In April 2024, at the Hong Kong Web3 Carnival, Lily Liu, the chairperson of Solana Foundation, first introduced the term "PayFi" to the forefront. The audience was filled with blockchain professionals, and most people's reaction was: another new narrative.

Two years later, no one says that anymore.

The annual trading volume of stablecoins has exceeded $9 trillion, surpassing the total of Visa and Mastercard. More than 200 million people worldwide use stablecoins for daily payments. Payment giants like PayPal and Stripe have launched stablecoin products. PayFi has already moved from the conceptual stage to practical implementation.

In this migration, a project called PolyFlow has attracted simultaneous attention from both Eastern and Western capital. From the Solana ecosystem to top-tier Asian funds, a group of the most perceptive institutions chose to place their bets almost within the same timeframe.

Why PayFi? Why PolyFlow?

This report attempts to answer these two questions.

1. PayFi Market: The Imagination Space from $9 Trillion to $100 Trillion

1.1 Stablecoins Have Already Won the First Battle

First, let’s look at a set of data. According to Visa's Onchain Analytics Dashboard:

Stablecoin Trading Data for 2025:

• Original trading volume: $32.3 trillion
• Excluding bots and arbitrage: $9 trillion
• Percentage of real payment scenarios: 45%

In 2022, only 18% of transactions with stablecoins were real payments, with most being speculative activity and arbitrage. By 2025, this ratio has risen to 45%. Stablecoins are transitioning from being "speculative tools" to "payment tools".

A More Intuitive Comparison:

• Visa's 2025 transaction volume: approximately $7.5 trillion
• Mastercard's 2025 transaction volume: approximately $6 trillion
• Real transaction volume of stablecoins: $9 trillion

Stablecoins have already become the largest payment network in the world.

But this is just the beginning.

1.2 When Machines Start Spending, PayFi Is No Longer a Choice

In the past six months, the term Web4.0 has started to appear more frequently in discussions among leading VCs, developers, and infrastructure projects. It is not a simple concept upgrade, but a structural shift brought about by changes in economic entities.

If the core of Web3 is "humanity truly owning digital assets for the first time," then the core change of Web4.0 is: AI Agents begin to become entities that can independently participate in economic activities.

They are not just tools; in an increasing number of scenarios, they gradually play the roles of "employees, service providers, executors, and even operators"—accepting tasks, invoking services, procuring resources, achieving goals, receiving payments, and distributing accounts.

What does this mean?

It means that in future commercial activities, there will not just be "humans paying humans" and "humans paying platforms," but a large number of settlement relationships will emerge, such as "Agent paying Agent," "enterprise paying Agent," and "Agent paying humans." An economic network involving both humans and intelligent agents is forming.

Once we enter this stage, the traditional payment system will quickly expose its boundaries.

AI Agents do not have bank accounts, cannot get IDs, do not qualify for credit cards, and cannot adapt to the large number of accounts, audits, credit assessments, and settlement processes designed for "natural persons" in the traditional financial system. Subscription models can cover small costs in the Agent era, but when the number of Agents grows from millions to billions, and transaction behavior changes from "low-frequency human-triggered" to "high-frequency automated execution," subscription and advertising models will struggle to support it. AI does not have "attention" to sell; what the agent economy needs is a payment system that is machine-callable, real-time settleable, globally accessible, and low-cost to operate.

This is why the payment foundation of the Web4.0 era can only likely be built on digital currencies and on-chain settlements.

In other words, PayFi is not an added value layer for Web4.0, but a necessary condition for underlying operations.

The x402 protocol launched by Coinbase and Cloudflare in 2025 is an early signal in this direction. It reactivates the HTTP 402 status code, allowing Agents to initiate instant payments directly when calling APIs, renting GPUs, or obtaining data services—no need to register an account, no need to link a credit card, no need to reconcile at the end of the month; invoke and pay, settle by instance. This is not a small tweak to existing payment methods but a complete rewrite of payment interfaces for the "machine economy".

