As an infrastructure, PolyFlow has already sown the seeds of PayFi, waiting for them to bloom, and the future is promising.
The State of Crypto Report 2024 recently released by A16z Crypto has clearly stated that stablecoins have become one of the most obvious "killer applications" in the field of Web3. Thanks to the popularity of smartphones and the implementation of blockchain technology, stablecoins may become the greatest financial empowerment movement in human history.
Stablecoins make value transfer simple, with quarterly transactions more than double Visa’s $3.9 trillion, and trillions of dollars of assets settled annually, fully demonstrating their usefulness. In addition, stablecoins account for nearly a third of daily cryptocurrency usage, at 32%, second only to decentralized finance (DeFi), at 34%, measured by daily active addresses.
（State of Crypto Report 2024: New data on swing states, stablecoins, AI, builder energy, and more）
The recently emerging PayFi is also an innovative application that integrates Web3 payments with decentralized finance (DeFi).
PolyFlow, the infrastructure of PayFi, is integrating the transformative power brought to us by digital currency and blockchain technology to build a new PayFi encrypted payment network, help accelerate the implementation of PayFi applications, promote the paradigm shift to innovative finance, and release the true value of Web3.0. Ultimately, make the grand vision in the Bitcoin white paper a reality.
1. What is PayFi
PayFi, or Payment Finance, is an innovative application model that combines payment functions with financial services based on blockchain and smart contract technology. The core of PayFi is to use blockchain as a settlement layer, combining the advantages of Web3 payment and decentralized finance (DeFi) to promote the efficient and free flow of value (Value Movement).
PayFi's goal is to realize the vision of the Bitcoin white paper, build a peer-to-peer electronic cash payment network that does not require a trusted third party, and fully leverage the advantages of DeFi to create a new financial market, including providing a new financial experience, building more complex financial products and application scenarios, and ultimately integrating a new value chain.
PayFi was first proposed by Lily Liu, Chairman of the Solana Foundation, at the 2024 Hong Kong Web3 Carnival. In her view, PayFi is a brand new financial market built around the Time Value of Money (TVM). These are difficult or impossible to achieve in traditional finance.
In this new PayFi financial market, not only can Web3 payments achieve efficiency improvements compared to traditional finance: instant settlement, cost reduction, openness and transparency, and global reach, but it can also achieve decentralization of the global network, permissionless access, asset ownership, and personal sovereignty based on decentralized finance (DeFi).
（https://x.com/Polyflow_PayFi）
2. PolyFlow — PayFi Infrastructure
The original intention of PolyFlow is to build a decentralized infrastructure to help more PayFi applications land and participate in the construction of a global payment network to reduce regulatory compliance pressure, eliminate the risks of fund custody, and minimize third-party involvement.
The core concept of PolyFlow is to effectively separate the transaction information flow and capital flow previously controlled by centralized institutions through a modular design, and use a decentralized approach to enable each transaction process to better comply with regulatory compliance standards and eliminate fund custody risks. At the same time, it uses the characteristics of blockchain to connect the DeFi ecosystem and promote the large-scale implementation of PayFi applications.
PolyFlow has launched two key components: Payment ID (PID) and Payment Liquidity Pool (PLP):
PID is associated with information flow as a powerful tool that can achieve user identity recognition and compliance access, privacy protection and data sovereignty, AI data processing, X to earn and other functions;
PLP is associated with the flow of funds, and the funds used to pay for transactions are managed by smart contracts. It can not only provide a safe and compliant framework for the circulation, custody and issuance of digital assets, but also introduce the composability and scalability of the DeFi ecosystem.
As a result, PolyFlow has built a business architecture for the PayFi application that is lightly regulated, compliant, risk-free, and compatible with the DeFi ecosystem, as well as a secure and compliant framework for the circulation, custody, and issuance of digital assets.
（https://x.com/Polyflow_PayFi）
It is important to understand that Bitcoin and its blockchain network built by Satoshi Nakamoto represent a new solution to financial and monetary problems born in the digital age. It is not only aimed at solving the eternal problem of human society: how to make value flow across time and space, but also aims to solve the trust problem of third parties in transactions. These are what PolyFlow aims to achieve.
3. How PolyFlow helps PayFi to be implemented
The current Web3 payment is still in a very early stage of basic services and primitive state, and digital currency is mostly used as a transaction medium for payment, such as cross-border remittances, OTC, Payment Card and other scenarios. This centralized approach is difficult to open up the decentralized financial (DeFi) ecosystem, and the scenarios are relatively limited.
To fully integrate Web3 payments and decentralized finance (DeFi) and build innovative PayFi applications, we need a brand new infrastructure - PolyFlow, as well as its key modules Payment ID (PID) and Payment Liquidity Pool (PLP).
PayFi applications can freely choose the general blockchain settlement layer (Transaction Settlement Layer) and currency layer (Currency Layer) according to their own application scenarios to adapt to their own needs. For example, choose Solana high-performance blockchain to build a PYUSD stablecoin usage scenario based on the Paypal ecosystem.
On top of this, PayFi needs to deal with the most critical links in the technology stack - asset custody and compliance access.
