Stripe's $1.1 billion acquisition of the stablecoin API infrastructure Bridge is the largest acquisition in the history of cryptocurrency. What makes us think is not the transaction itself, but the rapid progress of the entire stablecoin ecosystem towards traditional finance.
Both Stripe and PayPal have a huge global influence and have connected their existing ecosystems to the stablecoin crypto payment network in their own ways. By integrating stablecoins, these fintech companies have taken a step forward in the entire payment value chain. After integrating stablecoins, integrating DeFi to build a new PayFi application scenario is the next logical step.
1. Stripe & Bridge Acquisition
Founded in 2009, Stripe is committed to providing online payment services for businesses and one-stop payment solutions. Stripe is one of the three major payment giants in the United States. Its payment transaction volume in 2023 has reached 1 trillion US dollars. It supports 135+ currencies and 50+ payment methods worldwide.
Stripe became the first major payment company to offer Bitcoin payments in 2014, but the long confirmation time of the Bitcoin network, high transaction fees and price volatility led to a decline in demand, and the feature was gradually shut down in 2018.
Despite this, Stripe continues to pay attention to and gradually develop crypto business. Previously, Stripe announced on October 10 that it would reconnect U.S. businesses to the encrypted payment gateway (Pay With Crypto), with partners including Metamsak, Coinbase, Magic Eden, Audius, etc., allowing U.S. businesses to:
Accept USDC and USDP (Crypto Payin) from over 150 countries through Ethereum, Solana, and Polygon networks;
Merchants can receive stablecoins/USD (Crypto/Fiat payouts);
Integrations are available for checkout acquiring, element payment components, payment intent APIs, and soon will be available for the company’s subscription capabilities.
Of course, Stripe wants more than that.
Bridge’s latest official announcement stated: “Bridge and Stripe will work together to accelerate the adoption and practicality of tokenized dollars, making it easier for everyone in the world to transfer, store and spend money. Through many practical cases, it has been proved that stablecoins can become the core global capital flow infrastructure and represent a new payment platform. This is not because consumers or businesses inherently want "cryptocurrency", but because stablecoins solve key financial problems. "
Founded by entrepreneurs Sean Yu and Zach Abrams, Bridge is a stablecoin API infrastructure that provides software tools that help businesses accept stablecoin payments. The two founders previously sold Venmo competitor Evenly to Block in 2013; Abrams is also a former senior employee of Coinbase.
Bridge's main product is the Orchestration API, which is an API that integrates stablecoin payments into an enterprise's existing business. Bridge handles all compliance, regulatory and technical complexities. Through the Orchestration API, combined with Bridge's own 1) stablecoin cross-chain transactions, 2) fiat currency/cryptocurrency deposit and withdrawal acceptance, and 3) virtual bank accounts, it can help enterprises use stablecoin payments more conveniently, with a smoother and more seamless experience.
Bridge says that using its API, funds can be transferred globally in minutes, stablecoin payments can be sent seamlessly, local fiat currencies can be converted into stablecoins, and US dollar and euro accounts can be provided to consumers and businesses around the world, allowing users to save and spend in US dollars and euros.
If Bridge can help Stripe build a stablecoin-based crypto payment network, expand the Stripe ecosystem, and capture the network effects of the entire stablecoin ecosystem, then a PayFi network that can combine crypto payments and decentralized finance can help Stripe further provide global financial services to users while achieving the free flow of value.
2. 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 encrypted 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 crypto payments achieve efficiency improvements over traditional finance: instant settlement, reduced costs, 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).
3. Why is PayFi the next step for Stripe & Bridge?
PayFi is the further construction, expansion and deepening of the encrypted payment network. On this basis, through blockchain and smart contract technology, and the introduction of DeFi, a new financial market is built to create payment-related financial derivative services in a global context, such as lending, financial management, investment, etc.
The emergence of Bridge, on the one hand, can help the implementation of Stripe's Pay With Crypto strategy. More and more existing businesses will be settled in stablecoins to achieve internal cost reduction and efficiency improvement, as well as a smooth and seamless user product experience. On the other hand, Stripe can use Bridge to build a stablecoin payment path outside the original bank, card organization, and SWIFT payment system, expand beyond its ecosystem, and be compatible with DeFi.
We have seen that Bridge can help customers issue stablecoins through the Issuance API and invest the balance in U.S. Treasuries to improve capital efficiency. I believe that in the near future we will be able to see Bridge build more PayFi applications based on its stablecoin payments and combined with DeFi.
Therefore, after combining with Bridge, Stripe's network effect is no longer limited to its ecosystem, but the entire stablecoin market. Similarly, the PayFi ecosystem built in combination with DeFi can break through the geographical limitations of traditional financial services and realize the free flow of value and financial inclusion for global users. This is also the direction that Paypal, which has issued stablecoins, is working hard to achieve.
Both Stripe and PayPal have huge global network effects, and connect the existing networks to the stablecoin payment network through different paths. It will be natural to then connect with DeFi and build a new PayFi scenario.
If Stripe & Bridge or stablecoins are games between Web2 giants, then PolyFlow, in the form of PayFi infrastructure, helps PayFi project applications to be implemented and participates in the construction of a global payment network.
The core concept of PolyFlow is to use modular design and 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 the payment information flow, serving 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 payment fund flow, 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.
The encrypted payment gateway built by PolyFlow can also realize the advantages of Stripe & Bridge after connecting to stablecoin payments:
Reduce costs and increase efficiency. The point-to-point transaction between buyers and sellers does not involve middlemen to earn the difference in price, and does not require banks or card organization settlement networks to pay fees to all parties in the network.
No custody risk. Transaction funds are completely managed by the on-chain smart contract, which is open and transparent, eliminating the risk of centralized institutional fund management.
Compatible with DeFi. The on-chain Payment Liquidity Pool can be combined with DeFi to build PayFi scenarios based on lending, Staking, etc.
Global network reach. Added the option of cryptocurrency payment for merchants, open to 600 million crypto users worldwide.
PolyFlow, the infrastructure of PayFi, is integrating the transformative power brought to us by cryptocurrency 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. Ultimately, make the grand vision in the Bitcoin white paper a reality.
