beyond payments. Clara Medalie, research director at Kaiko, sees potential in what PayPal is doing, stating that the company is enhancing the role of the stablecoin in crypto trading within and beyond PayPal itself.

Furthermore, Kazemian also anticipates further growth for FRAXPYUSD, with Frax Finance exploring decentralized finance integration supported by the PayPal payment app.