Stablecoins: The Future of Payment Finance (PayFi)
Stablecoins are revolutionizing payments, offering a seamless, borderless alternative to legacy financial systems constrained by transfer limits, banking restrictions, and settlement delays. Their rapid adoption signals a pivotal shift toward a more efficient, decentralized financial landscape with instant, global access to value.
The Rising Value Proposition of Stablecoins: Superior Composability & Productivity
As blockchain technology scales, stablecoins are becoming the preferred trust-minimized medium of exchange, bridging traditional and decentralized finance. Their importance is evident—USDT and USDC now rank among the largest holders of U.S. Treasury securities, reinforcing their role in global liquidity while expanding access to the world’s reserve currency.
List of Largest Holders of US Treasury Debt (Dec 2024) – Source: US Department of Treasury & DefiLlama
Beyond payments, stablecoins unlock superior composability and productivity through varied collateral models:
- Treasury-backed reserves: Regulatory-compliant stability
- Crypto-collateralized assets: Transparent, permissionless governed by on-chain security
- Algorithmic & Hybrid models: Self-sustaining, highly capital-efficient monetary systems
Stablecoins are more than just digital dollars; they serve as the backbone of programmable finance, fueling liquidity, accessibility, and financial sovereignty at scale. As adoption accelerates, they will cement their role as the foundation of the next-generation PayFi ecosystem.
The Next Evolution: Energy-Backed Stablecoins & Proof-of-Work 2.0
Stablecoins have become the backbone of digital payments, yet their reliance on centralized issuers and traditional financial infrastructure exposes them to regulatory risks and counterparty dependencies.
Their stability is often fragile, built on assumptions that may falter in times of market stress, creating potential vulnerabilities and exploitation risks.
The Evolution Of Stablecoins – Source: X
A truly decentralized payment system demands a stable unit of account that is independent of legacy institutions. Enter the “Decentralized Energy Dollar”, introduced by Quai Network via a groundbreaking approach by leveraging Proof-of-Work (PoW) as an oracle for currency issuance, creating an on-chain monetary system that is not pegged to fiat but backed by energy expenditure.
Unlike traditional stablecoins, which derive value from centralized reserves, Quai’s energy-tied model anchors purchasing power to real-world energy costs, fostering a self-sustaining and censorship-resistant economy.
This design enables a decentralized energy dollar, providing a scalable, efficient, and trust-minimized medium of exchange. With its high-throughput architecture, Quai ensures low-cost, near-instant payments, making it an ideal platform for global transactions.
By eliminating reliance on centralized entities, Quai not only advances the sovereignty of digital money but also unlocks one of cryptocurrency’s most compelling use cases—seamless, borderless financial infrastructure.
By merging blockchain, energy, and monetary policy, Quai Network redefines stable payments, positioning itself as a transformative force in DeFi.
Report Summary
Pioneering an innovative front on a largely nascent next-generational PayFi layer, Quai Network is poised to scale and penetrate the payment landscapes with its purpose-built network. This report will cover:
- Key Innovations & Unique Value Proposition: A deep dive into Quai’s breakthrough technology stack as an innovative PayFi layer, outlining novel features like Proof-of-Entropy-Minima (PoEM), redefining PoW economics for scalability and efficiency.
- The Energy Dollar and Thermoeconomics: Analyzing the dual-token model of $QUAI & $QI, their role in value accrual, and how they drive network growth.
- Ecosystem & Adoption: Exploring Quai’s expanding ecosystem, strategic partnerships, and its positioning as the foundation for PayFi adoption.
Deep Dive: Quai’s Innovative PayFi Layer
Quai Network aims to pioneer a scalable, globally accessible, and purpose-built payments infrastructure, redefining how digital assets integrate with real-world finance. By fusing scalability, efficiency, and accessibility, Quai establishes itself as the foundation for the next evolution of PayFi.
