In the 2024 State of Crypto report published by A16z, it states: "By enabling fast, cheap, global payments, among other uses, stablecoins have become one of crypto’s most obvious “killer apps”... The proliferation of dollar stablecoins — rendered possible by the ubiquity of smartphones and the cryptography of blockchains — could become the greatest experiment in financial empowerment humanity has ever undertaken.”

Stablecoins have simplified value transfer, with quarterly transaction volumes now exceeding more than twice of Visa's $3.9 trillion, and assets worth trillions of dollars settled annually, showcasing their practicality. Furthermore, in terms of daily active addresses, stablecoins account for nearly one-third of daily cryptocurrency usage at 32%, second only to decentralized finance (DeFi) sector at 34%.

（State of Crypto Report 2024: New data on swing states, stablecoins, AI, builder energy, and more）

The recently emerging trend of PayFi, is an innovative application that combines both crypto payments and DeFi.

Serving as an infrastructure layer for PayFi, PolyFlow is integrating the transformative power of digital currencies and blockchain technology, to create a set of new PayFi crypto payment rails. This supports the rapid adoption of PayFi applications, propelling a shift towards innovative financial paradigms and unlocking the true value of Web3. Ultimately, it aims to bring the ambitious vision of the Bitcoin whitepaper to life.

I. What is PayFi?

PayFi (Payment Finance) is an innovative application model that combines payment functions with financial services using blockchain and smart contract technology. Its core is to utilize blockchain as the settlement layer, combining the advantages of crypto payments and DeFi to promote efficiency and freedom of value movement.

PayFi aims to realize the vision of the Bitcoin whitepaper, creating a peer-to-peer electronic cash payment network without trusted third parties, while fully leveraging DeFi’s advantages to create a new financial market. This includes offering new product experiences, building more complex financial products and application scenarios, and ultimately integrating into a new value chain.

PayFi was first coined by Solana Foundation Chairwoman Lily Liu at the 2024 Hong Kong Web3 Carnival. She posits that PayFi is constructed around the Time Value of Money (TVM), creating a new financial market that is difficult or impossible to achieve in traditional finance.

In this new PayFi financial market, crypto payments improve traditional finance by offering instant settlements, cost reductions, transparency, and global reach. Combined with DeFi, it enables a decentralized global network with permissionless access, asset ownership, and self sovereignty.

II. PolyFlow, an infrastructure for PayFi

The fusion of crypto payments and DeFi has given rise to PayFi. PayFi seeks an entirely new infrastructure to support its implementation and address complex compliance issues. Since Solana Foundation Chair Lily Liu introduced the concept of PayFi at the Hong Kong Web3 Summit, PolyFlow has been regarded as one of the pioneering protocols aimed at constructing the financial infrastructure for PayFi.

The vision of PolyFlow is to build a decentralized infrastructure to support the deployment of more PayFi applications, participate in the global payment network, reduce regulatory compliance pressures, eliminate custody risks, and minimize third-party involvement whenever possible.

PolyFlow’s core concept revolves around modular designs, decoupling the transaction information flow and fund flow previously controlled by centralized institutions. By doing so in a decentralized manner, it enhances compliance with regulatory standards and reduces custody risks throughout the transaction process. Additionally, PolyFlow leverages blockchain features to connect with the DeFi ecosystem, facilitating the widespread adoption of PayFi applications.

PolyFlow introduces two key components: Payment ID (PID) and Payment Liquidity Pool (PLP).

PID is associated with payment information flow, serving as a powerful tool for user identity verification, compliance access, privacy protection, data sovereignty, AI data processing, and X to earn.

PLP is associated with payment fund flow, managed by smart contracts, providing a secure, compliant framework for digital asset value movement, custody, and issuance, while incorporating DeFi’s composability and scalability.

Therefore, PolyFlow builds a business architecture for PayFi applications, with light regulatory compliance, no custody risks, DeFi compatibility, and a secure and compliant framework for digital asset value movement, custody, and issuance.

III. How PolyFlow Enables PayFi

Current crypto payment services remain at a rudimentary stage, mainly using digital currencies as a medium of exchange in scenarios like cross-border remittances, OTC trading, and payment cards. These centralized approaches struggle to connect with the decentralized finance (DeFi) ecosystem, limiting its application adoption.

To fully integrate crypto payments with DeFi and build innovative PayFi applications, we need a new infrastructure——PolyFlow, along with its key components, Payment ID (PID) and Payment Liquidity Pool (PLP).

PayFi applications can first select a suitable blockchain for transaction settlement and stablecoins for the medium of exchange based on their needs. For example, Solana’s high-performance blockchain might be selected with a stablecoin rail based on PayPal’s PYUSD.

