Is Plasma suitable for DeFi or just for payments?

Hello everyone, today the market is crashing, so I wrote this article for you. If we ask this question straightforwardly, I think the short answer would be: Plasma was not born to do DeFi in the way that the market is used to, but it is also not just for simple payments.

The problem lies in the fact that we are using the same word 'DeFi' for many different things, and @Plasma has to expose that ambiguity.

In most of the recent cycle, DeFi has almost been synonymous with composability.

AMM combined with lending, lending combined with yield strategy, yield strategy further combined with derivatives. The entire ecosystem is built on the assumption that state must be public, transactions must be atomic, and data must always be available for all other protocols to read and interact.

This is where Ethereum and L2 rollups shine. And it is also here that Plasma has almost no competitive edge.

Plasma, right from the start, accepts a very clear trade-off: data is not fully on-chain.

Execution occurs off-chain, and safety comes from the ability to exit in case of an incident. This makes Plasma a very poor choice for traditional composable DeFi.

Without continuous public state, without atomic composability, combining multiple complex financial protocols is almost impossible.

If we try to cram these DeFi models onto Plasma, the result is likely to resemble the first Plasma: complex, fragile, and no one uses it long-term.

But if we stop there and conclude that Plasma 'does not fit with DeFi,' that would be too hasty.

The issue is that DeFi does not only have one form.

Most of what we call DeFi is actually speculative DeFi, where liquidity, matching capabilities, and speed of strategy changes are much more important than costs or long-term predictability.

Plasma $XPL does not target that segment, and it does not need to.

On the contrary, there is another layer of DeFi that is less noticed, but is closely tied to real money: settlement, payment, clearing, treasury management, stablecoin flow.

Here, the financial logic is simpler, but the scale is much larger.

Users do not care about combining protocols, but they care about whether money goes correctly, cheaply, quickly, and has an exit in case of an incident.

With this layer of DeFi, Plasma begins to make sense.

If we see stablecoins as a primitive of DeFi, Plasma is actually very 'DeFi-native' in its own way.

It allows value to flow stably at nearly zero cost, with low latency, and without bearing on-chain data costs.

In the context of RWA and cross-border payments, this is a very pragmatic form of DeFi, even though it does not resemble what the crypto community often calls DeFi.

Another important point is that Plasma forces builders to be more disciplined in financial product design.

On Ethereum or L2, having public and composable state makes it easy for people to get caught up in adding more, leveraging more, and optimizing more.

Plasma does not allow that naturally.

It is more suitable for financial systems with a clear lifecycle, less dependent on global state, and not needing continuous reaction to each block.

This makes Plasma less attractive to traders, but very suitable for organizations and payment systems.

If viewed from the perspective of systemic risk, Plasma also reflects a different way of thinking about DeFi.

Instead of trying to make everything transparent and automated to the maximum, Plasma focuses on the ability to withdraw when trust is broken.

With speculative DeFi, this is not as important as optimizing profits.

But with DeFi linked to real money, this is a vital factor.

No one wants to place hundreds of millions of dollars into a system where, in case of an incident, they do not have a clear exit.

It should also be stated plainly that Plasma is not a good environment for permissionless innovation.

If someone wants to build a new financial protocol, experiment with new models, and combine it with various other things, Plasma will be very limiting.

But this may not be a disadvantage, but rather a deliberate choice.

Not all infrastructures need to become a playground. Some infrastructures are born to operate more stably than to experiment continuously.

So is Plasma suitable for DeFi or just for payments?

From my perspective, Plasma is not suitable for DeFi in the common sense of crypto, but it is very suitable for another layer of DeFi — DeFi of settlement, stablecoins, and RWA.

If we consider DeFi as 'everything financial on-chain,' then Plasma is a valid part of DeFi.

If we consider DeFi as 'composable money lego,' then Plasma should not participate.

It is important that Plasma forces the ecosystem to clearly distinguish between types of DeFi.

Not all financial systems need the same level of openness, composability, or data availability.

As DeFi expands beyond the realm of traders and farmers, architectures like Plasma may become more necessary, even if they never become the center of the narrative.

Ultimately, I think the right question is not whether Plasma is suitable for DeFi, but which type of DeFi we are talking about.

With speculative DeFi, the answer is almost no.

With DeFi linked to real money, payments, and RWA, Plasma is not only suitable but may also be more applicable than many architectures considered 'standard.'

And if DeFi truly wants to mature, it may have to accept that not every part of it needs to be the same.
@Plasma #Plasma $XPL