Bitcoin Evolution Timeline – Source: Quai Network Primer Doc 2024
Unlike conventional blockchains, Quai reimagines Proof-of-Work (PoW) as an oracle for currency issuance, introducing an energy-backed monetary system that serves as a decentralized alternative to fiat-backed stablecoins / low-volatility coin.
All these are underpinned by its own novel technical implementations.
Coupled with sharding for scalability and EVM compatibility, Quai Network is not just enhancing blockchain efficiency—it is reshaping the economics of digital payments.
Evolving With PoW 2.0: Proof-of-Entropy-Minima (PoEM)
Traditional PoW has long been the backbone of decentralized security, yet it faces challenges such as efficiency constraints, centralization risks from mining pools, and scalability limitations.
PoEM revolutionizes PoW consensus by addressing inefficiencies inherent in Bitcoin’s Nakamoto consensus. Unlike traditional PoW and Proof-of-Stake (PoS) systems that rely on periodic consensus at each block production, PoEM achieves perpetual consensus, eliminating network latency as a factor in block finalization.
This ensures instant fork resolution, where all nodes remain in agreement on the blockchain’s state, even without complete system-wide information.
PoW vs. PoEM Flow Comparison – Source: Quai Network Documentation
A major advancement PoEM brings over Bitcoin’s Heaviest Chain Rule (HCR) is its intrinsic block weight model, which factors in total entropic reduction rather than cumulative difficulty alone. This leads to a deterministic, time-independent block weighting system, dramatically reducing orphan rates and improving finalization speed by 28.5% over traditional PoW.
Unlike mechanisms such as GHOST, which attempt to address orphaned blocks through discounted weights, PoEM eliminates redundant computation and optimally leverages entropy calculations to maximize security and efficiency.
Beyond improving single-chain consensus, PoEM is uniquely designed for hierarchical coordination across sharded blockchains, ensuring seamless scalability without compromising security. It creates a Nash equilibrium, eliminating vulnerabilities like selfish mining while enabling fair resource allocation.
This transition from multi-round consensus to single-shot communication fundamentally enhances throughput by 16.3%, making PoEM one of the most efficient and scalable PoW models in existence.
By integrating entropy-based validation, deterministic block preference, and optimized computational efficiency, PoEM redefines blockchain consensus, eliminating the need for contentious forks and paving the way for next-generation decentralized infrastructure.
Optimizing Network Scalability: Hierarchical Architecture
Scalability has long been a critical challenge for blockchain networks, often requiring trade-offs between decentralization and security. Quai Network introduces a novel hierarchical architecture that shards state without compromising security, enabling a highly scalable and interoperable blockchain ecosystem.
A Three-Tier Merge-Mined Structure
Quai Network’s Hierarchical Structure – Source: Quai Network Documentation
Quai Network’s architecture is composed of a network of interconnected, merge-mined chains, structured within a three-tier hierarchy. This design enhances scalability while preserving full-network security, allowing multiple blockchains to function as independent yet interoperable execution environments.
- Sharding Without Security Fragmentation: Unlike traditional sharding, which splits both state and security, Quai utilizes merged mining to ensure all chains remain secured under a unified consensus framework. This prevents coordination risks and latency issues often associated with cross-shard state updates.
- Parallel Execution for High Throughput: Quai’s multi-threaded design allows each sub-network to operate as an independent execution thread, enabling asynchronous block production and atomic transaction processing across all chains. This design significantly enhances transaction throughput, achieving speeds of 50,000+ TPS while maintaining a trustless, decentralized structure.
Balancing Horizontal and Vertical Scaling
Further strengthening its infrastructure, Quai leverages horizontal and vertical scaling mechanisms to ensure the network remains secure and trustless while accommodating exponential growth. With peak GPU mining at 4 TH/s and 150,000 GPUs contributing computational power, Quai not only secures the network but also democratizes mining participation, making it more accessible.
Transactions and contract interactions remain composable across all chains via shared hash-linked references, ensuring seamless interoperability.
