Over the past decade, decentralized finance (DeFi) has transformed our understanding of financial services, offering decentralized lending platforms, trading venues, and savings tools. However, most of these innovations remain within the realm of cryptocurrency and blockchain, rarely interacting with the traditional financial system. PayFi is a new approach from Huma aimed at bridging this gap by connecting DeFi capital with real financial flows.
The essence of the PayFi model
Traditional financial services, such as lending, are funded by banks and other centralized institutions. PayFi offers an alternative where the capital to finance these operations comes from DeFi users. The PayFi model operates on the principle that funds deposited by users are not used for trading crypto assets or speculation but are directly invested in real off-chain payments.
These payments include:
Payments to e-commerce sellers: For example, Huma can advance funds to sellers who are awaiting payments from platforms like Shopify or Amazon. These funds are typically received with a delay, and Huma gives sellers access to capital earlier.
Salary advances: Instead of waiting until the end of the month, employees can receive part of their salary in advance. Huma funds this advance and then receives the funds from the employer on payday.
Financing accounts receivable: Companies often face the problem of waiting for payments from customers. Huma can purchase this receivable, providing the company with immediate access to liquidity needed to conduct business.
How it works
The process of investing in PayFi is quite simple. Users deposit their stablecoins (e.g., USDC or DAI) into the Huma protocol. These funds are then pooled and used to finance the aforementioned real financial operations. The Huma protocol acts as an intermediary, providing a connection between capital from DeFi and the traditional financial system. It automates the lending and repayment process using smart contracts.
Investors in PayFi receive income from these real financial operations, which can be significantly more stable and less volatile compared to income from typical crypto protocols.
Advantages and prospects of PayFi
Risk reduction: Unlike investments in high-risk protocols, PayFi provides income that comes from real commercial flows rather than speculation. This makes the model attractive to those seeking stability.
Access to capital: PayFi opens a new, efficient funding channel for small and medium-sized enterprises (SMEs), which often face difficulties in obtaining loans from traditional banks.
Interaction with the real world: This model is one of the most vivid examples of how DeFi technologies can be used to solve real economic problems and provide value outside the cryptocurrency ecosystem. It promotes the mass adoption of DeFi.
Huma's PayFi model is not just another financial innovation. It is a bridge connecting decentralized and centralized worlds, demonstrating the potential of DeFi as a driving force for the growth of the real economy.