In this trend, the future of PayFi is not just about on-chain payments for human users, but evolving into a light settlement system for the Web4.0 world: serving both humans and Agents; capable of handling consumer payments as well as payroll, revenue sharing, settlement, and clearing in business collaborations; supporting cross-border flows and enabling currency exchange and payout execution between different currencies.

This is precisely the position PolyFlow is preparing for.

Wherever AI Agents need on-chain identities, PolyFlow's PID (Payment ID) provides a solution. The PID not only offers payment identities for human users, but can also become the "digital passport" for AI Agents—a verifiable, traceable, cross-chain universal payment identity. By 2025, PolyFlow has integrated the x402 protocol, and its encrypted payment gateway Pelago Connect is expanding payment scenarios from "human to human interaction" to "Agent to Agent interaction".

Wherever AI Agents need high-frequency micropayment channels, PolyFlow's PLP (Payment Liquidity Pool) naturally adapts—capable of handling small payments of a few cents each, high-frequency settlements of hundreds of transactions per second, and supports 24/7 unattended operations. This "light settlement" capability is precisely the prerequisite for true Web4.0 commercial activities to run smoothly.

Wherever AI Agents require a credit system, the on-chain credit data accumulated in the PID will become the trust cornerstone of the agent economy—identifying which Agents are "reliable executors," which merchants are "compliant counterparts," and which partnerships have stable performance records. In the future, verifiable, traceable, and reusable credit credentials will be essential for making these judgments. The PID provides an infrastructure-level way of carrying these judgments for the first time.

This is also PolyFlow's long-term positioning in the Web4.0 era: Building infrastructure for human payments today, constructing the payment and settlement highways for the agent economy tomorrow.

From the product layout perspective, PolyFlow will not only remain at the "payment channel" stage in the future, but will gradually extend to a lightweight settlement product layer that is closer to real business collaborations (such as payroll, payout, exchange, and settlement execution capabilities for global business scenarios), serving the commercial networks involving "boss—employee—contractor—subcontractor—Agent." In other words, in the world of Web4.0, many actions that required manual financial processes, manual reconciliations, and manual cross-border remittances in the past will be redefined by target-driven agent collaboration and on-chain settlement systems—no longer "end-of-month salary settlements" but instant settlements around task completions and business goals.

This is PolyFlow's vision: when the Web4.0 era fully arrives, PolyFlow will be more than just a PayFi project; it will be the payment foundation connecting human and AI Agent economic activities.

A world that cannot operate without cryptocurrency payments is already taking shape before our eyes.

1.3 PayFi Aims to Penetrate a $100 Trillion Market

The $9 trillion of stablecoins is just the tip of the iceberg. The real battleground is the traditional payment market:

Global Payment Market Size (2025):

① Credit Card Payments: $16 Trillion

• Problem: Merchants have to pay 2-3.5% fees per transaction
• PayFi Solution: Reduce fees to 0.3-1%
• Savings: $240-560 billion in transaction fees annually

② Business Payments (B2B): $89 Trillion

• Problem: Requires $4 trillion in pre-financing liquidity, with huge costs of capital occupation
• PayFi Solution: Instant settlement via smart contracts, no need for pre-financing
• Release: $4 trillion in liquidity

③ Cross-Border Remittance: $800 Billion

• Problem: Average fee of 6.5%, delivery takes 3-5 days
• PayFi Solution: 0.5% fee, funds arrive in seconds
• Savings: $52 billion in transaction fees annually

Total: An addressable market exceeding $100 trillion.

Even if PayFi only penetrates 5% of this market (conservatively estimated), it will still result in an annual transaction scale of $5 trillion.

1.4 Three Catalysts for 2026

Catalyst One: Regulation Moves from Watchful to Embracing

2025 is a watershed moment:

• The U.S. "GENIUS Act" passes, granting stablecoins a clear legal status
• The EU's MiCA regulations came into full effect
• Singapore, Hong Kong, the UAE, and Japan have issued regulatory frameworks

The result is: traditional financial institutions no longer remain passive but are making significant entries into the market.

