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The non-transactionalization of cryptocurrencies composes the Web3 way out exploration
Compared with the separatist rule of Ethereum, Solana’s ecosystem is smaller but has stronger action. After the collapse of FTX, Solana relied on high-performance, strong marketing and various hardware products to become popular again.
Specifically, high performance refers to the Firedancer upgrade, strong marketing is the Meme season, and hardware is various Web3 phones, but these are not enough. PayFi proposed by Lily Liu, chairman of Solana Foundation, has also become a hot topic, although the hot topics in July 10The writing of the month is a bit outdated, but in the long run,The entire Web3 industry has turned to off-chain and real consumption scenarios..
“A long time ago, you owned me, I owned you.”
This article is not a song made for Solana, but a song written for Web3’s way out.
The idea of encrypted wallets is hard to calm down: PayFi’s first voice
Before giving Lily Liu’s definition of PayFi, let’s talk about Web3 wallets. From 2022 to 2023, with the traffic anxiety of smart contract wallets, account abstraction (AA) and exchanges, a number of Web3 wallets have ushered inFollowing the second peak of the 2017-2021 Dog era.
From the perspective of the exchange, wallets are the main entrance for people to interact with the chain, and the subsequent traffic will flow in and out of thereafter, and even have the possibility of replacing CEX. Secondly, under the increasingly fierce competition in Ethereum L2, multi-chainTimes Wallet must be the main battlefield for aggregating liquidity.
However, the wallet ecosystem in 2024 is not eye-catching. OKX’s built-in Web3 wallet is already the leader, but in more cases it has not become an independent product. One of the important reasons is that the Web3 wallet has empty traffic and no transaction closed loop mechanism.That is, the wallet cannot solve the profit problem. If you want to charge a handling fee, the user will directly open the desktop product. Why not pay a less handling fee?
From the perspective of more “path dependence”, the problem of crypto wallets lies in the excessive pursuit of transaction characteristics. Please note that this does not conflict with the above-mentioned profit difficulties. The core product feature of crypto wallets lies in providing users with richer chainsThe transaction feature supports the support, from accessing more chains to more bidding ranking features dApp recommendation mechanisms.
User funds are not like Alipay. They are placed in crypto wallets. The non-custodial mechanism can be bought with peace of mind, but they cannot get the user’s sincerity. In a word, crypto wallets have no correlation with Web2 wallets, and they don’t care about money.Nor financial management.
The above factors make it impossible for crypto wallets to establish their own closed-loop payment system like PayPal, WeChat, or Alipay. From a broader business scenario, Web3 wallet only has users and no support from the merchant side. If dApp is considered a merchant, that is only a small number of on-chain merchants.
However, the wallet does have a lot of traffic, and the on-chain benefits or losses of DeFi can indeed be converted into off-chain consumption, but losses are also possible, because it depends on whether it is the ETH standard, the stablecoin standard, or the fiat currency standard.
A normal payments require support from the merchant and user side, but this is exactly the current industry shortcoming. Let’s explain this problem with the top male entrepreneur Chuan Bao. On September 19, 2024, Chuan Bao visited New York.PubKey bar and bought only 998 beer for supporters. Chuanbao used Strike to initiate payments, and merchants used Zaprite to collect payments.
In this case, the merchant and Chuanbao used the same payment system, which is difficult to imagine in the Web2 era. It is equivalent to Chuanbao using Alipay to pay, and merchants using WeChat to receive payment, but in Web3, it is said thatThrough it, because both parties use the Bitcoin network as the settlement layer, sort out the workflow:
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Chuanbao uses Strike to initiate payment requests, Strike calls Lightning Network to start the payment process, and Lightning Network initiates transactions after confirmation through the Bitcoin network;
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Merchant PubKey uses Zaprite to collect payments, Zaprite uses Lightning Network to confirm payment status, and Lightning Network ends the transaction after confirmation through the Bitcoin network.
