Introduction

PolyFlow is an AI-driven modular protocol designed for crypto asset operations. PID (Web3 Payment ID) is a decentralized identity authentication solution built using zero-knowledge proofs. By combining modular design with AI-centric data structures, PolyFlow aims to provide partners with secure, efficient, cost-effective, and compliance-friendly infrastructure to fully leverage PayFi and asset operations.

Funding Background

Funding Background（Image Source https://www.rootdata.com/Projects/detail/Polyflow?k=MTI1OTc%3D）

According to RootData, PolyFlow’s investors include Hash Global and ZC Capital. However, detailed information regarding the funding date and amount has not been publicly disclosed as of now.

Core Team

According to PolyFlow’s official website, the core team comprises Co-founder Raymond Qu, Co-founder Shine Sha, CFO Chuck Zhang, CTO Peter Chen, and Marketing Director Fabio Toffani. Among them, Raymond is also the founder of payment companies Huiyuantong and Airswift, bringing considerable experience and resources in the payment industry.

The Significance of PolyFlow

In the current crypto payment business model, both payment solution providers and asset management service providers predominantly operate in a centralized manner. These centralized entities lack transparency, and the risk between counterparties can easily lead to single points of failure. Moreover, centralized decision-making introduces widespread custodial risks. These issues have long plagued the industry, significantly increasing transaction complexity and drawing concerns from regulators:

• Centralized Custody: Institutions holding user-related private keys expose user assets to significant custodial risks.
• Traditional Fiat Settlement: The current crypto payment model is transitional and must integrate with traditional fiat settlement systems, which will result in increased costs and reduced efficiency.
• Regulatory Blind Spots: Opaque centralized entities, combined with an incomplete cryptocurrency legal framework, present major challenges for regulators.
• Service Limitations: Single institutions often support only limited categories of cryptocurrency payment services, making it difficult to meet diverse user demands.
• DeFi Incompatibility: Centralized institutions struggle to integrate effectively with the DeFi ecosystem, hindering the widespread adoption of PayFi.

Core Features

The integration of crypto payments and DeFi has given rise to PayFi. PayFi seeks a new infrastructure to support its implementation and address complex compliance issues. PolyFlow has been regarded as one of the pioneering protocols designed to build financial infrastructure for PayFi.

PolyFlow’s core concept revolves around modular design, introducing two key components: Payment ID (PID) and Payment Liquidity Pool (PLP). These components deconstruct the flow of transaction information and funds, previously controlled by centralized institutions, while unlocking their value. By achieving this in a decentralized manner, PolyFlow enhances regulatory compliance and reduces custodial risks throughout the transaction process. Additionally, PolyFlow leverages blockchain functionality to integrate with the DeFi ecosystem, promoting the widespread adoption of PayFi applications.

Blockchain Use Cases for PolyFlow Include:

• A simpler gateway for achieving mass adoption of cryptocurrency
• Non-custodial solutions ensure compliance
• Privacy protection through ZK (zero-knowledge) technology
• DeFi revenue generation by providing liquidity for payment transactions
• A proprietary PID layer that facilitates cross-functional transactions
• An integrated liquidity pool for settlement execution
• Multi-functional Dapps that expand product offerings and features

Comparison with Traditional Payment Institutions:

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1. Payment ID (PID)

PID is a decentralized ID linked to encrypted user privacy-protected KYC/KYB information, associating users with cross-platform verifiable credentials. It enables the following features:

• Compliance Access: PID can include verification information from different platforms, which can be easily shared via QR codes. This structured identity recognition and transaction management method simplifies partner verification processes while maintaining compatibility with the DeFi ecosystem. Importantly, it bridges the information silos previously built by centralized institutions by connecting to an open, decentralized identity system, empowering both the traditional finance and DeFi ecosystems.
• Privacy Protection: PID leverages technologies such as zero-knowledge proofs to fulfill Anti-Money Laundering (AML) and Counter-Terrorist Financing (CTF) obligations without compromising user privacy. This is a crucial prerequisite for users to engage with traditional finance and the DeFi ecosystem.
• Data Sovereignty: PID stems from the separation of transaction information flow. On the one hand, it reports fund flows to regulatory authorities to meet compliance requirements; on the other hand, it returns on-chain behavioral data to individual users. Users can contribute PID-tagged data for AI analysis in exchange for rewards and token incentives — a departure from the traditional centralized model where institutions profited by exploiting such data. Additionally, PID plays a vital role in building on-chain credit systems.