Traditional Institutions Entering in 2025:

• PayPal (PYUSD monthly trading volume exceeds $1 billion)
• Stripe (fully supports stablecoins, covering 135 countries)
• Visa (in deep cooperation with Circle, testing blockchain settlement)
• JPMorgan (handling $1 billion daily with JPM Coin)

Catalyst Two: Technology Maturity and Cost Control

Results of Layer2 Scaling:

In 2022, a single transfer on Ethereum could cost $15-50 in Gas fees. By 2025, a transfer on L2 will only cost $0.01-0.05. On Solana? $0.00001.

When transaction costs fall to negligible levels, micropayments become truly feasible.

Imagine:

• Rewarding a favorite article with $0.5
• Buying an item in a game for $0.99
• Paying $10 monthly for an AI assistant subscription

In traditional payment systems, these scenarios are either impossible (fees exceed the amounts) or involve complex processes (linking cards, monthly settlements, etc.).

But in the PayFi system? Scan, pay, done. 3 seconds.

Catalyst Three: DeFi Yields Rebound, Innovative Applications Regain Vitality

During the DeFi winter of 2022-2023, many thought DeFi was dead.

However, starting in 2025, as the tokenization of RWA (real-world assets) progresses, DeFi yields started to rise:

• On-chain U.S. Treasury: 4-5% annual yield
• Stablecoin lending: 6-8% annual yield
• High-quality asset staking: 10-15% annual yield

When DeFi can consistently provide annual yields of over 8%, an innovative application becomes feasible: Buy Now Pay Never.

This was one of the most exciting scenarios Lily Liu envisioned when proposing the PayFi concept.

2. PID: The Invisible Infrastructure of PayFi

Before discussing PolyFlow, it is essential to understand one premise: for PayFi to be realized, the bottleneck lies not in the payment tools themselves but in the infrastructure.

2.1 Three Major Challenges for PayFi

Challenge One: How to Ensure Compliance in a Decentralized Environment?

Traditional payment companies (Visa, PayPal) have centralized KYC systems. When you register your account, you upload your ID; once approved, you can use it.

But in the blockchain, everything is decentralized. No one can force you to upload your ID.

What to do? Not doing KYC is illegal. Doing KYC, however, undermines the original intent of decentralization.

Challenge Two: How to Create Value from Payment Data?

Every time you swipe your credit card, banks collect your consumption data: what you bought, where you bought it, how much you spent.

What do banks do with this data?

1. Assess your credit (determining whether to provide you a loan, and at what interest rate)
2. Sell to advertisers (if you've bought baby products, you'll receive baby formula ads)
3. Optimize risk control models (identify fraudulent transactions)

But the value generated from this data yields zero returns to the user. The data is monopolized by the platform.

Challenge Three: How to Provide Financial Services to Small Merchants?

The logic of traditional banks: you deposit money, and I invest it for profit; the profits belong to me, and what interest do I give you? Almost nothing.

The logic of payment companies: the money merchants receive stays in my account for 3-7 days; I earn interest from it, and the profits belong to me; merchants? Just have to wait for the funds to arrive.

The hard-earned money of small merchants gets "exploited" for time value in the payment process by financial institutions.

2.2 PID: A Clever Solution

PolyFlow's proposed PID (Payment ID) is essentially a "decentralized digital identity wallet." But it cleverly addresses the three challenges mentioned above.

Solving Challenge One: Compliance through Zero-Knowledge Proofs

PID employs zero-knowledge proof technology, achieving "proof without disclosure".

For example: When you go to buy alcohol, the merchant needs to confirm you are over 21 years old.

• Traditional Method: Show your ID, the merchant can see your name, birth date, address, ID number—this information is all disclosed.
• PID Method: Generate a proof that "my age ≥ 21 years," and the merchant only receives "True" or "False," without seeing any other information.

This embodies "compliance with privacy protection"—meeting regulatory requirements (verifying age) while protecting user privacy (not disclosing identity).

More importantly, this KYC proof is cross-platform universal.