Blockchain Types Overview – Source: Quai Network Primer Doc 2024
This hierarchical structure not only enhances scalability but also lays the foundation for a global payment and financial infrastructure, capable of handling high transaction volumes without centralization risks. Through its multi-threaded, merge-mined execution model, Quai Network sets a new standard for blockchain scalability, enabling a seamless, high-performance decentralized ecosystem.
Effective Scaling: Adaptive Dynamic Sharding
Quai Network also introduces adaptive dynamic sharding, an effective mechanism that automatically expands the network’s execution capacity by introducing new shards efficiently only when transaction demand increases. This ensures scalability while maintaining efficiency and decentralization.
Quai Network Dynamic Scaling via Sharding – Source: Quai Network Primer Doc 2024
The protocol monitors network congestion indicators, such as the rate of uncle blocks and gas limit utilization, to determine when additional execution shards are necessary. When demand surges, the system seamlessly deploys new region chains and their associated zones, integrating them into the broader network consensus without disrupting operations.
A key advantage of this approach is its self-regulating nature, allowing the network to dynamically scale in real-time while preserving security and minimizing resource overhead.
Moreover, whenever a new execution shard is introduced, existing region chains automatically inherit an additional subordinate zone, ensuring balanced workload distribution across the ecosystem.
This adaptive sharding model positions the network for global-scale adoption, offering a future-proof solution to blockchain scalability without compromising decentralization, security, or performance.
Through these advancements, Quai Network lays the foundation for a truly scalable and efficient blockchain ecosystem, primed to serve as a global payments layer.
Self-Organizing Subnets: Enhancing Node Network Efficiency
Traditional peer-to-peer networks suffer from excessive bandwidth and unnecessary latency overhead due to geographical proximity as nodes are operated across the globe. This overhead incurred can scale to often 10-100x the actual block data size.
Quai Network’s Self-Organised Subnets Distribution Map – Source: Quai Primer Doc 2024
To overcome this, Quai Network enhances network efficiency and scalability through self-organizing subnets, where nodes dynamically cluster based on geographic proximity—structuring them into localized subnetworks to facilitate efficient transactions regionally before propagating globally.
This intelligent network topology ensuring faster transaction propagation and improved overall performance while preserving decentralization.
Workshares: Eliminating Mining Pool Centralization
Another key innovation within this model is workshares, which decentralize mining rewards, enabling more frequent payouts and reducing miners’ reliance on centralized pools—promoting a fairer, more distributed mining ecosystem. Traditionally, PoW blockchains determine finality based on chain depth, with blocks serving as the primary sampling mechanism for hashrate.
Workshares redefine this by allowing miners to submit incremental proofs of work before finding a full block, significantly increasing miner payouts while improving network propagation.
Quai Network Workshares Diagram Illustration – Source: Quai Network Primer Doc 2024
Unlike conventional mining pools, where centralized entities aggregate hashrate to ensure frequent rewards, workshares enable solo miners to receive payouts 20-50x more often, reducing reliance on centralized pools. This built-in distributed mining pool protocol democratizes mining rewards, ensuring a more equitable and censorship-resistant mining landscape.
Beyond fairer payouts, workshares also enhance network efficiency by bundling transactions into groups, minimizing bandwidth waste, and enabling pre-validation of transactions before block inclusion.
Additionally, workshares remove the incentive for miners to withhold blocks for ex-protocol ordering advantages, reinforcing PoEM’s Nash equilibrium—a fundamental breakthrough over traditional PoW.
By integrating a reward-based mechanism tied to computational effort, Quai’s workshares eliminate the need for monopolistic mining pools, ensuring a more decentralized and secure blockchain network while improving miner incentives and transaction propagation efficiency.
Taking Traditional PoW To Another Level: EVM Compatibility & Smart Contract Functionality
Quai’s integration with the Ethereum Virtual Machine (EVM) ensures that developers can seamlessly build decentralized applications (dApps) on the network. Unlike traditional PoW blockchains, which often prioritize security at the expense of programmability, Quai maintains robust security while enabling complex financial logic through smart contracts.