Beyond these choices, PayFi applications must address two critical elements in the tech stack: asset custody and compliance access.

3.1 Asset Custody

Asset custody is vital in the financial sector (both on-chain and off-chain). For off-chain payments, asset custody typically requires licensing and strict compliance. For on-chain crypto payments, asset custody should further address issues like smart contract security, private key management, and compatibility with traditional finance and DeFi.

PolyFlow’s Payment Liquidity Pool (PLP) utilizes smart contract addresses to receive funds for payment transactions, implementing on-chain asset custody without relying on costly, centralized enterprise wallets.

The decentralized model of PLP offers the following advantages:

• Decentralized Asset Custody: Provides convenient, secure, and compliant asset custody for PayFi applications, ensuring fund safety while minimizing the need for intermediaries.
• Liquidity Pool: By aggregating transaction funds via smart contract addresses, PLP supports liquidity needs for payment transaction financing.
• DeFi Compatibility: Centralized applications are incompatible with the DeFi ecosystem, but blockchain-based PLP can seamlessly connect with DeFi.
• Risk-Free RWA Yield Category: Revenue generated by the protocol is reflected directly in PLP, providing a stable, risk-free revenue source from real-world payment transactions for DeFi.

This PLP structure can integrate flexibly with the DeFi ecosystem, ensuring that PayFi applications can adapt to the evolving digital asset landscape.

3.2 Compliance Access

Compliance access is essential to foster a healthy financial payment ecosystem. The core requirement here is ensuring all transactions and fund flows meet KYC/AML/CTF standards and align with the regulatory frameworks of relevant jurisdictions.

To address this, PolyFlow introduces the Payment ID (PID), which can link encrypted KYC/KYB proof information with verified credentials across multiple platforms, enabling:

• Compliance Access: PID can incorporate verification information across multiple platforms, simplifying verification for partners.
• Privacy Protection: Using technologies like zero-knowledge proofs, PID enables compliance with AML/CTF obligations without compromising user privacy. This is a prerequisite for users participating in both traditional finance and DeFi ecosystems.
• Data Sovereignty: PID allows transaction information to be shared with regulators to meet compliance requirements, while also returning on-chain behavioral data to users.
• AI-Driven Insights: In addition to KYC/KYB information, PID can connect with transaction data uploaded off-chain or collected on-chain. AI can analyze this data to extract additional value for PID holders, playing a critical role in establishing on-chain credit systems.

The innovative introduction of PID offers transformative benefits to the industry, bridging traditional finance and DeFi while providing users with a flexible, reliable method to manage digital identities, engage in cross-platform transactions, and build on-chain credit.

（https://x.com/Polyflow_PayFi）

IV. PolyFlow’s Real-World Application in PayFi

With general access to blockchain and stablecoin, alongside PolyFlow’s unique asset custody and compliance modules, more PayFi will be built on chain and come to reality.

Recently, the DePIN project Roam and RWA platform Huma Finance collaborated on the DePIN hardware loan program. This initiative aims to expedite the deployment of Roam’s DePIN hardware, to accelerate its development of a global decentralized Wi-Fi network.

PolyFlow plays an essential role in this innovative PayFi use case.

（https://x.com/Polyflow_PayFi）

PID offers a credit basis for loans, enabling credit from Roam network to pass through to reach individual miners (End Users). This facilitates microloans for single or multiple miner users. PLP, as the fund carrier for these loans, ensures secure and compliant custody of funds without relying on intermediaries. Further, leveraging Solana’s consensus ledger, it eliminates the heavy burden of building a strong trust relationship for credit activity.

Users can stake future cash flows generated by Roam Growth products, using Roam Tokens or NFTs as collateral. This allows them to quickly obtain loans to purchase Roam Wi-Fi hardware, contributing to the global decentralized Wi-Fi network while earning RoamPoints as rewards.

This “Buy Now Pay Never” innovation built on PolyFlow, introduces a new financial application model (Micro Lending) for the entire DePIN industry, significantly accelerating network construction and advancing the sector to its next growth phase.

In addition to this, PolyFlow actively collaborates with traditional financial institutions, Web3 projects, and other partners to explore diverse PayFi applications such as cross-border payments, payment cards, payment gateways, wallet settlement networks, supply chain finance, and DePIN financing.

V. The Future of PayFi

The rapid rise of stablecoins over the past five years signifies their emergence as a currency running parallel to traditional financial infrastructure. We now see stablecoins increasingly utilized in non-transactional settings, becoming a part of our everyday life.

The advent of PayFi further enhances the financial applications of stablecoins, promoting financial inclusion for global users and advancing crypto toward true mass adoption.

As a foundational infrastructure, PolyFlow has already planted the seeds of PayFi, and poised for growth, with a promising bright future ahead.