In this process, Zaprite only has a subscription fee of $25. In addition, merchants only need to deduct miner processing fees, and the rest are their own income. We can compare it. Visa/MasterCard/AE, etc. need 1.95%-The handling fee is about 2%, while the average price of Bitcoin miner processing fees has been around $1.46 recently, and there is no need for handling fees to accept Bitcoin.
We continue to move forward,The logic of Web2 Payments is generally similar to that of Chuanbao buying beer, but there are quite a few intermediate links, which is also the disadvantage of Web2, and the opportunities for Web3 Payments and PayFi are also hidden in it.
Conduct concepts and product replacement. The products we usually use such as Alipay, WeChat Pay and Paypal are electronic wallets, which are aimed at the C-end, and the corresponding one is the B-end enterprise/merchant collection system. As long as a lightning network is builtThe fund clearing network can build the simplest P2B (personal and enterprise) interaction system. Generally speaking, the intermediate clearing network requires card organization and payment agreement to form together.
The above figure is an example. The Web2 payment system can be divided into P2P individuals, P2B and B2B individuals and businesses, as well as payment behaviors between merchants, and interbank transaction systems such as SWIFT or CIPS, orCross-border CBDC trading systems such as mBridge are carried out.
However, it should be noted that payment is strictly between individuals and enterprises, and between enterprises. We hereby include P2P and interbank in order to facilitate comparison with Web3 payment behavior, because in Web3, payment behaviorThe most important scenario is between individuals, such as Bitcoin, which is a peer-to-peer electronic cash payment system.
If we refer to the payment system of Web2, then the payment system of Web3 is very simple. Of course, theoretical simplicity cannot conceal the ecology’s fragmentation. An obvious feature is that the traditional payment system has more banks and fewer card organizations, so it has extremely strongThe network effect of Web3 is the opposite, with a lot of public chains/L2, but the main assets are only US dollar stablecoins, and only a few products such as USDT/USDC.
Even with the most optimistic estimate, there are only about 30,000 merchants supporting Bitcoin worldwide. Although in some regions, including big brands such as Starbucks, their acceptance is still incomparable to traditional card organizations or e-wallets.
Merchants such as Binance Pay/Solana Pay are more concentrated online merchants, such as travel OTA platforms such as Travala. The number of billion-level merchants that have expanded into cards on a large scale is still 100 million.
We will explain the content about the payment system in detail below, and it is time to introduce the concept of PayFi.
PayFi stack: The intersection of DeFi, RWA and Payments
The reason for adopting the narrative structure of first talking about Payments and then introducing PayFi is because the difference between the two is very large. Overall, PayFi is more like DeFi + Stablecoin + Payment System, and it does not have much relationship with Web2 Payments. As mentioned earlier, everyoneYou can feel something, too.
Let’s first explain Lily Liu. PayFi is the time value of money (TVM). For example, making money in DeFi is the TVM’s performance, but the problem is that this may take time, such as pledging tokens to obtain rewards.There will be a lock-up period, but as long as there are tokens, there will be a possibility of value-added. In previous operations, you can invest in DeFi after obtaining profits, so as to cycle and constantly look for the possibility of profits.
And now, this part of the revenue can turn to other directions, such as using expected revenue for current consumption, for example:
1. Alice invests USDC annual interest rate (APR) of 5% and receives US$105 in principal and interest income in one year;
2. Bob runs a watermelon stall. In order to sell more melons, he now allows Alice to come here to eat $5 melons with financial management certificates. A year later, Bob exchanges $5 for financial management products with tickets.
This example is very simple, so simple that it cannot stand scrutiny. For example, how Alice and Bob ensure the smooth execution of the contract, what should I do if Alice’s financial management income is reduced, but without considering these, Alice does not need to pay a cost to eatMelon, Bob received $5 in accounts receivable.
A year later, the bull market came, and Bob received a lot of $5 and was preparing to enter large enterprise suppliers. After choosing and choosing, he saw Evergrande looking for watermelon sellers, and the order was $5 million. Bob was very happy.But what Evergrande gave him was commercial tickets. With experience in cooperation with Alice, Bob happily accepted commercial tickets. The two parties agreed to give cash a year later, and if they didn’t give it, they would use the house to pay off the debt.
