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[KIM MOON-SOO] Paypal annoucement, Connecting CeFi and DeFi

[KIM MOON-SOO’s Token Biz] Oct. 21 2020, PayPal, the world’s largest payment system operator, announced that its customers will be able to use Bitcoin and other virtual currencies on their PayPal accounts. As PayPal approached the decentralized Bitcoin, a new era where centralized finance (CeFi) and decentralized finance (DeFi) has started. 1. History of PayPal development and its influence: Pether Thiel, Elon Musk and eBay To understand the influence of PayPal’s support of cryptocurrencies, the history of PayPal first needs to be examined. Established in 1998, Peter Thiel is the PayPal founder. Tesla founder Elon Musk acquired PayPal in 2000 and listed it in 2002. As soon as it went public, online marketplace eBay purchased PayPal from Elon Musk for $1.5 billion. After managing PayPal for many years, eBay spun off PayPal in 2015 with the goal to strengthen its independence. iPhone maker Apple’s introduction of Apple Pay in 2014 and the rapid growth of payment processing platform Stripe were seen to have affected eBay’s decision to spin off PayPal. Following the spinoff, PayPal acquired potential competitors and continuously invested on blockchain-based companies. Finally, it has become the world’s largest digital finance platform with its market capitalization standing at $200 billion. It has 350 million users. 2. Bitcoin: From the era of investment to collecting What would happen if PayPal supports Bitcoin? PayPal allowing its account holders to buy and sell Bitcoin will increase the practical use and distribution of the cryptocurrency. The service will result in an era where people can easily collect and save bitcoin without going through a cryptocurrency exchange. 3. Expansion digital finance industry connections. While in competition, a decision made by one company affects the strategy of another company. PayPal’s competitors include Alipay, KakaoPay and Naver Pay. Immediately following PayPal’s announcement to enable users to buy, hold and sell Bitcoin, Bitcoin was a popular search word on Chinese search giant Baidu. Once PayPal starts to absorb digital assets in the digital era, its competitors will also start offering a similar service. Once this movement starts to spread, traditional banks that are losing its customers to digital finance firms like Kakao Bank and Naver Bankbook will inevitably have to consider signing agreements with Bitcoin. 4. Integration of Bitcoin and CBDC Digital platforms like PayPal, Kakao Pay and Naver Pay are key distribution channels for central bank digital currency (CBDC) that are being prepared. Digital finance platforms will be linked with Bitcoin and eventually CBDC. 5. PayPal’s announcement PayPal’s recent announcement to allow its users to transact through Bitcoin is not just a company event, but also the starting point where CeFi and DeFi are connected. Indirect influence will be wide across the whole industry including both digital finance firms and also traditional finance companies PayPal cooperates with. Once the use of Bitcoin starts to become more common starting with PayPal, the world will be met with a paradigm where they have to set strategies for CeFi using DeFi, going beyond using the DeFi paradigm built to prevent crimes. KIM MOON-SOO, professor of ABC MBA at aSSIST Business School

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