The Web3 industry is gradually shifting its focus beyond pure trading and speculation, exploring real-world consumption scenarios and off-chain applications. This transition is not just a trend but a necessary evolution for broader adoption and sustainability.
While Ethereum continues to dominate with its extensive ecosystem, Solana has emerged as a agile contender, leveraging high performance, strong marketing, and hardware integrations to regain momentum post-FTX collapse. Key developments like the Firedancer upgrade, meme coin seasons, and Web3 phones have played a role, but the concept of PayFi, introduced by Solana Foundation’s Lily Liu, represents a broader shift toward practical utility.
At its core, this movement is about reimagining cryptocurrency’s role beyond trading—enabling everyday payments, decentralized finance (DeFi) integrations, and real-world asset (RWA) utilization. This article explores the rise of PayFi and its implications for Web3’s future.
The Limitations of Current Crypto Wallets
Crypto wallets have long been seen as the gateway to blockchain interactions. From 2022 to 2023, innovations like smart contract wallets, account abstraction (AA), and exchange-integrated solutions brought renewed attention to wallet technology. However, by 2024, wallets struggled to achieve standalone success due to critical limitations.
Most wallets focus heavily on trading features, supporting multiple chains and dApp integrations, but they fail to create a closed-loop ecosystem. Unlike Web2 payment systems like PayPal or Alipay, crypto wallets don’t manage funds or offer financial services—they merely facilitate transactions. This lack of functionality makes it difficult to retain users or generate sustainable revenue.
Moreover, wallets lack merchant-side support. While dApps could be considered “merchants,” they represent only a fraction of potential commercial applications. Without widespread merchant adoption, crypto wallets remain isolated from real-world economies.
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The Rise of Web3 Payments
Web3 payments aim to bridge the gap between crypto assets and everyday transactions. Traditional payment systems like Visa or Mastercard involve multiple intermediaries, leading to fees ranging from 1.95% to 2%. In contrast, blockchain-based payments can reduce costs significantly.
For example, Bitcoin’s Lightning Network allows users to make instant, low-cost transactions. When former President Donald Trump used Strike to buy beer at a New York bar, the merchant used Zaprite to receive payment via Lightning. The entire process involved minimal fees—primarily network costs—compared to traditional card payments.
This case highlights the potential of Web3 payments: decentralized, efficient, and cost-effective. However, challenges remain. Currently, only about 30,000 merchants globally accept Bitcoin, and solutions like Binance Pay or Solana Pay are mostly limited to online platforms. Scaling to millions of merchants will require robust infrastructure and broader acceptance.
Understanding PayFi: Beyond Payments
PayFi, as conceptualized by Lily Liu, extends beyond payments by incorporating the time value of money (TVM). In DeFi, assets can generate yield through staking or lending. PayFi leverages this yield to enable immediate consumption without liquidating assets.
Consider this example:
- Alice invests 100 USDC in a DeFi protocol with a 5% annual yield.
- She can use her expected yield (5 USDC) to purchase goods from Bob, a merchant, who accepts her “yield voucher.”
- After one year, Bob redeems the voucher for 5 USDC from Alice’s matured investment.
This model allows Alice to spend future earnings today, while Bob gains access to deferred revenue. It mirrors traditional finance concepts like accounts receivable or commercial bills but operates on blockchain infrastructure.
PayFi intersects with RWA by tokenizing real-world assets, such as invoices or debts, making them tradable on-chain. However, unlike traditional RWA platforms that focus on “on-chainization,” PayFi emphasizes “off-chain” utility—using crypto assets for real-world transactions.
Key Components of PayFi
- DeFi Integration: Yield-generating protocols form the foundation, providing the earnings needed for spending.
- Stablecoins: Assets like USDT or USDC offer price stability for everyday transactions.
- Payment Gateways: Solutions like Lightning Network or Solana Pay enable seamless transfers.
- RWA Platforms: Protocols like Ondo or Goldfinch bridge on-chain liquidity with off-chain loans.
Together, these elements create a闭环 (closed-loop) system where crypto earnings fuel real-world spending, and real-world assets bring tangible value on-chain.
The Road Ahead for Web3
The transition to non-trading applications is critical for Web3’s mass adoption. While concepts like PayFi are still evolving, they represent a shift toward practical utility. Key challenges include:
- Regulatory Clarity: Governments must define frameworks for crypto payments and RWAs.
- Merchant Adoption: Businesses need user-friendly tools to accept crypto payments.
- User Education: Consumers must understand how to use DeFi yields for spending.
Despite these hurdles, the potential is immense. By tapping into off-chain demand, Web3 can attract billions of users and trillions in liquidity, moving beyond speculative trading to meaningful economic activity.
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Frequently Asked Questions
What is PayFi?
PayFi is a concept that combines DeFi yields with real-world spending. Users can spend anticipated earnings from investments without selling their underlying assets.
How do Web3 payments work?
Web3 payments use blockchain networks like Bitcoin or Solana to transfer value directly between parties, reducing intermediary fees and processing times.
What are the benefits of using crypto for payments?
Benefits include lower transaction fees, faster settlements, and access to global markets without traditional banking barriers.
Is PayFi safe?
While innovative, PayFi relies on smart contracts and external protocols. Users should assess risks like yield volatility or counterparty defaults.
Can PayFi work with any cryptocurrency?
Stablecoins are ideal due to their price stability, but volatile assets can also be used with proper risk management.
How does PayFi relate to RWA?
PayFi often involves tokenized real-world assets (e.g., invoices or loans), enabling on-chain trading and off-chain utility.
Conclusion
The evolution toward non-trading applications marks a new chapter for Web3. Concepts like PayFi demonstrate how cryptocurrency can integrate into everyday economies, offering tangible benefits beyond speculation. While challenges remain, the industry’s focus on utility and adoption will ultimately determine its success.