Quai uses work-enabled primitives to ensure Miner Extractable Value (MEV) resistance, enhancing the fairness and security of the network. This feature is particularly crucial in maintaining the integrity of DeFi applications.
Furthermore, Quai Network’s Work-Based Asynchronous Consensus Mechanism (PoEM), with its objective measure for block preference, optimizes transaction processing efficiency.
This feature, along with EVM compatibility and MEV-resistant transaction ordering, makes Quai a robust platform for developers looking to build on a reliable, future-proof blockchain network.
Interoperability
Quai Network enables trustless cross-chain transactions through External Transactions (ETXs), allowing seamless state transfers between different Quai chains. These transactions leverage hash-linked references and a hierarchical routing mechanism to ensure secure and efficient interoperability across the network.
Quai Network’s Cross-Chain ETXs Flow Outline – Source: Quai Network Documentation
Each ETX originates from an origin chain and is routed through a dominant chain (Region or Prime) before reaching the destination chain.
This two-step process that involves (1) propagation up the hierarchy (origin → dominant chain), and (2) propagation down to destination chain ensures efficient coordination and maintains security across the network.
Furthermore, ETX not just applies to direct user transactions (account-initiated ETXs), it also facilitate cross-shard state transitions (contract-initiated ETXs) via Quai’s OP_ETX opcode, allowing smart contracts to operate across multiple shards without compromising security or efficiency.
This interoperability ensures that Quai can support a broad range of use cases, from DeFi applications to enterprise-grade financial systems.
Liquid Mining Tokens (LMTs): Redefining PoW Economics
Quai Network introduces Liquid Mining Tokens (LMTs) – an innovation that that transforms PoW mining into a dynamic and composable financial asset. Unlike traditional PoS mechanisms that rely on capital accumulation, Quai’s staking model is directly linked to computational effort, reinforcing both decentralization and network security.
Potential of LMT Economics Overview – Source: X
Novel Financial Dynamics
LMTs empower miners to stake PoW-generated assets for additional rewards, transforming mining into a profitable and financially flexible activity. This mechanism aligns network security incentives with broader financial utility, enabling miners to unlock greater liquidity from their earned rewards.
Additionally, optional reward locking mechanisms allow miners to extend staking durations for enhanced and predictable returns, promoting system stability and long-term participation.
DeFi Integration and Composability
LMTs seamlessly integrate into DeFi protocols, enhancing asset utilization and productivity by enabling lending, borrowing, and collateralization, thereby increasing both liquidity and utility within the mining economy.
By merging mining incentives with financial composability, Quai Network’s LMTs have the potential to redefine PoW economics, fostering greater network value productivity. This innovation paves the way for a scalable, liquid, and decentralized alternative to traditional mining models, unlocking new financial opportunities within the ecosystem.
TDLR: Why Quai Network Stands Out
Technical Blockchain Comparison Table – Source: Quai Network Blog
Quai Network redefines PoW by addressing its inherent limitations while enhancing scalability, security, and decentralization. Through innovative mechanisms like PoEM and workshares, Quai eliminates inefficiencies, improves finality, and decentralizes mining rewards, creating a more resilient and equitable consensus model.
Coupled with heterogeneous engineering on the blockchain-level, Quai introduces a scalable and efficient multi-threaded architecture, enabling high transaction throughput, censorship resistance, and adversarial resilience. This adaptive structure ensures that Quai can only handle global-scale operations as a robust PayFi layer and versatile DeFi ecosystem, while maintaining decentralization and security.
Quai Network’s Energy Dollar & Thermoeconomics
$QUAI & $QI: A Dual-Token System for Scalable Value Accrual
Quai Network’s dual-token model is designed to balance its native ecosystem DeFi utility and scalable payments, ensuring a secure, efficient, and sustainable economic framework.
$QUAI vs. $QI Comparison Table – Source: Quai Network Primer Doc 2024
This system differentiates $QUAI, a value-accruing crypto asset optimized for DeFi, governance, and long-term value retention, from $QI, a decentralized, energy-backed unit of account engineered for high-speed transactions and scalable payments.
