If we were to identify the 'darling' of the PayFi track, Morph, this consumer-grade public chain, would surely hold a place.
Since February 2025, Morph has successively launched Morph Pay, Morph Black NFT card, and Morph Platinum NFT, quickly becoming a hot topic in the Web3 community and the PayFi industry.
You might be curious why a project positioning itself as an L2 public chain would turn to PayFi.
Lawyer Mankun understands that Morph has always aimed at 'empowering developers and creating applications that resonate with consumers,' committed to making blockchain technology a part of daily life through an efficient, secure, and user-friendly blockchain platform. Entering the PayFi track is not a sudden inspiration but a further deepening of Morph's positioning in its consumer-grade public chain, focusing on providing users and ecological applications with more diversified payment and financial services.
However, from the current voices in the community, there is still room for improvement in product construction and business logic.
In this article, Lawyer Mankun will also explore from a legal perspective, based on Morph's exploration, the optimization direction and compliance paths for such PayFi products.
Overview of the Morph project
Without further ado, let's first take a look at the roadmap of the Morph project.
2024 Q1-Q2: Technical architecture refinement period
In the early to mid-2024, Morph's core task is to refine the technical architecture, providing a solid technical foundation for future user growth and decentralized applications.
By implementing zkEVM, Morph enhances privacy protection and transaction efficiency. Meanwhile, EIP-4844 technology addresses transaction storage and gas fee issues, improving the platform's performance and scalability. The implementation of decentralized ordering ensures the platform's decentralized characteristics, laying a solid foundation for future large-scale decentralized applications and user growth.
2024 Q4: Mainnet launch period
As we enter the fourth quarter of 2024, Morph has successfully completed the launch of its mainnet, marking a step towards the productization phase of the Morph project. Meanwhile, the realization of a modular architecture makes the platform more flexible in functional expansion and application deployment. By enhancing platform performance and simplifying the user experience,
During this period, Morph has provided developers and users with more efficient and convenient services, ensuring the smooth deployment of large-scale decentralized applications.
2025 Q1: PayFi launch
As we approach Q1 2025, Morph is at a critical juncture in its strategic transformation.
Through the innovative product Morph Pay, Morph has not only transitioned from public chain infrastructure to a financial service platform but has also further expanded the PayFi track. The launch of Morph Pay is not just an increase in payment tools; it integrates management of virtual and fiat assets, high-yield accounts, and ecosystem reward mechanisms, forming a complete PayFi ecosystem closed loop.
In addition, Morph has further strengthened its PayFi ecosystem by launching two types of NFTs—Morph Black NFT and Morph Platinum NFT. These NFTs are tied to different user rights, such as exclusive airdrops and payment discounts. Through these NFTs, Morph not only enhances the binding of user identity but also provides points rewards and yield mechanisms, further enhancing user engagement and platform stickiness.
Deep dive into business models
PayFi, as an emerging blockchain track, combines two major elements: traditional payment (Pay) and decentralized finance (Fi), aiming to provide more convenient, efficient, and transparent financial services through blockchain technology. This track is not limited to simple payments and transactions but encompasses multi-layered financial functions, addressing pain points in the traditional financial system with innovative products and services.
Compared to most PayFi projects, Morph's PayFi core module has its unique features; in addition to traditional payment and DeFi functions, it also integrates NFT rights and incentive mechanisms, incorporating more innovative elements for user engagement and platform stickiness.
1. Account management + high-yield mechanism
In the PayFi ecosystem, platforms typically provide users with a unified account management system, allowing them to conveniently manage virtual and fiat assets. These accounts are not only used for storing and transferring funds but also for providing users with high-yield features.
On the Morph Pay platform, users can manage their virtual and fiat assets through a single entry point, achieving unified asset management. Additionally, the platform offers an annualized yield mechanism of up to 30%, allowing users to enjoy payment functions while utilizing this mechanism for asset appreciation. This mechanism not only provides potential returns for digital asset holders but also allows traditional fiat currency users to experience similar financial benefits.
In this core module, compliance points to note include:
Yield commitments may attract the attention of regulatory agencies, especially when the yield structure is not transparent or when asset flow and risk information are not clearly disclosed. The platform must ensure that its high-yield account features comply with local financial regulatory requirements and avoid being classified as asset management products or unregistered financial instruments.
In certain jurisdictions (e.g., Hong Kong, Singapore), high-yield products are subject to strict regulation. The platform should ensure that its transparency and risk disclosures meet legal requirements to avoid potential legal risks.
2. Payment card + NFT rights
In the PayFi model, the combination of payment tools and incentive mechanisms is an important means for the platform to attract users. By providing a variety of card products, the platform can not only meet users' daily payment needs but also offer exclusive rights and rewards to users.
