Why do I need a PayPal account to verify my address?

PayPal is the chosen merchant service for the site because it reduces the risk of fraudulent users creating bogus accounts and causing problems for other members. The $0.50 transaction fee allows us to pull your address from PayPal. It's a way to let our members know that the people they are dealing with are legitimate people. The verification fee is good until your address changes. At that time, you will need to reverify your address.

How is this free? What's the catch?

There's no catch. There seemed to be a want for a free way to organize collections and propose trades with others. So, here it is! Any money the site generates to stay up is from donations or sponsors.