If you complete KYC on Platform A and receive a "verified" credential stored in your PID, when you go to Platform B, you can directly present this credential, and Platform B can verify the signature's validity to know that you have already passed KYC without needing to upload your ID again.

What Does This Mean for Users?

Imagine you need to use services across 10 different payment platforms, exchanges, and DeFi protocols.

• Traditional Method: You have to KYC on each platform separately, upload your ID 10 times, wait for 10 verifications, which could take weeks.
• PID Method: Complete KYC the first time, then instant authentication across all platforms, done in 5 seconds.

What Does This Mean for Platforms?

• Traditional KYC Costs: $50-100 per user (manual review, system maintenance, compliance costs)
• PID Method: $5-10 per user (only needs to verify signatures)
• Saving 90% on compliance costs.

Solving Challenge Two: Data Sovereignty Returned to Users

In the PID system, all transaction data is stored in the user’s own PID (in encrypted form), rather than controlled by the platform.

Users Can Choose:

1. Not to authorize anyone (to protect privacy)
2. Authorize AI analysis (to obtain personalized financial services)
3. Authorize data requesters (to receive direct benefits)

For instance: If you buy coffee at Starbucks daily, this consumption record exists in your PID. Visa wants this data to improve their consumer behavior models. In the traditional system, Visa directly takes the data from Starbucks or the payment company, and you don’t get a dime.

But in the PID system:

1. Visa needs to request your authorization
2. Upon your agreement, the system generates "anonymized consumption frequency data" (without including your identity information)
3. Visa pays $0.5 to purchase this data
4. This $0.5 goes directly into your wallet

Your data, why can't you sell it?

According to BCG's estimation, each person's data asset is valued at about $100-1000 annually. With 5 billion internet users worldwide, this presents a market of $500-5000 billion. The PID allows regular users the opportunity to share in the profits of this market for the first time.

Solving Challenge Three: Allowing Merchants to Earn Profits While Collecting Payments

This is another innovation from PolyFlow: PLP (Payment Liquidity Pool).

Traditional Model:

Merchant collects payment → funds stay in the payment company’s account for 3-7 days → payment company earns interest from it → profits belong to the payment company → merchants ultimately receive the principal, without any interest

PolyFlow's PLP Model:

Merchant collects payment → funds enter PLP smart contract → automatically yield from DeFi → profits belong to the merchant → merchants can withdraw principal + profits at any time

2.3 The Network Effect of PID

The value of PID lies not in individual users but in network effects.

This is similar to the early logic of WeChat Pay: In 2013, WeChat Pay was just launched with only a few million users. At that time, Alipay held 90% market share. Many said WeChat Pay "stood no chance."

However, WeChat Pay successfully did one thing: it bound social relationships.

• If your friends use WeChat Pay, you will too.
• The more stores you use WeChat Pay at, more merchants will integrate.
• The more merchants, the more users.

This is the network effect: Users attract merchants, and merchants attract more users.

PID is currently in the early stage of WeChat Pay in 2013: the network effect has just begun, but the potential is enormous.

3. Token Economics: Value Capture Driven by Scenarios

If PID is PolyFlow's "identity infrastructure," then the destruction mechanism of the $PID token is the "value capture engine".

Many project tokens are merely for speculation, with their rise and fall entirely dependent on market sentiment, lacking actual value support. But $PID is different. Its design follows a simple logic: The more the network is used, the higher the token value.

3.1 How Does the Destruction Mechanism Work?

Every transaction in PolyFlow triggers an automatic destruction. The protocol extracts a portion from transaction fees to repurchase $PID from the public market and permanently destroy it. When merchants redeem liquidity vouchers, the redemption fees are also 100% allocated for repurchase destruction.

There is also credit penalty destruction: if a user violates the protocol rules (malicious refunds, fraudulent transactions, fake orders), the system will additionally destroy their staked $PID. This not only maintains ecological health but also creates additional deflationary pressure on the token.

3.2 True Scenarios for Destruction

If PID is PolyFlow's "identity infrastructure," then the economic model of the $PID token is the "value capture engine".

Thank you for considering the needed participation options available for PolyFlow and related activities.

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