Chainfeeds Introduction:
NingNing, a cryptocurrency researcher, introduced the PayFi project and its potential in reshaping the global financial landscape, pointing out that PayFi is expected to become a key innovative force in the global financial system by innovating the use of the time value of money, and it deserves close attention from investors and industry practitioners.
Source:
https://x.com/0xNing0x/status/1833857840903336218
Article author:
Ning
Viewpoint:
NingNing: PayFi's core innovation lies in its reinterpretation of the time value of money (TVM). Traditional finance uses annualized interest rates to quantify TVM, but PayFi measures it down to milliseconds. This may sound like a technical detail, but its impact is revolutionary. Suppose there is a fund of $1 million that takes 3 days to complete a cross-border transfer in the traditional banking system. With an annualized rate of return of 5%, the opportunity cost of these 3 days is: $1 million * (5% / 365) * 3 = $410.96 Now, suppose the PayFi system shortens this process to 1 minute: $1 million * (5% / 525600) * 1 = $0.95. This is PayFi's potential value creation! It not only saves costs, but more importantly, it releases a huge amount of liquidity. This is why the PayFi project focuses so much on high-performance blockchains. It should be noted that there is a nonlinear relationship between the time value of money released and the final confirmation time. The shorter the confirmation time, the higher the time value released, but this growth is not linear. When the confirmation time is already very short (such as milliseconds), the additional time value brought by further shortening the confirmation time is relatively small. When designing the PayFi system, it is necessary to find a balance between speed, security, and decentralization. Huma is planning to launch a T+0 settlement solution, which will push PayFi to the limit of efficiency. On a high-performance public chain like Solana, funds can theoretically be transferred and confirmed in less than half a second. But this is not the end. Imagine new financial products such as "second-level lending", "micropayments as a service", and "dynamic pricing insurance" that are impossible in traditional finance. PayFi will usher in a new era of financial innovation.
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