Two giants in the financial world are starting to work together. One person sees this as the start of mass adoption for crypto. Others see this as a partnership between two entities with questionable commitments to privacy.
So, we are going to look what this partnership between PayPal and MetaMask means for us, the users. Is this a good deal for us?
What Does This Partnership Bring to the Table?
The consensus about this partnership is positive. Most articles commenting on this see it as being beneficial for both companies. On one side, PayPal will generate revenue because each transaction with them will have a fee. On the other hand, MetaMask expects an increase in customers who will explore Web3.
JUST IN: PayPal partners with MetaMask to integrate new #crypto services.
— Watcher.Guru (@WatcherGuru) December 14, 2022
But hold on, what does this partnership bring for us, the users? Well, we can buy ETH with PayPal in our MetaMask wallets. Or, in case you already have ETH on PayPal, you can fund your MetaMask with it. First, it is available for most US citizens. Hawaii is exempt for now. However, Consensys, the company behind MetaMask, plans to roll this out nationwide.
MetaMask will also have an easy on-ramp option now. Existing PayPal account holders don’t need to go through a KYC procedure. The ‘Know Your Customer’ procedure, that requires you to supply an official ID. The KYC can easily take a few days. The current on-ramp partners for MetaMask, require such a KYC. These are, for instance, MoonPay, Wyre and Transak.
So, this is all indeed on a positive note. But we, as MetaMask users, do we need this partnership?
Our US users will now be able to fund their wallet with ETH via @PayPal! 🦊
Rolling out in the next weeks in the US, excl. Hawaii, through our mobile app (make sure to update to v5.13.0)🧵👇https://t.co/392JwFYF3m
— MetaMask 🦊💙 (@MetaMask) December 14, 2022
Are PayPal and MetaMask Centralized?
Looking at PayPal, we can only conclude that they are a centralized company. This goes against the initial idea of blockchain in general. We have also seen what can happen to CeFi (Centralized Finance). You only have to remember Celsius, Hodlnaut, or Vauld. All three companies are bankrupt. You can read up on why Celsius went bankrupt, we had in-depth coverage of this.
We also saw the recent FTX collapse. As a result, currently, the word ‘centralized’ is not that popular in crypto circles. For instance, we see that DEXs are gaining in popularity. When using a DEX, you will need a non-custodial wallet. In other words, you stay in control of your private keys.
Now, when looking at MetaMask, they claim to be a decentralized wallet. However, that image received a serious dent recently. Venezuelan MetaMask users underwent a ban and couldn’t use their wallet anymore. This is due to legal compliance or rather sanctions from the US government. Consensys and its MetaMask complied to the sanctions. Iranian users had a similar issue. In the Venezuelan case, Consensys resolved the matter within a few days, as The Block pointed out. However, it proves that MetaMask is not as decentralized as they portray themselves to be.
MetaMask Data Sharing Issues
During recent weeks, MetaMask had a serious backlash about their data collection practices. It turned out that MetaMask shared user internet-protocol information with Infura. This is the ConsenSys-made ‘RPC (remote procedure call) service’. Such an RPC reads and writes data to the Ethereum blockchain.
There was a change in wording during November in their user agreement. Besides user transaction data, they also shared IP addresses with Infura. It turned out that this was ‘by default’. As a result, the crypto community became very vocal about this. This went against the decentralization ethos. A clear violation of Ethereum’s privacy focus. This has been going on since 2018.
🚨CONSENSYS UPDATES ON NOV. 23
When using Infura, the default Remote Procedure Call (RPC) provider in MetaMask, it will “collect your IP address and your Ethereum wallet address when you send a transaction.” pic.twitter.com/Ek6o7jsNRR
— Kyle Chassé (@kyle_chasse) November 24, 2022
As a result of the backlash, Consensys came up with some solutions. This makes it more difficult to trace transactions back to users.
So, we see two centralized companies starting to partner in the crypto space. Add to this the recent MetaMask data sharing issues. Now it seems this may not be the portrayed marriage from heaven after all. Yes, it is convenient for many new crypto users to use PayPal in their MetaMask. But at what privacy cost will that be? Many MetaMask users have already switched to alternative wallets. For example, Trust Wallet or Rainbow Wallet. It is doubtful that these users will come running back to MetaMask.
On the surface, the PayPal partnership with MetaMask sounds and looks good. However, when you start to dig a bit deeper, we see plenty of issues that go against crypto pillars. Maybe this is a step closer to mass adoption, but it is also a step closer to centralization. The MetaMask data sharing issue is another obstacle. It goes against the decentralization ethos that blockchain and crypto stand for.
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