What is PayFi, and why does the cryptocurrency market need it

At the dawn of its formation in 2020, the decentralized finance market had a limited range of applications, and its ecosystem consisted mainly of a few decentralized exchanges.

However, today the decentralized finance market has grown to enormous proportions and, as of April 2026, is valued at more than $90 billion, according to the DeFi Llama aggregator.

As the decentralized finance market developed, distinct segments began to emerge within its structure, one of which is PayFi (Payment Finance).

What is PayFi?

The abbreviation PayFi stands for "Payment Finance."

PayFi (Payment Finance) is a new financial model in which payments are executed through blockchain within decentralized applications, and all operations are automatically governed by smart contracts.

The term PayFi was introduced by Solana Foundation chair Lily Liu back in 2024. According to Liu, PayFi is a new financial market based on TVM*.

* TVM (Time Value of Money) is a financial principle stating that the same amount of money today is worth more than the same amount in the future because it can be invested to generate income.

One of the key aspects of the PayFi market is payments involving real-world assets. In the PayFi environment, real-world assets include tokenized assets:

• Stablecoins such as Tether (USDT) and USDC (USDC);
• Tokenized gold such as Tether Gold (XAUT) and Pax Gold (PAXG);
• Tokenized funds such as BUIDL by BlackRock;
• Tokenized real estate funds such as Propy (PRO), Epic Chain (EPIC), and Parcl (PRCL);
• Commodities such as coffee, grain, corn, and other products;
• Accounts receivable, treasury bonds, securities, and other financial instruments.

The main goal of PayFi is to make money not just a store of value, but a tool that constantly works and generates utility. In other words, money should not sit idle but should immediately participate in payments, investments, and other financial processes. PayFi enables more efficient capital use and opens more opportunities for both users and businesses.

Difference between PayFi and DeFi

One of the key aspects of PayFi is near-instant access to liquidity (money). In traditional systems, transactions such as lending and financing can take days, weeks, or even months. Despite the digital revolution, traditional systems remain slow, costly, and opaque. This is largely due to the presence of intermediaries and compliance* requirements.

* Compliance is a system of internal rules, procedures, and controls that ensure a company's activities comply with laws, regulatory requirements, and industry standards. It includes customer verification, financial transaction monitoring, risk management, and internal auditing. The main goal of compliance is to reduce legal and financial risks, prevent fraud and money laundering, and avoid fines and sanctions from authorities.

PayFi removes intermediaries from transactions, with their functions taken over by smart contracts on the blockchain. At the same time, blockchain ensures transparency and allows transactions to be completed within minutes or even seconds.

Thus, PayFi focuses on the globalization of payments and cross-border transfers via blockchain, whereas decentralized finance focuses on generating yield.

Advantages of PayFi

The PayFi market introduces a concept that allows payments to be made not from existing assets, but from future income, such as interest from deposits. This concept can be described as "buy now, never pay."

For example, a user plans to purchase a new smartphone for $100. Instead of taking out a loan, a PayFi user can deposit stablecoins with interest, and a portion of future income will be regularly allocated toward the purchase.

Globally, PayFi provides simple, fast access to banking services on the blockchain.

For businesses, PayFi enables instant settlements and liquidity access, eliminating many delays, such as those in supplier payments.

Risks and challenges of the PayFi market

Although the PayFi market has great potential, several issues may hinder its development. One of these is vulnerabilities in smart contracts. If errors exist, they can lead to loss of funds. This can be partially mitigated through fund-locking mechanisms: in suspicious or unforeseen situations, funds are temporarily frozen to prevent loss.

Another issue is legal uncertainty. The decentralized finance sector is generally weakly regulated, which not only imposes limitations on PayFi projects but also discourages investment inflows from the traditional financial sector.

Finally, a third major challenge for PayFi is ensuring privacy, given the transparency of blockchain payments. This is particularly relevant for business clients seeking to protect their transactions from external observers.

Integration of PayFi into the cryptocurrency market

One of the most notable projects in the PayFi space is Huma Finance, a decentralized lending platform based on future income.

Instead of relying on current balances, Huma Finance allows users to leverage future cash flows, such as:

• Regular payments;
• Salaries;
• Invoices;
• Interest income, for example, from deposits or staking.

Another well-known project in the PayFi space is Ondo Finance, a decentralized platform for tokenizing real-world assets. Ondo Finance offers blockchain products, including a tokenized U.S. Treasury fund (OUSG) and a stablecoin backed by short-term securities (USDY).

Ondo Finance is one of the largest players in the PayFi segment, with a TVL (Total Value Locked) exceeding $3.5 billion as of April 2026.

An example of a newer project in the PayFi segment is the PolyFlow protocol, a blockchain-oriented infrastructure that combines decentralized solutions with real-world assets.

PolyFlow enables secure transaction flow management and efficient asset distribution across liquidity pools without intermediaries, aiming to eliminate the limitations of traditional payment systems.