However, in half a year, Bob was preparing to enter the stock market. At this time, commercial tickets need to be cashed in. After PwC’s rating, Evergrande Commercial Tickets are AAA-level high-quality assets. Banks, non-financial institutions, and even individuals in the market want them.Everyone is crazy about robbing because Evergrande Real Estate has quality assurance and has great value-added potential.
Bob sold commercial tickets at an excess price of 5.01 million yuan, and the bank got commercial tickets, Evergrande got free sex, Bob got stock market dividends, and everyone has a bright future.(Generally, commercial tickets require discounts and handling fees. This is just an explanation of its workflow. Before the collapse of Evergrande Commercial Ticket, it was only about 7/2% off the face value of the Evergrande Commercial Ticket.)
Another meaning of TVM is to monetize non-circulating assets. Even non-circulating assets themselves can be currency or their equivalents, which has some similarities with the logic of re-pled. For details, please refer to Triangle Bond or Moderate Inflation: Restaking Re-pledan alternative perspective article.
In the Web3 context, the monetization of non-circulating assets can only be DeFi, so PayFi is a natural extension of DeFi, but the previous LEGO on-chain is extracted and a part of the liquidity is invested in the chain to improve life.
The relationship between PayFi and Payments is that payment is the easiest and most convenient way to meet the downlink of funds. PayFi and RWA intersect each other, but traditional RWA emphasizes “on-chain”, such as the so-called tokenization.The process requires tokenizing securities, gold or real estate to meet the possibility of on-chain circulation. Many alliance chains that are more familiar to China do this, such as blockchain electronic invoices, or Gongxinbao.
It is hard to say that PayFi is a subset of RWA. A considerable part of PayFi’s behavior is “downlink”. As for whether there is a link to the chain, it is not the focus of the PayFi concept, but its behavior needs to involve interaction with the off-chain link.
However, there is no need for everyone to worry about it. In many concepts of Web3, there is a lack of large-scale products and user groups. It is more about speculation on concepts and selling coins. A rough division is made. Products involving PayFi/Payments and RWA can be sorted out in the following time order.Division:
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Old times: Ripple, BTC (Lightning Network, BTCFi, WBTC), Stellar
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2022 RWA Concept Three Musketeers: Ondo/Centrifuge/Goldfinch
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New Era-2024 PayFi: Huma (already established, became popular in 2024), Arf
In fact, from the above-mentioned product development history, it is no problem that you say PayFi is the continuation of RWA. The traditional narrative, especially the business model of on-chain funds lending to off-chain entities is PayFi in 2024, and in 2022 they are all called RWA.
It can even be said that lending in RWA, cross-border settlement similar to Ripple, and off-chain consumption of stablecoins constitute several current PayFi aspects. In essence, these are the only contents.
It can be said that Web3 software and hardware are built on the material and ideas of Web2, and the same is true for Web3 PayFi.The similarity with Payments is actually greater than the difference, while lending products are actually more from the perspective of capital flow. If off-chain products can have more returns, then these returns can also be used for payment behavior.
Being misunderstood is the fate of the expressor. I don’t know whether Lily Liu agrees with such an interpretation, but I think that only by sorting it out in this way can the logic be smooth. As long as it meets the on-chain income for off-chain consumption scenarios, it is in line withPayFi concept, so the next focus of the market will be Web3 Payments, RWA Loan and stablecoins. In fact, the three can often be included in a cyclical process.
For example, RWA enterprise lending is denominated at the U-based level. Individuals enter the lending pool on the RWA chain through the DeFi protocol. After the RWA lending agreement is evaluated, the LP obtains the agreement share profit and passes the Mastercard U card.The withdrawal happened to be made by the merchants supporting Binance Pay, which was a perfect closed loop.
History belongs to the pioneers, not to the summary.It doesn’t matter how PayFi is defined. The top priority is to explore the real benefits beyond the involuntary on the DeFi chain. The demand from billions of people off the chain will bring more liquidity and higher leverage to the chain.Value-level support, whoever can run through can define the market.
