The Six-Layer PayFi Ecosystem

The concept of the PayFi ecosystem as a six-layer technology stack was first proposed by Huma Finance. This framework facilitates cooperation between different layers, maintains openness and flexibility, and promotes innovation and growth in decentralized payment and financing solutions.

Insights from the History of the Internet

The idea draws inspiration from the early days of the internet. At that time, networks were isolated, closed systems that could not communicate with each other. The introduction of the Open Systems Interconnection (OSI) model, which established a seven-layer framework, enabled composability and interoperability. This laid the foundation for the global internet innovations we see today.

Similarly, the open PayFi stack aims to establish a modular and open network architecture for payment and financing. This accelerates adoption and enables new use cases, as participants in the ecosystem do not need to operate on the same infrastructure.

The Six Layers of the PayFi Ecosystem

1. Transaction Layer (L1/L2)

The foundational layer ensures high throughput, low transaction costs, and rapid settlement—core elements for the efficient operation of payment systems. Blockchain platforms such as Solana and Stellar have deeply optimized their solutions to meet these needs, launching Solana Pay and the Stellar Payment Distribution Platform, respectively.

Solana Technology Analysis:

• Throughput: Capable of processing 65,000 transactions per second (TPS).

• Transaction Costs: Fees range from $0.0024 to $0.048 per transaction.

• Settlement Speed: Near real-time settlement.

Solana achieves its high performance through parallel transaction processing engines, pipelined data validation, and its Proof of History (PoH) consensus mechanism. It also supports horizontal scaling with numerous nodes and linear growth in TPS.

Solana Pay aims to transform the retail experience by enabling direct, nearly cost-free, and instant transactions between customers and merchants. This protocol connects merchants directly with customers and integrates loyalty, rewards, and promotions into a single messaging solution.

Stellar focuses on processing payments within five seconds, with an average transaction fee of just $0.00005. Optimized for cross-border payments and emerging markets, Stellar offers asset tokenization and connects to the traditional financial system through "anchors."

1. Currency Layer

The currency layer of PayFi decentralized applications primarily relies on USDC. In some cases, PYUSD and USDP are also used. New PayFi applications can integrate other major stablecoins, such as USDT and USDM. In the future, non-U.S. dollar options like EURC, XSGD, GYEN, and HKDR may emerge.

In 2024, the stablecoin market saw significant growth:

• Total Market Value: Increased by 57%, from $130 billion to $204 billion.

• Market Share: USDT accounted for 68% of the market value, while USDC accounted for 22%.

• Monthly Transfer Volume: Grew by 148% to $2.6 trillion.

• Transfer Volume Share: USDC accounted for 55% of the transfer volume, indicating its popularity in high-frequency trading applications.

Key infrastructure providers include Portal and Perena:

• Portal: Offers wallet infrastructure and Web3 interfaces, supporting stablecoin account creation and physical/virtual cards backed by Visa.

• Perena: A stablecoin infrastructure provider on the Solana blockchain, focused on creating a unified and liquid ecosystem.

1. Custody Layer

This layer handles the secure storage and management of digital assets. Companies such as Fireblocks, Cobo, and Copper offer institutional-grade custody solutions. These solutions feature multi-party asset control, secure protocols for asset liquidation in case of default, and fine-grained account management controls.

1. Compliance Layer

A major challenge in using stablecoins for real-world payments is ensuring regulatory compliance, particularly anti-money laundering (AML) practices. Companies such as Chainalysis, Elliptic, and TRM Labs provide advanced AML solutions. PolyFlow offers an innovative compliance infrastructure tailored for PayFi.

PolyFlow is an infrastructure that enables direct purchases of goods and services using cryptocurrencies. It focuses on fund settlements between wallets (whether in crypto or fiat) without relying on bank accounts. By decentralizing the actual transaction processing, it reduces the risks associated with centralized custody and regulatory blind spots.