3.1 Asset Custody
Asset custody is crucial in the financial sector (on-chain/off-chain). Especially for off-chain payment applications, fund custody generally requires applying for a license and meeting strict compliance requirements. For on-chain payment applications based on blockchain, it is necessary to consider how to ensure the security of smart contracts, private key management, and compatibility with traditional finance and DeFi.
In response to this, the Payment Liquidity Pool (PLP) launched by PolyFlow uses smart contract addresses to receive funds for payment transactions, achieving on-chain custody of funds instead of relying on the traditional method of expensive corporate wallets of centralized institutions.
（https://x.com/Polyflow_PayFi）
PLP, a more decentralized model, can achieve:
Decentralized fund custody: Provides a convenient, secure, and compliant custody method for PayFi applications, minimizing the need for transaction intermediaries while ensuring the security of funds.
Liquidity pool: Transaction funds are pooled through smart contract addresses to provide liquidity for financing needs in payment transactions.
DeFi compatibility: Centralized applications are not compatible with the decentralized DeFi ecosystem. PLP built on the blockchain can seamlessly connect to the DeFi ecosystem and bring DeFi business logic to the PayFi application.
Risk-free RWA income category: The income generated by the protocol can be directly reflected in PLP. This income based on real-world payment transaction scenarios provides a risk-free and stable source for DeFi.
This PLP architecture can be flexibly integrated with the DeFi ecosystem, ensuring that the PayFi application can adapt to the ever-changing digital asset landscape.
3.2 Compliance Access
As we all know, only by ensuring compliant user access can we further promote the healthy development of the financial payment ecosystem and services. At this level, the fundamental requirement is to ensure that all transactions and capital flows comply with KYC/AML/CTF requirements and are adapted to the laws and regulations of the local jurisdiction.
To address this, PolyFlow launched the Payment ID (PID) DID, which can be bound to the encrypted KYC/KYB certification information of the user's privacy protection, and associate the user's verifiable credentials on multiple platforms. This can achieve:
Compliance access: PID can contain verification information between multiple and different platforms, helping partners to simplify the verification process.
Privacy protection: PID uses a variety of technical means such as zero-knowledge proof to help fulfill obligations such as anti-money laundering/counter-terrorist financing (AML/CTF) without leaking user privacy. This is a prerequisite for users to participate in the traditional financial/DeFi ecosystem.
Data sovereignty: On the one hand, PID can provide information on fund transactions to regulators to meet compliance requirements, and on the other hand, it can also return on-chain behavioral data to users.
AI-driven: In addition to KYC/KYB data information, PID can also associate transaction data uploaded off-chain or collected on-chain. AI can help analyze rich daily transaction data and extract additional value for PID owners. This also plays a vital role in establishing an on-chain credit system.
The innovative introduction of PID provides transformative advantages to the industry. It not only builds a bridge between traditional finance and the DeFi ecosystem, but also provides users with a flexible and reliable way to manage digital identities, participate in cross-platform transactions, and build on-chain credit.
（https://x.com/Polyflow_PayFi）
4. PolyFlow’s PayFi application
Based on the above-mentioned universal blockchain settlement layer and currency layer, as well as the asset custody and compliance access modules built by PolyFlow, PayFi can help to implement real applications and achieve interconnection with decentralized finance (DeFi).
Recently, the DePIN project Roam reached a cooperation with the RWA platform Huma Finance to launch the DePIN hardware loan program, which will help Roam quickly deploy its basic hardware facilities and accelerate the development of the global decentralized Wi-Fi network.
PolyFlow provides key underlying support for the construction of the DePIN hardware loan program PayFi scenario.
（https://x.com/Polyflow_PayFi）
PID provides the credit basis for loans, transmitting the credit of the entire Roam network to individual mining machine users (End Users), thereby realizing small loans for single or multiple mining machine users. As the carrier of loan funds, PLP can not only provide safe and compliant custody of funds and eliminate transaction intermediaries, but also all parties can eliminate the strong trust foundation that needed to be built before based on the consensus ledger of the Solana blockchain.
Users can pledge future cash flows generated by Roam Growth products and use Roam Tokens or NFTs as collateral to quickly obtain loans to purchase Roam’s Wi-Fi hardware devices, participate in the construction of a global decentralized Wi-Fi network, and receive RoamPoints rewards.
This innovative PayFi model of "Buy Now Pay Never" built by PolyFlow has created a new financial application scenario (Micro Lending) for the DePIN industry, which can greatly accelerate the construction of the DePIN network and promote the industry development into the next stage.
In addition, PolyFlow is also actively working with many traditional financial payment institutions, Web3 project parties and other partners to explore more PayFi application scenarios, such as cross-border trade, Payment Card, Payment Gateway, Wallet Settlement Network, Supply Chain Finance, DePIN, etc.
5. PayFi has a promising future
The rapid rise of stablecoins in five years shows that it is already a currency that runs parallel to traditional financial infrastructure. At the same time, we have seen that the construction of stablecoins in non-transaction scenarios is increasingly entering the homes of ordinary people.
The emergence of PayFi can further help stablecoins expand financial scenarios, bring financial inclusion to global users, and promote Crypto towards true Mass Adoption.
As an infrastructure, PolyFlow has already sown the seeds of PayFi, waiting for them to bloom, and the future is promising.