By integrating these two assets, Quai Network aligns financial composability with real-world utility, creating a flexible and efficient foundation for blockchain-based economic infrastructure.
$QUAI: A Value-Accruing Cryptocurrency Asset
As an EVM-compatible token built on an account-based ledger, $QUAI serves as the native asset of Quai Network, designed for both long-term value accrual utility and ecosystem-wide financial interactions on its native DeFi ecosystem. Its primary functions include:
- Store of Value: Programmatically structured with a sustainable monetary policy for long-term value accrual.
- Medium of Exchange: Facilitates seamless transactions across Quai Network.
- DeFi & Governance Utility: Used for staking, governance, and other protocol-level interactions, integrating deeply with Quai’s financial ecosystem.
With its composable nature, $QUAI acts as the foundation for financial innovation within Quai’s multi-chain network.
$QI: The Decentralized Energy Dollar
$QI: The Decentralized Energy Dollar – Source: X
Unlike $QUAI, $QI operates as an energy-backed unit of account, utilizing a UTXO ledger model with fixed denominations to maximize scalability and transactional efficiency.
Designed as a decentralized alternative to fiat-backed stablecoins, $QI derives its value from energy costs, creating a resilient, inflation-resistant economic model.
By eliminating reliance on external oracles or centralized entities, $QI mitigates depeg risks and structural vulnerabilities, ensuring a trust-minimized and self-sustaining monetary system.
The key traits can be summarised by:
- Medium of Exchange: Engineered for seamless, low-cost, high-frequency transactions.
- Energy-Linked Stability: Pegged to energy costs, offering a decentralized hedge against inflation.
- Scalability & Liquidity: Supports real-world financial applications without reliance on centralized collateralization.
$QI also offers cash-like privacy, with transactions using fixed denominations and preventing address reuse within a block. Additionally, $QI supports multi-party signatures, providing enhanced privacy and control while maintaining a high level of anonymity.
The Essence of $QI Thermoeconomics
The rationale behind this novel approach lies in the fundamental economic principle that energy is the most universal resource. Unlike fiat, which is subject to inflationary pressures and central bank policies, Qi is issued in proportion to hashrate and mining difficulty, ensuring an endogenous and market-driven supply mechanism.
Inspired by Robert Sam’s Seigniorage Shares model, Quai’s monetary design creates a stable yet adaptable store of value without the need for external reserves.
The Qi energy dollar reflects production costs in real-time, ensuring that its value remains stable relative to global energy expenditures. This model naturally aligns currency valuation with real-world productivity, making it an ideal medium for economic transactions.
Key Token Mechanics: Dynamic Issuance & Adaptive Supply
The issuance and supply of $QUAI and $QI are governed by PoEM, ensuring a secure, adaptive, and competitive issuance model. Both tokens are minted through PoEM mining, with miners selecting $QUAI or $QI as rewards, creating a competitive supply mechanism where mining one reduces the issuance of the other.
Block Reward Issuance Model
$QUAI and $QI Token Inflation Model Visualisation
Quai Network’s PoEM consensus secures the issuance and supply of both $QUAI and $QI via a dynamically responsive economic model that focuses on sustainable network security and value retention. Key features of the dual-issuance model:
- Dynamic Mining Rewards: Miners receive block rewards in either $QUAI or $QI, creating a competitive issuance mechanism where mining one reduces the supply of the other.
- Supply Growth Control: $QI rewards scale linearly with difficulty, while $QUAI rewards follow a logarithmic curve, resulting in asymptotic supply growth over time.
- Optional Reward Locking: Miners can lock rewards for an extended period to receive multipliers, incentivizing long-term participation and network security.
- Two-Way Conversion Mechanism: Users can seamlessly swap between $QUAI and $QI at a protocol-defined exchange rate, where the input token is burned, and the output token is minted.
This model ensures that $QUAI remains a deflationary asset for DeFi, while $QI sustains its role as a scalable and stable unit of exchange. Both tokens with its distinct characteristics operates independently to complement one another while serving its respective economic functions.
