Hello friends, this is Colton, CEO and registered investment adviser rep at Hedgehog. Our motto is "Buy, balance, relax" because we make it just that easy. Hedgehog will build your diversified crypto portfolio, which you can customize however you like, and keep it synced to the market automatically. Available on iOS and Android.

Dollars to Donuts

A headline of note — specifically, dollar notes: PayPal launched a USD-based stablecoin this week. (Whether Dunkin will accept these dollars for donuts remains to be seen. But certainly it can save PayPal millions in interchange fees. To be safe, bring your own donuts.)

"PayPal USD is designed to contribute to the opportunity stablecoins offer for payments and is 100% backed by U.S. dollar deposits, short-term U.S Treasuries and similar cash equivalents," per the press release. "PayPal USD is redeemable 1:1 for U.S. dollars and is issued by Paxos Trust Company." The asset, which goes by the ticker symbol PYUSD, is an Ethereum-based ERC-20 token.

PayPal has been around for 25 years, and since inception the company has been predicated on dealing with digital dollars… but usually the normal, non-crypto type. So why does PayPal need a stablecoin? Here's the official reason:

PayPal USD is designed to reduce friction for in-experience payments in virtual environments, facilitate fast transfers of value to support friends and family, send remittances or conduct international payments, enable direct flows to developers and creators, and foster the continued expansion into digital assets by the largest brands in the world. Most of the current volume of stablecoins is used in web3-specific environments – PayPal USD will be compatible with that ecosystem from day one and will soon be available on Venmo.

This is more of that vaunted institutional infrastructure that's supposed to lead to greater crypto adoption. Mike Marais, founder of web3 wallet Rainbow, quipped: "if paypal did it whos next? shopify? Robinhood?" (A Coinbase engineer responded, "The Federal Reserve.")

As for me, I think this is a big win-win for Paxos and PayPal. Paxos may be better known for providing the infrastructure for Binance stablecoin BUSD, and full-reserve commodity tokens like GPAX, which represents claims on gold. Offering PYUSD gives them access to the US market where Circle's USDC has long been the USD stablecoin of choice.

For PayPal, it means that they may be able to send internal international transfers on ETH layer 2 rails instead of using wire transfers, or else in place of remitting payments on VISA or MasterCard pipes, which are often more expensive than the slower ACH and SWIFT rails.

Bonus, here's a relevant link from February 2022: "Comparing and contrasting PayPal balances with USDC from first principles."

Quick Hits

Following up on last week's coverage of Worldcoin's woes: "Worldcoin's plan to decentralize orb production sparks illicit data harvesting concerns." Given this rare opportunity, let's all appreciate the phrase "decentralize orb production." Apparently the orb — excuse me, Orb — is the brainchild of a designer who used to work for Kanye West. More importantly:

Founder of Applied Blockchain Adi Ben-Ari decided to get his iris scanned by a Wordlcoin orb. He said the app-based verification process asked him if he was happy to share his iris scan with Worldcoin for "analytics and to save being scanned again in case of an Orb upgrade." Ben-Ari pointed out this suggests the hardware doesn't technically restrict data from leaving the orb, introducing an element of trust in the device manufacturer.

Worldcoin response: "If an individual opts-in to data custody, biometric data is first processed locally on the Orb and then sent, via encrypted communication channels, to distributed secure data stores, where it is encrypted at rest. Once it arrives, the biometric data is permanently deleted from the Orb." Hmmm.

Two more links that piqued my interest:

How's your summer going? Reply and update me. Mine has been a rollercoaster: we launched our mobile app, I got married, and I had a nice honeymoon with my wife, but I'm back to the grind. Hope you all are thriving.

Keep hedging,
Colton