PayFi: A New Path for Crypto Assets Market Towards Mass Adoption

In the process of seeking large-scale applications in the Crypto Assets market, the traditional financial market is undoubtedly a huge opportunity. Although we have already seen some development paths, such as the rise of asset tokenization, the current early-stage model of physical assets migrating to the blockchain still lacks sufficient liquidity and is difficult to sustain in the long term. Even though the development of the Internet of Things may bring new vitality to decentralized physical infrastructure, it still does not address the core issue.

In this context, the emergence of Web3 payments has attracted widespread attention. It has the potential to drive the widespread adoption of stablecoins, especially in non-trading scenarios. According to data platforms, the total supply of stablecoins has reached approximately $170 billion, settling trillions of dollars in assets annually. Approximately 20 million addresses are engaged in stablecoin transactions on-chain 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 transaction costs to traditional financial payment networks. However, these advantages are still far from sufficient. More importantly, we should focus on the new financial markets brought by the innovative applications of PayFi. As an emerging concept that integrates Web3 payments, physical assets, and decentralized finance, PayFi is expected to drive the development of the Crypto Assets market into broader fields.

Definition and Features 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 is to utilize blockchain as a settlement layer, integrating the advantages of Web3 payments and decentralized finance to promote the efficient and free circulation of value.

The goal of PayFi is 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 new financial experiences, constructing more complex financial products and application scenarios, and ultimately integrating a completely new value chain.

In this new PayFi financial market, not only can Web3 payments achieve efficiency improvements over traditional finance, such as instant settlement, lower costs, transparency, and global reach, but it can also realize decentralization, permissionless access, asset ownership, and personal sovereignty based on decentralized finance.

The Relationship Between PayFi and Related Concepts

PayFi is not entirely equivalent to Web3 payments, decentralized finance, or physical assets. It is an innovative application that integrates these concepts. PayFi builds upon, expands, and deepens Web3 payments, introducing decentralized finance to create a brand new financial market.

Compared to decentralized finance, PayFi focuses more on the processes of sending and receiving digital assets and settlement, rather than mainstream trading activities. It seamlessly integrates Web3 payments with decentralized finance through blockchain and smart contract technology, creating payment-related financial derivative services such as lending and wealth management.

In terms of physical assets, PayFi involves two aspects: first, asset tokenization, which puts assets on the blockchain to enable seamless value transfer; second, providing liquidity support for financing needs in PayFi scenarios. This model not only covers payments and transactions of digital assets but also incorporates financial activities such as lending, wealth management, and investment.

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, it can help traditional financial payment companies leverage blockchain technology to gain a larger market share. From a negative perspective, the Web3 community can use payments as a vehicle to address the pain points of the traditional financial system through blockchain technology, achieving a new financial paradigm and product experience.

With the development of PayFi, the value flow methods based on blockchain and smart contract technology will accelerate the integration of Web3 payments and decentralized financial services, making digital assets more practical and efficient in everyday transactions and complex financial environments. The emergence of PayFi is expected to address the long-standing separation between traditional finance and Crypto Assets, becoming a key driver for the large-scale application of the crypto market.

Infrastructure Requirements of PayFi

To implement PayFi, the following key infrastructure components are required:

1. Blockchain Settlement Layer: As the underlying infrastructure for settlement, it requires high throughput, low cost, and fast settlement characteristics.

2. Currency Layer: Sufficient liquidity support is needed, especially for stablecoins as on-chain trading mediums.

3. Custody Layer: Ensure the security of smart contracts, private key management, and compatibility with traditional finance and decentralized finance.

4. Compliance Layer: Ensure that all transactions and fund flows comply with KYC/AML/CTF requirements while adapting to the laws and regulations of the local jurisdiction.

5. PayFi Application Layer: Based on the above foundational layer, it supports the practical implementation of PayFi applications.

Conclusion

In the long term, the shift of the Web3 industry towards off-chain and real consumption scenarios has become an inevitable trend. PayFi provides the possibility for the slogans "Making decentralized finance great again" and "Bringing Crypto Assets to mass adoption."

PayFi not only helps traditional markets reduce costs and increase efficiency, but more importantly, it can truly bridge the gap between traditional financial markets and Crypto Assets markets. With the rise of stablecoins, PayFi accelerates the integration of payment and financial services, creating a brand new financial market. In this market, individuals have more financial autonomy and choices.

In the future financial ecosystem, PayFi will become a key force driving the development of the Crypto Assets market, opening new paths for financial innovation and inclusive finance.