The Concept of PayFi

PayFi (Payment Finance) is a relatively new concept that combines payments and decentralized finance (DeFi), first proposed by Lily Liu, the chair of the Solana Foundation, and defined as a new financial market built around the time value of money.

To understand PayFi, one must first clarify the 'time value of money.' The 'time value of money' refers to the concept that the value of money changes over time. Generally (considering issues such as inflation and investment returns), the present value of a given amount of money is higher than its future value (100 yuan this year > 100 yuan next year); if people wish to obtain funds now rather than in the future, they should pay an additional cost for those funds, which is interest.

Let's illustrate this with a simple example: suppose you can receive 1000 yuan now, and if you deposit it in a bank with an annual interest rate of 5%, after one year, you will have 1050 yuan (1000 yuan principal + 50 yuan interest). In this case, the value of 1000 yuan today is higher than that of 1000 yuan a year later because you have the opportunity to earn interest returns through investment. If the inflation rate is 5%, then the purchasing power of 1000 yuan a year later is: 1000 * (1 - 0.05) = 950, which equals 950 yuan today.

Moreover, since payments are rooted in real-world life scenarios, to effectively capture the time value of money in real-world payment scenarios, it is necessary to introduce real-world assets (such as real estate, equity, bonds, etc.) onto the blockchain through tokenization (RWA), while also moving payment and business processes onto the blockchain, thus forming the logic of Web3 payments.

Thus, we can provide a more detailed supplement to PayFi. PayFi refers to an innovative financial field that improves and optimizes payment systems based on the time value of money in payment settlement scenarios through blockchain technology, smart contracts, and tokenization.

What do you think about the PayFi track? Feel free to leave comments for discussion~