PID Features

Verifiable Credentials

PID is a DID (Decentralized Identifier) that provides users verifiable identity information linked to payment attributes. Users can obtain Verifiable Credentials (VC) from Polyflow’s partner organizations or official Polyflow plugins from different platforms. These VCs can be bound to the user’s PID. Third-party DApps can access these VCs through the PID to verify or trust the PID’s address.

Soulbound Token (SBT)

PID functions as a soulbound token, meaning once a PID is minted and assigned, it cannot be transferred. This soulbound nature ensures the uniqueness of the identity behind the PID.

Voucher System

Due to the soulbound nature of PID, a voucher system is introduced to assign transaction properties to traditional DID projects before the user confirms PID minting. A voucher is another form of PID; once a PID is minted, no further minting can occur. Vouchers can be transferred or traded. Vouchers can be redeemed for PIDs and permanently bound to a specific address.

Multi-Chain

PID is now deployed across multiple chains, enabling multi-chain minting. Users can interact with DApps using different PIDs on different chains. DApps can also verify the authenticity of users and access essential KYC information linked to their PID.

Account-Based System

Polyflow introduces an account-based system for users’ PIDs, allowing them to bind their PID to an invisible account.

• Quick Login: Users can log in to their Polyflow account using any wallet associated with their PID.
• Easy Management: Users can manage and view their multi-chain PIDs from a unified personal dashboard within the account-based system.
• KYC Aggregation: KYC information obtained from different institutions or ZeroKYC plugins is aggregated under the user’s account for use across various PIDs on different chains.
• Configurable KYC: Users can configure different KYC information (such as varying content, levels, or institutions) for each PID across different chains to meet security requirements for interacting with DApps on those chains.

2. Payment Liquidity Pool (PLP)

The PolyFlow Liquidity Pool is a truly utility-driven revenue generation mechanism, not based on speculation. PolyFlow builds smart contract addresses to facilitate transactions, eliminating third-party processors and retaining processing fees as revenue. The fully autonomous, smart contract-driven liquidity pool ensures greater decentralization, reduced custodial risk, and lower third-party costs.

On-Chain RWA (Real-World Asset) Returns

PLP can be seen as a risk-free DeFi yield product suitable for on-chain cash flow management. This is an unprecedented breakthrough, as previous DeFi yield models inherently carried risks. For instance, financial products based on decentralized exchanges are always exposed to the risk of impermanent loss. In contrast, on-chain lending products may face fluctuations in collateral asset prices — both common risks within the DeFi ecosystem.

In real payment scenarios, PLP generates risk-free income directly from transaction fees. For example, in a payment gateway environment, when consumers make payments to a smart contract address within the PLP, liquidity providers can earn payment rewards by settling funds when merchants request early payouts.

Most importantly, this process is risk-free, and the yield is determined by the ratio between the liquidity provider’s funds and the total transaction volume. PLP can offer attractive fixed or flexible-term financial products, supporting supply chain finance, wallet settlement networks, stablecoins, insurance, and other innovative applications within the PayFi ecosystem.

PLP Features

• Automatically generated contract-based non-privileged access asset vault.
• Automated vault allocation process maximizes vault reusability and leverages decentralization.
• Funds are fully controlled and protected by contracts.
• Non-privileged system notifies and executes states.
• Assets are stored in decentralized vaults while maintaining integrity.

Ecosystem Participants

• Payment-Related Projects

These projects directly use our protocol, integrating it to enable crypto payment collection and related services. Transaction fees are generated during the use of PolyFlow. Subsequently, these projects will receive pfToken minted by the protocol. These projects must be PID holders and meet certain additional PID verification requirements. Additionally, they must create their own wallet address in the PLP system beforehand.

• Merchants

Merchants are direct users of the gateway. They use the gateway to accept crypto payments. Each merchant has its own account and funds account within the gateway. They can withdraw funds from the gateway and use the assigned wallet address to receive crypto payments.

• Customers

Customers are direct users of merchants and are the source of wallet address allocation requests via the gateway. Customer identity verification is handled by the merchant.

• Web3 Users

Web3 users can participate in liquidity staking to provide liquidity for fast redemption of pfUSDT and enjoy a share of transaction fees and platform revenue. They can also conduct fast exchanges between pfUSDT and USDT through the liquidity pool. Alternatively, they can stake PolyFlow governance tokens to earn platform income.

Fee Allocation

Transaction Fees

Each time pfUSDT is minted, a transaction fee is incurred. The fee is proportional to the minted amount. The total fee rate of 0.5% is adjustable, but any changes must later be decided through multisig authorization or governance token voting. Fee = X x 0.5%

Fee Distribution

• 0.25% stays in the wallet as natural protocol revenue.
• 0.03% is minted as pfToken and deposited into the PolyFlow treasury.
• 0.2% is minted as pfToken and allocated to the liquidity staking pool.
• 0.02% is minted as pfToken and rewarded to users who call the aggregation methods

3. Staking

Risk-free returns supported by payment transaction processing fees drive PolyFlow’s staking program. Each transaction generates a small processing fee, which is distributed among participants in the staking program.