1. Financing Layer

The financing layer includes protocols that connect capital supply and demand to provide lending pools for PayFi applications. It focuses on risk management, asset pricing, structuring, tokenization, and distribution. Huma Finance is a leading decentralized lending infrastructure protocol, coordinating the operation of these pools within the PayFi ecosystem.

Key Features of Huma:

• Customized for payment financing.

• Modular structured finance.

• Risk management through dynamic assessment agents.

• Instant liquidity access.

• Compliance and open architecture.

Providing capital for PayFi applications can offer higher returns on users' USDC compared to other options (such as Ondo). However, the risk is higher due to potential loan repayments being overdue.

1. Application Layer

The foundational layer provides the infrastructure for secure and efficient operations and is the most user-facing level. This layer enables end-users to interact with PayFi solutions across various use cases.

Key Application Examples:

• Arf: A global liquidity platform offering short-term financing solutions for cross-border payments.

• Bitso x Felix: A WhatsApp-based payment platform transforming remittances in Latin America.

• BSOS: Provides supply chain growth power for fintech solutions.

• Fonbnk: A platform allowing users to convert mobile phone credit into digital currency.

Other important applications include Easy Labs (a Web3 financial contract automation platform), GoBankless (an African blockchain payment platform), Helio (a merchant platform supporting USDC payments), Jia (a microcredit platform for emerging markets), Rain (a credit card solution backed by digital assets), and Reap (a financial management platform in Hong Kong), among others.

The Future of PayFi

PayFi continues to expand with an increase in product offerings and user adoption. Significant advancements are expected in these areas in 2025:

• T+0 Settlement: Implementing same-day settlements to transform cross-border transactions, eliminating the current 2-3 day settlement period.

• Market Education: Coordinated efforts to educate the market about the unique use cases of PayFi, establishing a clear identity that differentiates it from traditional finance and general DeFi applications.

• Regulatory Developments: Monitoring and adapting to regulatory developments in various jurisdictions, particularly regarding stablecoin regulations and the application of crypto travel rules across jurisdictions.

The Six-Layer PayFi Ecosystem

The concept of the PayFi ecosystem as a six-layer technology stack was first proposed by Huma Finance. This framework facilitates cooperation between different layers, maintains openness and flexibility, and promotes innovation and growth in decentralized payment and financing solutions.

Insights from the History of the Internet

The idea draws inspiration from the early days of the internet. At that time, networks were isolated, closed systems that could not communicate with each other. The introduction of the Open Systems Interconnection (OSI) model, which established a seven-layer framework, enabled composability and interoperability. This laid the foundation for the global internet innovations we see today.

Similarly, the open PayFi stack aims to establish a modular and open network architecture for payment and financing. This accelerates adoption and enables new use cases, as participants in the ecosystem do not need to operate on the same infrastructure.

The Six Layers of the PayFi Ecosystem

1. Transaction Layer (L1/L2)

The foundational layer ensures high throughput, low transaction costs, and rapid settlement—core elements for the efficient operation of payment systems. Blockchain platforms such as Solana and Stellar have deeply optimized their solutions to meet these needs, launching Solana Pay and the Stellar Payment Distribution Platform, respectively.

Solana Technology Analysis:

• Throughput: Capable of processing 65,000 transactions per second (TPS).

• Transaction Costs: Fees range from $0.0024 to $0.048 per transaction.

• Settlement Speed: Near real-time settlement.

Solana achieves its high performance through parallel transaction processing engines, pipelined data validation, and its Proof of History (PoH) consensus mechanism. It also supports horizontal scaling with numerous nodes and linear growth in TPS.

Solana Pay aims to transform the retail experience by enabling direct, nearly cost-free, and instant transactions between customers and merchants. This protocol connects merchants directly with customers and integrates loyalty, rewards, and promotions into a single messaging solution.

Stellar focuses on processing payments within five seconds, with an average transaction fee of just $0.00005. Optimized for cross-border payments and emerging markets, Stellar offers asset tokenization and connects to the traditional financial system through "anchors."

