Payment Liquidity Pool (PLP)
Last updated
Last updated
PLP is a product derived from splitting out transaction fund flow from the payment process. The smart contract address provided by the liquidity pool is used to receive funds, achieving on-chain custody of assets without relying on the traditional method of expensive enterprise wallets used by centralized institutions for asset management, fund aggregation, and yield generation. This more decentralized PLP model can achieve the following:
Digital Assets Self-Custody: It brings convenient, secure, and compliant custody methods to PayFi applications, ensuring asset safety while minimizing the need for transaction intermediaries.
Liquidity Pool: By aggregating transaction funds through smart contract addresses, PLP provides liquidity for financing needs in payment transactions.
DeFi Ecosystem Compatibility: Centralized applications are incompatible with the decentralized DeFi ecosystem. PLP, built on blockchain, seamlessly connects to the DeFi ecosystem and brings DeFi business logic to PayFi applications.
Risk-Free RWA (Real-World Assets) Yield Category: The protocol’s generated yield directly reflects in PLP. This income, based on real-world payment transaction scenarios, provides a risk-free stable yield source for DeFi.
The flexible architecture of PLP allows it to eliminate the asset custody risk of transaction intermediaries, while ensuring that PayFi applications can adapt to the ever-changing landscape of digital assets.
PLP can be considered a risk-free DeFi income 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 always faced the risk of impermanent losses, and collateral in on-chain lending products could be impacted by volatile underlying asset prices. These are very common scenarios within the DeFi ecosystem.
PLP directly generates risk-free income from transaction fees in real payment scenarios. For example, in a payment gateway context, when consumers make payments to the smart contract address within PLP, liquidity providers can earn payment-related rewards by settling funds in case of merchants requesting early payments.
Most importantly, this process is risk-free, with the yield determined by the ratio between liquidity providers’ funds and 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.