Staking Rewards

• Native Yield on pfUSDT Held in the Contract: This refers to the returns generated by holding pfUSDT in the contract. It may include staking rewards, protocol-generated revenue, or earned interest.
• Fast Exchange Transaction Fees: Fees generated when users utilize the contract’s fast exchange feature. These fees will be allocated to the revenue pool.
• Core Protocol Business Logic Fees: A portion of fees generated from core protocol activities such as pfToken minting, fund aggregation, or other services provided by the protocol.

Business Partnership

PolyFlow has established strategic partnerships with several institutions across sectors such as cross-border payments, supply chain finance, and blockchain infrastructure. Below is a summary of key partners and their collaboration details:

1. Cross-Border Payment Sector

• NihaoPay: Partnered with PolyFlow to integrate PayFi into its cross-border payment system, enhancing merchants’ global business capabilities.
• Virgo Group: Formed a partnership with PolyFlow to promote the growth of the PayFi ecosystem in Canada.

2. Supply Chain Finance Sector

• Pelago: Collaborated with PolyFlow to successfully enable suppliers to obtain $300,000 in on-chain loans via the Pelago platform on the Stellar network, driving blockchain adoption in supply chain finance.

3. Blockchain Infrastructure Sector

• Ethereum: PolyFlow supports the Ethereum network, enhancing protocol compatibility and expanding its application scope.
• Polygon: Integrated with PolyFlow to provide efficient, low-cost blockchain solutions, optimizing user experience.
• X Layer: PolyFlow supports the X Layer network, expanding its multi-chain ecosystem.
• BEVM: Integrated with PolyFlow to strengthen the protocol’s multi-chain compatibility.
• Trusta Labs: Unlocking decentralized credit in PayFi.

Additionally, PolyFlow plans to integrate ecosystems such as Solana and TON in the future, further expanding its application scope across different blockchains.

Risks and Opportunities

1. Market Competition

PolyFlow faces competition from both traditional financial institutions and blockchain payment protocols in the decentralized payment sector. Centralized payment giants such as Visa, Mastercard, and PayPal have extensive user bases and well-established payment networks. Meanwhile, blockchain payment solutions like the Lightning Network, Stellar, Ripple, and various Layer 2 (L2) solutions are also enhancing efficiency and reducing costs. For PolyFlow to stand out, it must rely on technological innovation — such as lower transaction costs, faster settlement speeds, and smart contract-based payments — to attract both users and merchants.

2. Technical Dependence

PolyFlow’s operation depends on fundamental blockchain infrastructure, including underlying blockchain networks, smart contracts, cross-chain technologies, and oracles. It may need to function on Ethereum, Solana, or other public chains, while interacting with decentralized oracles and cross-chain bridges. While these technologies improve the protocol’s scalability and interoperability, they also introduce security risks and performance limitations. Issues like network congestion, excessive gas fees, or hacking incidents could compromise PolyFlow’s stability and user experience. Therefore, optimizing infrastructure and ensuring robust security are crucial for success.

3. Regulatory Uncertainty

Blockchain payment protocols face regulatory challenges across different global jurisdictions. These include KYC/AML requirements, stablecoin compliance, securities-related concerns regarding payment tokens, and cross-border payment laws. For example, the U.S. and EU are tightening regulations on stablecoins, while Japan and Singapore maintain a more open stance toward crypto payments. PolyFlow must balance user privacy and regulatory compliance while adapting flexibly to evolving global regulations to ensure its payment network remains legal and globally scalable.

Conclusion

PolyFlow Protocol offers an innovative decentralized payment (DePay) solution. Currently, decentralized payments face several challenges: high transaction fees, insufficient liquidity, regulatory uncertainty, and poor user experience. PolyFlow introduces two core mechanisms to address these issues: Payment ID (PID) and Payment Liquidity Pool (PLP). These separate payment information flow from fund flow, enhancing transaction transparency and compliance while leveraging the DeFi ecosystem to boost liquidity. Unlike traditional DePay solutions such as BTCPay Server, MoonPay, or stablecoin-based payment methods (like USDC direct settlement), PolyFlow enhances payment fund management by enabling users to earn DeFi yields during transactions and providing flexible cross-chain settlement options. This innovative architecture shows significant promise for global payments, B2B settlements, and seamless payment integration within the Web3 ecosystem.