Understanding LayerFi (Layered Finance): The Inevitable Logic of On-Chain Financial Evolution (2025-2030)

BitMart founder Sheldon Xia proposed the concept of LayerFi, believing that it is an inevitable evolution to solve the current on-chain financial dilemmas and outlines a blueprint for future financial infrastructure that combines decentralized trust with scalable efficiency. (Background: BitMart DEX makes a grand debut: opening a new experience for on-chain trading) (Background Supplement: BitMart Card officially launched: enjoy the freedom of crypto payments) *This article is an advertising piece, written and provided by BitMart, and does not represent the position of the Block, nor is it investment advice, buying or selling recommendations. Please see the end of the article for liability warnings. Some thoughts on the future of on-chain finance. Written after the market's violent fluctuations on October 11, 2025. —— BitMart Founder Sheldon Xia Let's start with a simple question. On October 11, 2025, the crypto market experienced the largest liquidation event in history. In this extreme stress test, some systems collapsed, some survived, and some will become stronger as a result. Since entering the blockchain industry in 2013, we have served over 12 million users and processed trillions of dollars in transactions over nearly thirteen years. I have witnessed the evolution of the industry from speculation to infrastructure. What I want to say today is: LayerFi is not a stopgap measure, but an inevitable choice for the maturity of on-chain finance. Let me introduce my background first. I am the founder of BitMart and have been in the blockchain industry since 2013. Over the past nearly 13 years, our platform has processed trillions of dollars in transactions, serving over 12 million users. I have also witnessed the complete transformation of this industry from speculative frenzy to infrastructure construction. Today, I want to share a core perspective with you: LayerFi is not a stopgap measure, but an inevitable choice for the maturity of on-chain finance. The essence of finance is a balancing game of efficiency and trust. The core of the financial system lies in two major propositions: how to establish trust and how to improve efficiency. Historically, starting from the Gold Standard in 1717, the currency value was guaranteed by scarce physical assets, gradually transitioning to institutional commitments and market mechanisms. In the 1960s, computerized clearing improved efficiency, and transactions became the norm from manual to electronic. Each reform reshaped the relationship between efficiency and trust. Traditional finance relies on intermediaries such as banks, exchanges, and clearinghouses as "trust nodes" to guarantee transactions. However, in the era of globalization and digitization, cross-border transfers may require multiple institutions, take days to process, incur high costs, and users cannot immediately grasp the status of their funds. Compliance costs are rising, and trust costs erode efficiency. Blockchain replaces intermediaries with distributed ledgers and consensus mechanisms, using algorithms to directly establish a trustless model. The emergence of Bitcoin and Ethereum allows smart contracts to automatically execute financial rules and complete transactions quickly and at low cost. By October 2025, the DeFi locked value reached $160 billion, with a peak daily trading volume of $80 billion on decentralized exchanges, making trustlessness a reality. However, the high technical threshold and self-custody risks of pure DeFi limit its popularity; pure CeFi, while easy to use, requires complete trust in the platform and carries single-point risks. Understanding the innovative structure of LayerFi LayerFi is not just a mix of CeFi and DeFi, but a system innovation with a layered architecture. Like the design of a skyscraper, the foundation is thick and solid, the structure supports functionality, and the top layer pursues experience, with materials and solutions differing according to objectives. First Layer: Settlement Layer (Settlement Layer)—— The cornerstone of asset security, relying on mature Layer 1 such as Ethereum to carry final settlement and asset custody, ensuring transparency, verifiability, and immutability, with the platform having no right to use the assets. Slowness and high costs are acceptable at this layer, as security is paramount. Second Layer: Execution Layer (Execution Layer)—— The efficiency engine, using Layer 2 technologies such as Optimistic Rollups or ZK-Rollup, efficiently processes a large number of transactions off-chain and then submits the results to the settlement layer, achieving both performance and ultimate security. Third Layer: Application Layer (Application Layer)—— User interface and services, providing an ultimate experience through a centralized front-end without touching asset control, supporting mobile and email sign-ups, customer support, automatic handling of gas fees, etc., reducing the barriers to use. This design breaks the dilemma of not being able to achieve decentralization, security, and performance simultaneously, allowing different levels to achieve their own optimal balance. Advantages and future of LayerFi LayerFi reduces user technical barriers, retains asset autonomy, and introduces clear responsibilities and compliance management for institutions. For regulators, the front end can execute KYC and AML, while the back end has transparent on-chain records to prevent money laundering and track the flow of funds, balancing innovation and security. In 2025-26, LayerFi will enable interoperability between Layer 1 and Layer 2, advancing account abstraction, further reducing costs and latency. In 2027-28, the tokenization scale of RWA (real-world assets) will expand, with deep integration of AI, further blurring the lines between on-chain and traditional finance. In 2029-30, global regulatory and technical standards will unify, and complex financial products will be fully on-chain, with LayerFi becoming the foundational infrastructure for global capital flow. The future of blockchain and finance is symbiosis, not disruption. LayerFi achieves optimal balance at different levels, retaining decentralized trust while providing scalable efficiency. It serves as a symbiotic bridge between finance and technology, not disrupting the traditional but integrating innovation into the existing system. By 2030, when DeFi locked value exceeds $2 trillion and RWA reaches $5 trillion, LayerFi will solidify its role as a globally trusted and efficient financial infrastructure. PS On-chain computation has matured relatively, and decentralized storage on-chain may be a new key component five years from now. Beyond RWA assets, a larger asset class is the social production data generated by human societal behaviors on-chain in the future. I believe DeFi is the future, and LayerFi is a necessary stage in this evolutionary process. We are also working on high-performance public chains for L1, so stay tuned. Our BitMart Card is very useful, and we welcome everyone to apply. Our US site will go live in October. On the launch day, we will legally provide digital asset trading services to users across 49 states in the US. We invite everyone to stay tuned. Advertising Disclaimer: The content of this article is an advertising piece provided by the contributor, and the contributor has no relationship with the Block, nor does this article represent the position of the Block. This article does not intend to provide any investment, asset advice, or legal opinions, and should not be regarded as an offer to buy, sell, or hold assets. Any services, programs, or tools mentioned in the advertising piece are for reference only, and the final actual content or rules are subject to the announcements or explanations of the contributor. The Block is not responsible for any potential risks or losses, reminding readers to conduct their own careful verification before making any decisions or actions. Related Reports BitMart releases the 2025 mid-year report: technological innovation drives steady growth. Fed Philadelphia president...