By integrating this flexible and dynamic issuance model, Quai Network is designed for both DeFi-driven economic incentives ($QUAI) and real-world transactional scalability ($QI), reinforcing its long-term sustainability.
Optimizing Utility & Adoption
Quai Network’s dual-token system strategically caters to distinct user segments, optimizing for both financial applications and high-frequency payments.
Tailored Token Utility for Diverse Participants
- $QI: Acts as a primary medium of exchange, enabling fast, frictionless transactions across Quai’s payment infrastructure.
- $QUAI: Designed for DeFi users, facilitating staking, governance, and financial composability.
Bifurcation of the two tokens essentially allows Quai Network to onboard a broad range of users that (1) seek primarily to use its network as a payment layer via $QI, and (2) users who seek innovative, complex DeFi use-cases.
Adaptive Reward Mechanisms for Sustainable Growth
Lastly, while the dual-token model explicitly promotes network & ecosystem growth on both fronts. The adopted dynamic issuance framework completes the final piece of the puzzle—economic sustainability. This approach strengthens network security and adoption by:
- Optimizing miner incentives with logarithmic and linear issuance models.
- Encouraging long-term participation through reward multipliers and staking incentives.
- Regulating inflation via competitive mining mechanisms.
By aligning incentives across network security, payments, and DeFi adoption, Quai Network fosters a self-reinforcing token economy. This structure not only ensures scalability and resilience but also solidifies Quai’s role as a next-generation PayFi layer, seamlessly bridging decentralized finance with real-world utility.
Ecosystem Highlights & Accreditations
Quai Network’s Based Ecosystem
Quai Network Ecosystem Map – Source: X
Quai Network has cultivated a comprehensive DeFi ecosystem, spanning multiple pillars of utility. From multi-chain DEXs like QuaiSwap and IceCreamSwap (AI DEX Aggregator with native launchpad) and, to robust infrastructure with StorkOracle and Portal to Bitcoin, and leading decentralized compute providers such as io.net and Akash Network, the network is primed for diverse on-chain activity. The ecosystem also extends into NFTs, gaming, and entertainment, with platforms like QuaiMark, QuaiBattle, and Qowboy fostering user engagement. Quai’s expansive ecosystem positions it as a versatile and scalable hub for dApps.
Investor Backing and Partnership Highlights
Quai Network $5M Strategic Round – Source: The Block
Quai Network has secured $15 million USD in total funding across three rounds, with backing from top-tier investors and accredited venture capital firms such as Polychain Capital and Alumni Ventures. Its most recent $5 million USD strategic funding round in Q3 2024 saw participation from Cogitent Ventures, MH Ventures, TPC Ventures, Giga Chad Ventures, and DexCheck Ventures.
Additionally, Quai is supported by renowned angel investors and strategic partners, further solidifying its ecosystem credibility and reinforcing its potential for long-term growth.
Closing Remarks
Quai Network represents a paradigm shift in blockchain design, seamlessly integrating PoW security, scalable architecture, and a revolutionary energy-backed currency.
By leveraging Proof-of-Work 2.0, the energy dollar (Qi), and EVM compatibility, Quai provides a decentralized, stable, and scalable financial ecosystem that aligns with real-world economic principles.
With innovations such as workshares, liquid mining tokens, and sharded smart contract execution, Quai is not only solving blockchain’s biggest challenges but also redefining how digital money should work in the modern era. The network’s commitment to decentralization, privacy, and economic efficiency makes it a groundbreaking player in the next evolution of cryptocurrency.
As Quai continues to develop, it has the potential to replace fiat-based economic models with a system that is inherently stable, energy-efficient, and resistant to centralization. With its focus on thermoeconomics, Quai may very well become the foundation for a global, decentralized financial system built for the 21st century and beyond.
Authors: @0xCheeezzyyyy, Memento Research
This report was written in partnership with Quai Network. This report has been prepared for informational purposes only. It does not constitute investment advice, financial advice, trading advice, or any other sort