What PayPal Means For Crypto?
VeradiVerdict - Issue #109
I wanted to share some thoughts on the PayPal integration of crypto and what it means for the space but let’s start off with the 2020 Presidential Election since Election Day was yesterday and the election is still going on.
My colleague Joey Krug was one of the co-founders of Augur, a decentralized prediction market created in 2015 and one of the first ICOs on Ethereum. A prediction market is a valuable source of data as users are submitting predictions with real money on the result of an outcome. Some examples of markets includes sports matches, elections, and prices of stocks. The beauty of a decentralized prediction market is that markets can be created on decentralized infrastructure (i.e. Ethereum), thus run without a centralized intermediary on smart contracts where payouts can be made automatically through code and data goes into the result of the outcomes comes from a diverse set of reporters. A native token can incentivize the creation of markets and accurate reporting of data. Entry into these markets can be done through crypto, enabling a greater set of users.
The presidential election has proven to be like the super bowl for prediction markets in terms of traction as millions of dollars have gone through markets on FTX, Polymarket, and Augur. More importantly though, they seem to be a much more accurate source of data for how the election will go vs early polls which has been a bit inaccurate during recent elections.
Below is a chart from Polymarket:
Below is a chart from FTX:
These prediction markets are proving to be a good way to watch the election, as real-time analysis and data are updating these charts through crowd perception and betting. Crypto is really enabling greater access, more accuracy/transparency, and more economic equality. So far, it’s been a really competitive race and the crowd has recently swung back to Biden for the win. It’ll be interesting to see what happens!
Recently, PayPal announced a new service that would enable customers to buy, sell, and hold cryptocurrency directly from their PayPal accounts. This is a significant announcement as PayPal is a payments company with over 300 million active users and would enable those wallets to use cryptocurrencies for purchases at over 26 million merchants that have partnerships with the company. Other companies that have recently incorporated cryptocurrencies include Robinhood and Square but in terms of user scale, I would argue that this is the most significant announcement since the Libra announcement from Facebook. This new service from Paypal would be rolled out initial in the US, then expand internationally, finally into Venmo.
What does this mean for the industry? I believe the Paypal service would benefit the industry as a whole. The first suggestion I give to folks that are trying to get educated about crypto is to just buy a little bit of crypto. Having skin in the game is an important step for motivation to learning more about how it works and its use-cases, eventually using crypto in applications when they are ready. Since folks already use Paypal, the service will reduce the friction of getting fiat into crypto and enable crypto payments to their merchants. This service could be integrated into decentralized applications, making it easier for user onboarding.
What does this mean for Pantera and its investments? Pantera has made quite a few investments in exchanges, wallets, custodians, trading, lending, and payment platforms that really provide solutions to getting fiat into crypto and financial use-cases for crypto globally. In addition, Pantera has made investments into projects that enhance scalability and provide security and services to digital wallets. These portfolio companies could potentially partner or even get acquired by PayPal if PayPal decides to buy vs build. Regardless, because PayPal is enabling crypto to be held by a greater number of users, Pantera’s investments on the application layer of decentralized finance for example will benefit. These includes products such as decentralized marketplaces, prediction markets, gaming, and non-fungible tokens (collectibles). Finding a cost-effective and accurate fiat-to-crypto on-ramp has been one of the hurdles to greater crypto and application adoption.
- Paul V
DIGESTS
The 2020 Elections Are Boosting Crypto Prediction Markets
In just over three weeks, the trading volume on decentralized betting platform Polymarket went from zero to almost $3 million.
SEC Harmonizes and Improves “Patchwork” Exempt Offering Framework
Rule amendments harmonize registration exemptions, eliminating complexity and facilitating access to capital and investment while preserving or enhancing important investor protections
NEWS
PayPal Raises Crypto Buying Limit to $15K/Week for ‘Eager’ Customers
PayPal’s cryptocurrency service is going to expand rapidly in 2021, executives said on the payments giant’s third-quarter earnings call Monday evening.
Leading ‘Privacy Coin’ Zcash Poised For Growth Following Placement On Ethereum
As well as bitcoin has performed this year, which has seen its price increase by 88%, it is far from the most profitable crypto year-to-date.
REGULATIONS
PBoC governor says digital yuan's pilot has done 4M transactions so far with $300M
The testing phase of China's central bank digital currency (CBDC) initiative has so far conducted 4 million transactions, according to Yi Gang, the governor of the People's Bank of China (PBoC).
Leaked ‘Tai Chi’ Document Reveals Binance’s Elaborate Scheme To Evade Bitcoin Regulators
Binance Holdings Limited, the world’s largest cryptocurrency exchange conceived of an elaborate corporate structure designed to intentionally deceive regulators and surreptitiously profit from crypto investors in the United States
IN THE TWEETS
NEW PRODUCTS AND HOT DEALS
The Graph Token Sale Raises $12 Million in 24 Hours
The Graph, a blockchain data company providing services for some of DeFi’s most popular apps, has raised $12 million in a token sale that sold out in just over 24 hours.
Opium Protocol has closed a $3.25 million funding round joined by several top investors of the industry
In addition to closing the investment round, Opium Team is happy to welcome Stani Kulechov (Aave) as an advisor to the team.
LETS MEET UP
Walks at the park or Zoom coffee meetings!
ABOUT ME
Hi, I’m Paul Veradittakit, a Partner at Pantera Capital, one of the oldest and largest institutional investors focused on investing in blockchain companies and cryptocurrencies. The firm invests in equity, pre-auction ICOs, and cryptocurrencies on the secondary markets. I focus on early-stage investments and share my thoughts on what’s going on in the industry in this weekly newsletter.