In the Morph ecosystem, Morph Pay Card serves as the core payment tool, providing online and offline payment functions. By combining NFT incentive mechanisms, users holding Morph Black NFT and Morph Platinum NFT can enjoy customized payment discounts, privileges, and platform rewards, further enhancing the payment experience. These NFT cards complement the functions of payment cards, providing not only payment convenience but also granting users more customized payment discounts, privileges, and platform incentives.
The combination of Morph Pay Card and NFT cards provides the platform with dual functions of payment and incentives, creating the core module of the PayFi ecosystem. Users not only enjoy payment convenience but also gain long-term financial returns and exclusive rights, enhancing user engagement and loyalty.
In this core module, compliance points to note include:
If the platform involves cross-border payments and exchanges between virtual assets and fiat currencies, it must ensure that payment tools comply with Anti-Money Laundering (AML) and Know Your Customer (KYC) requirements, and ensure compliance in different jurisdictions.
If incentive tools (like NFTs) provide actual returns or priority rights, they could potentially be classified as securities, especially in markets like the U.S. and Europe. Therefore, the platform needs to pay special attention to whether the design of incentive tools complies with local securities regulatory requirements, especially if they are related to token issuance or token presale activities, which may require risk disclosures and ensure compliance with regulations.
The platform needs to clearly disclose the reward mechanisms, ensuring users understand the relationship between points and token issuance, avoiding undisclosed risks, and ensuring that the reward mechanisms comply with financial promotion regulations.
3. Points + Airdrops
In the PayFi model, the platform further encourages users to participate in the construction of the platform ecosystem by setting up a points system, airdrop activities, and guiding behaviors. These mechanisms can not only increase user engagement on the platform but also embed paths for asset flow in user behavior.
In the Morph ecosystem, the platform further enhances user interaction and participation through points (Morph Points) and airdrop incentive mechanisms. Users can earn Morph Points by participating in different activities, completing tasks, or trading. These points can be redeemed for platform rewards or participate in airdrop activities. Such airdrops are often linked to future token issuances (TGE), and the rewards obtained from participating in airdrops may become part of future tokens.
The use of Morph Points is not limited to point redemption; it may also be related to users' priority experiences on the platform, community rewards, NFT card rights, etc., further enhancing user loyalty and platform stickiness.
In this core module, compliance points to note include:
From a functional perspective, points or airdrops are essentially also incentive mechanisms. Therefore, like the incentive tools mentioned above, if they are related to token distribution, the platform must ensure transparency, fulfill risk disclosure obligations, and comply with relevant financial promotion regulations and the securities laws of users' locations.
If the platform uses points and airdrops to guide users to perform certain actions, such as registering, trading, or joining the community, it should ensure that these actions comply with relevant financial regulations to avoid unauthorized financial promotions. Especially in different regions, the platform needs to pay special attention to the regulatory requirements for promoting virtual assets.
Summary by Lawyer Mankun
From Morph's exploration, it can be seen that PayFi, as an emerging track in the blockchain industry, is gradually shifting from an extension of payment tools to a multi-dimensional platform with more financial service functions. Through innovative payment tools, decentralized financial services, and user incentive mechanisms, PayFi projects can provide users with a more convenient and efficient financial experience.
In this process, Morph showcases the potential of this track by integrating payment and financial incentive mechanisms. However, recent community disputes regarding NFT cards also indicate that PayFi projects still need to better manage incentive mechanisms and user expectations during their development. These issues are not unique to Morph but are challenges faced by the entire industry.
Therefore, how to address these challenges may affect the sustainable development of such PayFi projects. Lawyer Mankun states:
1. From a business logic perspective, it is essential to strengthen the balance between incentive mechanisms and user experience, especially concerning rewards in the forms of NFTs, points, airdrops, etc. When designing these mechanisms, project parties must not only ensure that they effectively increase user participation but also consider the long-term loyalty of users and ecological stickiness. Properly planning the relationship between incentives and long-term value is necessary to avoid one-off transactions.
2. In operational management, it is particularly important to focus on communication with users. Especially concerning sensitive operations such as rights distribution and NFT card issuance, it is crucial to promptly and transparently disclose all key information to the community, including product functions, rights, and potential risks. Vague market commitments or failure to respond timely to user concerns can easily lead to unnecessary market chaos and negative sentiment, which may affect brand image and user base.
3. Regarding compliance requirements, PayFi projects usually involve sensitive areas such as the exchange of virtual assets and fiat currencies and user yield commitments. Although this is often repeated, it remains crucial to ensure that all products comply with local financial regulatory requirements, including AML/KYC, audits, risk disclosures, etc.
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