Introducing PolyFlow — APayFi Protocol Linking Real World Assets with DeFi Introducing PolyFlow — A PayFi Protocol Linking Real World Assets with DeFiBackgroundAs Bitcoin’s whitepaper titled, “Bitcoin: A Peer-to-Peer Electronic Cash System,” it is all about a decentralized, peer to peer, digital cash system. Payments delivery is one of the earliest promises of blockchain technology.In the ever changing world of digital finance, payments, currently built on the ancient rails that came with the rise of the internet 20 years ago, often fall short when it comes to digital assets.Blockchain is the new financial infrastructure — the new payments rails. Payments should be further built on-chain to facilitate the paradigm shift towards digital assets and uphold Bitcoin’s commitments.Polyflow has now reached a moment where it can leverage the power of blockchains and the true value of Web3.0 to set the vision laid out by the Bitcoin whitepaper into reality.PolyFlow IntroductionPolyFlow — the first decentralized PayFi infrastructure, connecting RWA and DeFI, aims to further promote efficient and free flow of value. Traditional payments, crypto payments, and DeFi are blended together here seamlessly. Handling real-world payment scenarios in a decentralized manner, PolyFlow drives the establishment of a new paradigm and industry standards.PolyFlow supports the development and implementation of various PayFi use cases through its modular design. It further enhances the composability and scalability of the DeFi ecosystem. Overall, PolyFlow constructs a business architecture for PayFi that is lightweight, compliant, free from custodial risks, and compatible with the DeFi ecosystem.PolyFlow is presenting two powerful tools — Payment ID (PID) and PolyFlow Liquidity Pool (PLP) in order to modularize the information flow and the fund flow within the payment process.PID handles the Information Flow. PID allows to realize powerful capabilities such as compliance, privacy protection, AI data processing, X-to-earn etc.PLP handles the Fund Flow. PLP manages funds within smart contracts for payment transactions. It ensures secure and compliant handling of digital asset circulation, custody, and issuance. PLP not only provides a framework for traditional payments but also introduces composability and scalability to DeFi ecosystems.To top it all, AI can help analyze a wealth of daily transaction data and return this information to its PID owner (previously wielded only by tech giants). The smart contract driven fees can be reflected in the PLP, introducing a risk free RWA yield category for DeFi ecosystem.Looking ahead, as a PayFi infrastructure, PolyFlow possesses the capability to enable on-chain credit. It assists PayFi applications in implementing various functionalities for consumers such as BNPL, pay-day-loans, credit cards etc; and for corporations, functionalities such as corporate credit, supply-chain financing, etc. PayFi cannot excel without real world applications. And it’s these use cases that can drive crypto towards mass adoption.Not only can PolyFlow support and materialize these use cases revolutionizing the traditional financial products, it can also empower exchanges, payment gateways, banks, supply chain finance services, and settlement networks, to expand and enhance their operations in the digital asset era. At the same time, it allows all the participants to share the profits of PayFi driven returns, truly realizing the value of Web3.0.The Current DilemmaIn the current business model of crypto payments, whether it’s payment solution providers or asset management service providers, most operate in a centralized manner. These centralized institutions lack transparency, and the risk between trading counterparts can easily lead to single points of failure. Additionally, centralized decision-making contributes to widespread custodial risks. These issues have long plagued the industry, adding significant complexity to transactions and causing concern for regulatory agencies:Centralized custody: Institutions holding user-related private keys exposing user assets to significant custody risks.Traditional fiat settlement: The current crypto payment model is transitional and must be integrated with traditional fiat settlement systems, resulting in increased costs and inefficiency.Regulatory blind spots: Opaque centralized institutions, coupled with incomplete cryptocurrency legal frameworks, pose significant challenges for regulation.Service limitations: Single institutions supporting limited categories of cryptocurrency payment services struggle to meet diverse user needs.DeFi incompatibility: Centralized institutions cannot effectively integrate with the DeFi ecosystem, hindering widespread adoption of PayFi.As we know, these centralized institutions, mostly represented by banks and exchanges, have collapsed in the past and are likely to do so again. Looking back at the 2008 global financial crisis and the recent collapses of FTX and Silicon Valley Bank in 2023, these are vivid lessons in the market. Addressing these issues is also the purpose outlined in the Bitcoin whitepaper.Crypto payments is in dire need of a modern infrastructure capable of addressing compliance challenges, custodial risks, anti-money laundering (AML) measures, and the integration of new digital assets. Similarly, decentralized finance (DeFi) requires a fresh infrastructure to provide new sources of yield, facilitate regulatory compliance, and enable the inclusion of real-world assets.PolyFlow’s PayFi SolutionThe 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.PolyFlow’s core concept revolves around modular design, 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.Payment ID (PID)PID is a decentralized ID that is linked to encrypted user privacy-protected KYC/KYB information. It associates users with verifiable credentials across multiple