1. Currency Layer

The currency layer of PayFi decentralized applications primarily relies on USDC. In some cases, PYUSD and USDP are also used. New PayFi applications can integrate other major stablecoins, such as USDT and USDM. In the future, non-U.S. dollar options like EURC, XSGD, GYEN, and HKDR may emerge.

In 2024, the stablecoin market saw significant growth:

• Total Market Value: Increased by 57%, from $130 billion to $204 billion.

• Market Share: USDT accounted for 68% of the market value, while USDC accounted for 22%.

• Monthly Transfer Volume: Grew by 148% to $2.6 trillion.

• Transfer Volume Share: USDC accounted for 55% of the transfer volume, indicating its popularity in high-frequency trading applications.

Key infrastructure providers include Portal and Perena:

• Portal: Offers wallet infrastructure and Web3 interfaces, supporting stablecoin account creation and physical/virtual cards backed by Visa.

• Perena: A stablecoin infrastructure provider on the Solana blockchain, focused on creating a unified and liquid ecosystem.

1. Custody Layer

This layer handles the secure storage and management of digital assets. Companies such as Fireblocks, Cobo, and Copper offer institutional-grade custody solutions. These solutions feature multi-party asset control, secure protocols for asset liquidation in case of default, and fine-grained account management controls.

1. Compliance Layer

A major challenge in using stablecoins for real-world payments is ensuring regulatory compliance, particularly anti-money laundering (AML) practices. Companies such as Chainalysis, Elliptic, and TRM Labs provide advanced AML solutions. PolyFlow offers an innovative compliance infrastructure tailored for PayFi.

PolyFlow is an infrastructure that enables direct purchases of goods and services using cryptocurrencies. It focuses on fund settlements between wallets (whether in crypto or fiat) without relying on bank accounts. By decentralizing the actual transaction processing, it reduces the risks associated with centralized custody and regulatory blind spots.

1. Financing Layer

The financing layer includes protocols that connect capital supply and demand to provide lending pools for PayFi applications. It focuses on risk management, asset pricing, structuring, tokenization, and distribution. Huma Finance is a leading decentralized lending infrastructure protocol, coordinating the operation of these pools within the PayFi ecosystem.

Key Features of Huma:

• Customized for payment financing.

• Modular structured finance.

• Risk management through dynamic assessment agents.

• Instant liquidity access.

• Compliance and open architecture.

Providing capital for PayFi applications can offer higher returns on users' USDC compared to other options (such as Ondo). However, the risk is higher due to potential loan repayments being overdue.

1. Application Layer

The foundational layer provides the infrastructure for secure and efficient operations and is the most user-facing level. This layer enables end-users to interact with PayFi solutions across various use cases.

Key Application Examples:

• Arf: A global liquidity platform offering short-term financing solutions for cross-border payments.

• Bitso x Felix: A WhatsApp-based payment platform transforming remittances in Latin America.

• BSOS: Provides supply chain growth power for fintech solutions.

• Fonbnk: A platform allowing users to convert mobile phone credit into digital currency.

Other important applications include Easy Labs (a Web3 financial contract automation platform), GoBankless (an African blockchain payment platform), Helio (a merchant platform supporting USDC payments), Jia (a microcredit platform for emerging markets), Rain (a credit card solution backed by digital assets), and Reap (a financial management platform in Hong Kong), among others.

The Future of PayFi

PayFi continues to expand with an increase in product offerings and user adoption. Significant advancements are expected in these areas in 2025:

• T+0 Settlement: Implementing same-day settlements to transform cross-border transactions, eliminating the current 2-3 day settlement period.

• Market Education: Coordinated efforts to educate the market about the unique use cases of PayFi, establishing a clear identity that differentiates it from traditional finance and general DeFi applications.

• Regulatory Developments: Monitoring and adapting to regulatory developments in various jurisdictions, particularly regarding stablecoin regulations and the application of crypto travel rules across jurisdictions.