In the past couple of weeks, PayPal started to roll out their new added features to PayPal Cash accounts, you guessed it -- CryptoHub! Sounds a bit "bandwagoney", you might say? That's because it is!
What should I be concerned about when "buying" cryptocurrency using PayPal's CryptoHub?
Let us start with the fact they are calling it a CryptoHub. Not a crypto wallet or crypto exchange. What does this mean for you? It means that there are better options to use when purchasing and storing your cryptocurrency.
Our biggest concern when it comes to our finances and personal information is privacy online. The blockchain ledger technology solves this for us. In the book "Blockchain Revolution" by Don and Alex Tapscott they state:
"We’re calling it the Trust Protocol. This protocol is the foundation of a growing number of global distributed ledgers called blockchains—of which the bitcoin blockchain is the largest. While the technology is complicated and the word blockchain isn’t exactly sonorous, the main idea is simple. Blockchains enable us to send money directly and safely from me to you, without going through a bank, a credit card company, or PayPal."
The biggest reason the blockchain technology was developed is to leave third-party intermediaries like PayPal out of our transactions and personal information. This blockchain technology has the power to set us free from the fees, security flaws, and cloudy terms & conditions of greedy corporations.
PayPal's terms & conditions are not clear at all. When establishing your CryptoHub, "you will not [actually] hold the digital Crypto Assets themselves in your Crypto Asset balance." What do you actually hold in your CryptoHub then? A balance. Yep, that is right, a balance.
What do you mean I can't transfer my cryptocurrency to an actual Crypto Wallet?
This is like watching a bad National Lampoon's special. PayPal wants you to "buy, sell, and hold a Crypto Asset balance" using their CryptoHub without the ability to send any crypto to an actual Crypto Wallet.
"You currently are NOT able to send Crypto Assets to family or friends, use Crypto Assets to pay for goods or services, or withdraw Crypto Assets from your Cryptocurrencies Hub to an external cryptocurrency wallet."
This is because when using PayPal to purchase Crypto Assets, they do not hold it for you. Instead [their] licensed service provider, Paxos Trust Company, LLC ("Paxos") is the holder. Paxos Trust Company is a Crypto Brokerage who partnered with PayPal. Paxos helps financial institutions by integrating cryptocurrency into their applications.
If we have to use a special key to access and use our crypto wallets, does PayPal's CyrptoHub give us one? If we get one, does it stay stored on PayPal's servers or Paxos Trust Company? --that would be a MAJOR CYBERSECURITY FLAW!
In reality, only one person should know and store the special key to prevent anyone from accessing your funds and buying a bunch of PS5's.
For now, according to PayPal's Cryptocurrency terms & conditions it is not clear to who actually owns the Crypto Assets you purchase through them.
Where Should I Buy & Store My Cryptocurrency/Crypto Assets?
One of the safest platforms for purchasing cryptocurrency is Coinbase.com. It is super easy and convenient. You can use a debit card to purchase cryptocurrency and you can even add a bank account to purchase and use to withdraw funds whenever you desire.
One of the best places to store your cryptocurrency is a Crypto Wallet. There are 3 different types of Crypto Wallets.
Software (Hot) Wallets (Most Popular) - Crypto DeFi Wallet, Coinbase Wallet, Interstellar: Stellar Wallet, Ripple Wallet, and a few more.
Hardware (Cold) Wallet (Safest & Securest) - Ledger Nano S, Ledger Nano X, and Ledger Backup Pack.
Paper Wallet (Safe IF PRIVATELY STORED) - A paper wallet is a printed piece of paper which contains keys and QR codes that are used to facilitate cryptocurrency transactions.
Our financial system is changing as we are quarantined in our homes. I suggest you start doing your own research by reading books about cryptocurrency and blockchain technology. A great book to start with is the one quoted in the beginning of this article: Blockchain Revolution by Don and Alex Tapscott. You can also find more books to read here.
Thank you for taking the time to read this article. Feel free to share this article with your friends and KryptoFam.
Disclaimer: By no means are you obligated to take any information from this article as financial advice. Please do your own research and consult a professional financial advisor for professional financial advice. This article is for educational purposes only.
I'm excited to have a company the size of PayPal gets involved in the crypto space. Hopefully, they make it easier to acquire.