platforms. It can achieve the following:Compliance Access: PID can include validation information from different platforms, which can be conveniently shared using QR codes. This structured identification and transaction management method simplifies the verification process for partners while remaining compatible with the DeFi ecosystem. Importantly, it bridges the information silos previously built by centralized institutions, connecting an open decentralized identity system through PID, empowering the entire traditional finance/DeFi ecosystem.Privacy Protection: PID utilizes various technologies, including zero-knowledge proofs, to fulfill anti-money laundering (AML) and counter-terrorism financing (CTF) obligations without compromising user privacy. This is a prerequisite for user participation in the traditional finance/DeFi ecosystem.Data Sovereignty: PID is derived from splitting transaction information flows. On one hand, it provides feedback to regulators about fund movements, meeting compliance requirements. On the other hand, it returns behavioral data on the blockchain to individual users. Users can contribute PID-tagged data for AI analysis in exchange for rewards and token incentives. This differs from the past practice of centralized institutions profiting from stealing such data. Additionally, PID plays a crucial role in building on-chain credit systems.PolyFlow innovatively introduces PID, providing revolutionary advantages for the crypto payment industry. It not only serves as a bridge between traditional finance and DeFi ecosystems but also offers users a flexible and reliable way to manage digital identities, participate in cross-platform transactions, and build on-chain credit.Payment Liquidity Pool (PLP)PLP is a product derived from splitting out transaction fund flow from the payment process. The smart contract address provided by the liquidity pool is used to receive funds, achieving on-chain custody of assets without relying on the traditional method of expensive enterprise wallets used by centralized institutions for asset management, fund aggregation, and yield generation. This more decentralized PLP model can achieve the following:Digital Assets Self-Custody: It brings convenient, secure, and compliant custody methods to PayFi applications, ensuring asset safety while minimizing the need for transaction intermediaries.Liquidity Pool: By aggregating transaction funds through smart contract addresses, PLP provides liquidity for financing needs in payment transactions.DeFi Ecosystem Compatibility: Centralized applications are incompatible with the decentralized DeFi ecosystem. PLP, built on blockchain, seamlessly connects to the DeFi ecosystem and brings DeFi business logic to PayFi applications.Risk-Free RWA (Real-World Assets) Yield Category: The protocol’s generated yield directly reflects in PLP. This income, based on real-world payment transaction scenarios, provides a risk-free stable yield source for DeFi.The flexible architecture of PLP allows it to eliminate the asset custody risk of transaction intermediaries, while ensuring that PayFi applications can adapt to the ever-changing landscape of digital assets.Materializing RWA Returns On-chainPLP can be considered a risk-free DeFi income product suitable for on-chain cash flow management. This is an unprecedented breakthrough, as previous DeFi yield models inherently carried risks. For instance, financial products based on decentralized exchanges always faced the risk of impermanent losses, and collateral in on-chain lending products could be impacted by volatile underlying asset prices. These are very common scenarios within the DeFi ecosystem.PLP directly generates risk-free income from transaction fees in real payment scenarios. For example, in a payment gateway context, when consumers make payments to the smart contract address within PLP, liquidity providers can earn payment-related rewards by settling funds in case of merchants requesting early payments.Most importantly, this process is risk-free, with the yield determined by the ratio between liquidity providers’ funds and total transaction volume. PLP can offer attractive fixed or flexible-term financial products, supporting supply chain finance, wallet settlement networks, stablecoins, insurance, and other innovative applications within the PayFi ecosystem.Solid Team Bringing Rapid AdvancementThese innovations do not happen overnight. Along with it, comes 20 years of comprehensive operational experiences in the traditional FIAT crossborder payment industry and in-depth knowledge of cryptocurrency and blockchain.PolyFlow is the results of an outstanding team consisting of members from large cross-border payment companies supplying Apple, Amazon, and Tiktok payments; from international standard organizations like W3C, Linux Foundations, IEEE, etc; from investment banks in New York, Hongkong, Singapore, Dubai, London; PolyFlow also has licensed partners in banking and payment firms from all of the major countries as well as LatAm, APAC and Africa; from wealth management firms that handles $100bn+ in both liquid and non-liquid assets; and from trade financing companies which deals with global cross border goods and commodity trades.PolyFlow owes much of its progress to early investors. In addition to the team’s two decades of accumulated resources in cross-border financial payments, CE Innovation Capitals, Hash Global, Stellar Foundation and Community Fund, ZC Capitals, and Meters Network provided over $5 million in funding support during the early stages. This enabled PolyFlow to achieve over $200 million in transaction volume within just one year. Furthermore, PolyFlow closely collaborates with mature cryptocurrency payment infrastructures such as Stellar and Ripple, receiving their sponsorship to jointly support and build new infrastructure for PayFi and the future Web3.0 economy.
