PayFi: A Key Boost for Crypto Assets to Achieve Mass Adoption

In the process of seeking large-scale applications in the Crypto Assets market, traditional financial markets are undoubtedly a vast blue ocean. Although we have seen some development paths, such as the rise of asset tokenization, the current early-stage model of physical assets migrating to the chain lacks long-term sustainability. Even if the Internet of Things may be rejuvenated by the decentralized physical infrastructure network (DePIN), it still struggles to address the core issues.

Therefore, Web3 payments have become an important focus. They are expected to drive the widespread adoption of stablecoins, especially in non-trading scenarios. Data shows that the total supply of stablecoins is approximately $170 billion, settling assets worth trillions of dollars each year. Approximately 20 million on-chain addresses transact with stablecoins each month, with over 120 million addresses holding a non-zero stablecoin balance.

Web3 payment brings advantages such as instant settlement, 24/7 availability, and low-cost transactions to traditional financial payment networks. However, this is far from enough. What we should focus on is the new financial market brought about by the innovative applications of PayFi. PayFi, as an emerging concept that integrates Web3 payment, physical assets, and decentralized finance, is expected to drive the Crypto Assets market to expand into broader fields.

The Essence of PayFi

PayFi, or payment finance, is an innovative application model that combines payment functions with financial services based on blockchain and smart contract technology. Its core lies in utilizing blockchain as the settlement layer, integrating the advantages of Web3 payments and decentralized finance to promote the efficient and free circulation of value.

PayFi aims to realize the vision of the Bitcoin white paper by building a peer-to-peer electronic cash payment network without the need for a trusted third party. At the same time, it fully leverages the advantages of decentralized finance to create a brand new financial market, including providing new financial experiences, building more complex financial products and application scenarios, and ultimately integrating an innovative value chain.

In this emerging PayFi financial market, it is not only possible to achieve efficiency improvements in Web3 payments compared to traditional finance, such as instant settlement, reduced costs, transparency, and global reach, but also to realize decentralization of the global network based on decentralized finance, with permissionless access, asset ownership, and personal sovereignty.

The Relationship Between PayFi and Related Concepts

PayFi is not entirely equivalent to Web3 payments. Although Web3 payments have achieved multiple efficiency improvements over traditional finance based on blockchain technology, PayFi is a further construction, expansion, and deepening on this basis, introducing decentralized finance to build a brand new financial market.

PayFi is not entirely equivalent to decentralized finance. The essence of payment is based on the transfer of value in the real world. Therefore, PayFi focuses more on the transfer and settlement processes of digital assets, rather than the mainstream trading activities of decentralized finance. By seamlessly connecting Web3 payments with decentralized finance through blockchain and smart contract technologies, it is possible to create financial derivative services related to payments.

PayFi is also not entirely equivalent to physical assets. Physical assets here have two meanings: first, asset tokenization, which is converting assets into on-chain tokens to achieve seamless value transfer; second, physical asset fundraising, which provides liquidity support for financing needs in the PayFi scenario.

Therefore, PayFi is an innovative application that integrates Web3 payments, decentralized finance, and physical assets, rather than being a standalone new concept. This model not only covers the payment and trading of digital assets but also includes financial activities such as lending, wealth management, and investment. Through blockchain and smart contract technology, PayFi not only makes global financial payment activities faster and cheaper but also reduces the friction and costs associated with traditional financial payment services.

The Significance and Value of PayFi

The true meaning of PayFi lies in promoting the application of digital assets in real-world scenarios. From a positive perspective, PayFi can facilitate the migration of the Web2 community to Web3, for example, traditional financial payment companies can leverage blockchain technology to gain a larger market share. From a negative perspective, the Web3 community can use payment as a medium to employ blockchain technology to address the pain points of the traditional financial system, achieving new financial paradigms and product experiences that traditional finance cannot.

Currently, Web3 payments are still in a relatively early stage of basic services and primitive state, more often using digital currencies as a medium of payment for transactions, such as cross-border remittances, over-the-counter trading, payment cards, and other scenarios. This semi-centralized approach makes it difficult to fully connect to the on-chain decentralized financial ecosystem, and the scenarios are relatively limited.

With the development and promotion of PayFi, this value transfer method based on blockchain and smart contract technology can accelerate the integration of Web3 payments and decentralized financial services, making digital assets more practical and efficient in everyday transactions and more complex financial environments.

The emergence of PayFi is expected to address the long-standing separation between traditional finance and Crypto Assets finance. In the future global financial ecosystem, PayFi will undoubtedly become a key driver for the mass adoption of crypto assets.

Industry experts believe that PayFi addresses not only the superficial issues that Web3 payments need to solve, such as the challenges of cross-border fund transfers and the low level of financial inclusion. It also needs to tackle the most fundamental issue at hand: effectively separating the information flow and the fund flow of transactions, allowing everyone to reach a consensus on the flow of funds on the blockchain's unified ledger. Only then can the overall efficiency of the Web3 industry be improved and promote real large-scale applications.

How a Public Blockchain Becomes the Natural Soil for PayFi Development

Regarding how a certain public chain can become the natural soil for the development of PayFi, industry experts provide the answer: "This public chain has three major advantages: high-performance public chain, capital liquidity, and talent mobility." These advantages create barriers that other competitors find difficult to overcome at this stage.

In addition, it can also be analyzed from the perspective of PayFi infrastructure:

Blockchain Settlement Layer

As a foundational infrastructure for settlement, although there are many optional blockchain settlement networks, this public chain stands out in terms of high throughput, low cost, and fast settlement. With further performance improvements brought about by future technological upgrades, it will facilitate the rapid implementation of the PayFi project.

Currency Layer

In addition to the efficiency and smoothness of the underlying settlement network, there also needs to be sufficient liquidity support, especially from stablecoins that serve as on-chain transaction mediums. The collaboration of this public chain with multiple fintech companies, along with the recent launch of new stablecoins, demonstrates its advantages in this field.

Asset Custody Layer

Asset custody is crucial in finance (on-chain/off-chain). For blockchain-based PayFi, it is necessary to consider how to ensure the security of smart contracts, private key management, and compatibility with traditional finance and decentralized finance.

Compliance Layer

Only by conducting user compliance 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 fund flows comply with KYC/AML/CTF requirements, while also adapting to the laws and regulations of the local judicial jurisdiction.

PayFi application layer

Based on the above foundational layer, it can support the actual implementation of PayFi applications. This public chain has already built numerous application scenarios aimed at consumers through its infrastructure, forming a trend of coordinated group operations, and possesses construction reserves far exceeding those of other public chains.

Conclusion

In the long term, the entire Web3 industry is shifting towards off-chain and real consumption scenarios, which has become a major trend. Whether it is "making decentralized finance great again" or "bringing Crypto Assets to mass adoption", these slogans often mentioned in the market can finally be realized through PayFi.

Blockchain and smart contract technology can make traditional payments faster and cheaper than ever before, but the use cases that help traditional markets reduce costs and increase efficiency are more about value capture on the part of traditional payment companies. This is good, but not the ultimate goal.

PayFi can truly bridge the traditional financial market and the Crypto Assets market, accelerating the integration of payment and financial services through the rise of stablecoins. It's not just about reducing costs and increasing efficiency, but about creating an entirely new financial market. In this market, every participant can gain unprecedented opportunities and value.

In the future financial ecosystem, PayFi will become a key driving force, paving the way for the widespread application of Crypto Assets.