PayFi: The Key to Building a New Financial Market

As the cryptocurrency market moves towards widespread adoption, traditional financial markets are undoubtedly a vast blue ocean. While we have seen some developmental paths, such as the rise of asset tokenization, the current early-stage physical asset on-chain models struggle to sustain in the long term due to a lack of liquidity. Even if distributed physical infrastructure networks can facilitate the resurgence of the Internet of Things, they still struggle to address the core issues.

Therefore, Web3 payments have become an important breakthrough. It is expected to promote the widespread use of stablecoins, especially in non-trading scenarios. According to data, the total supply of stablecoins is approximately $170 billion, settling assets worth trillions of dollars each year. About 20 million addresses conduct stablecoin transactions every month, with over 120 million addresses holding a non-zero stablecoin balance.

Web3 payment brings the advantages of instant settlement, 24/7 availability, and low-cost transactions to traditional financial payment networks. However, this is far from enough. We should focus more on the new financial markets brought about by the innovative applications of PayFi. As a new financial model that integrates Web3 payment, physical assets, and decentralized finance, PayFi is expected to become an important force in driving industry development.

The Essence of PayFi

PayFi, short for Payment Finance, is an innovative application model that combines payment functions with financial services based on blockchain and smart contract technology. It uses blockchain as the settlement layer, leveraging the advantages of Web3 payments and decentralized finance to facilitate the efficient and free flow of value.

PayFi aims to realize the vision of the Bitcoin white paper by building a peer-to-peer electronic cash payment network that does not require 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 innovative financial experiences, developing more complex financial products and application scenarios, and ultimately forming a completely new value chain.

In this emerging PayFi financial market, not only can Web3 payments achieve efficiency improvements over traditional finance, such as instant settlement, reduced costs, transparency, and global reach, but it can also enable a decentralized global network based on decentralized finance, with permissionless access, asset ownership, and personal sovereignty.

The Relationship Between PayFi and Related Concepts

PayFi is not equivalent to Web3 payments. While 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 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 collection, transfer, and settlement processes of digital assets, rather than the mainstream trading activities of decentralized finance. By seamlessly integrating Web3 payments with decentralized finance through blockchain and smart contract technologies, it is possible to create financial derivative services based on payment-related activities.

PayFi is also not equivalent to physical assets. Physical assets have two meanings here: first, asset tokenization, which means putting assets on the blockchain to achieve seamless value transfer; second, fundraising for physical assets, 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. This model not only covers payments and transactions of digital assets but also includes financial activities such as lending, wealth management, and investment. Through blockchain and smart contract technology, PayFi makes global financial payment activities faster and cheaper, while reducing friction and costs in 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, helping traditional financial payment companies leverage blockchain technology to gain a larger market share. Conversely, the Web3 community can use payments as a medium, utilizing blockchain technology to address the pain points of the traditional financial system, achieving new financial paradigms and product experiences.

Current Web3 payments are still in the early stages, primarily using digital currencies as a payment medium in scenarios such as cross-border remittances, over-the-counter transactions, and payment cards. This semi-centralized approach makes it difficult to fully integrate with the on-chain decentralized financial ecosystem, leading to limited scenarios. However, with the development of PayFi, the value transfer methods based on blockchain and smart contract technology will accelerate the integration of Web3 payments and decentralized financial services, improving the practicality and efficiency of digital assets in everyday transactions and complex financial environments.

The emergence of PayFi is expected to break the long-standing divide between traditional finance and crypto finance, becoming a key force in driving the mass adoption of cryptocurrencies. It not only addresses superficial Web3 payment issues, such as cross-border fund transfers and financial inclusion, but more importantly, it can effectively separate the information flow and fund flow of transactions, forming a consensus on the fund flow in the unified ledger of the blockchain, thereby enhancing the efficiency of the entire Web3 industry.

Advantages of Solana's PayFi

Solana has unique advantages in the development of PayFi, mainly reflected in three aspects: high-performance public chain, capital liquidity, and talent mobility. From the perspective of PayFi infrastructure, Solana is competitive on multiple levels:

1. Blockchain Settlement Layer: Solana features high throughput, low cost, and fast settlement, providing a solid foundation for the rapid implementation of PayFi projects.

2. Currency Layer: Solana has partnered with multiple financial institutions to launch various stablecoins, such as PYUSD, providing ample liquidity support for on-chain transactions.

3. Asset Custody Layer: The Solana ecosystem focuses on the security of smart contracts, private key management, and compatibility with traditional finance and decentralized finance.

4. Compliance Layer: Solana ecosystem projects focus on meeting KYC/AML/CTF requirements and adapting to the laws and regulations of different jurisdictions.

5. Application Layer: Solana has built a rich array of C-end application scenarios, forming a trend of collective operations. At the same time, it is actively laying out the B-end market, providing liquidity support for payment scenarios in cross-border trade and supply chain finance.

Solana is gradually establishing its positioning as a "payment chain," becoming the preferred blockchain solution for consumer retail and payment-related services. Its strategy is clear: to build an on-chain economy through decentralized finance and to achieve mass adoption through PayFi.

Conclusion

In the long term, the Web3 industry has inevitably shifted towards off-chain and real consumption scenarios. PayFi provides the possibility of realizing the industry goals of "making decentralized finance great again" and "promoting the mass adoption of cryptocurrency."

PayFi not only helps the traditional payment market reduce costs and increase efficiency, but more importantly, it can truly build a bridge between the traditional financial market and the crypto financial market. Through the development of stablecoins, PayFi accelerates the integration of payment and financial services, creating a brand new financial market.

In the future financial ecosystem, PayFi will become a key driving force, providing users with a more free and efficient financial service experience.