Solana Pay is an open protocol with specified payment criteria that developers may build on and adapt.
PayPal was a game changer in the payments processing sector. The financial innovation of Peter Thiel, Max Levchin, and, ultimately, Elon Musk, aimed far ahead of its time, permitting fast payments between consumers, companies, and others over the internet.
Many believe Solana (SOL) Pay to be the next breakthrough in payments processing, enabling payments while taking nonfungible tokens (NFTs) and Web3 into consideration. Some are even referring to Solana’s new payment mechanism as the Visa or PayPal of Web3. This article will explain Solana Pay and how it works so you can judge if the project is worth your time.
But first, before diving into the digital payment platform Solana Pay, it’s critical to comprehend Solana.
What exactly is Solana?
Anatoly Yakovenko, a software developer with experience at Dropbox and other large internet businesses, launched Solana in 2017.
While other blockchains are efficient or aiming toward efficiency, Yakovenko believes that many of them fail to account for time. Rather than depending on a common clock, each block operates on the local time of the relevant node.
What is the issue here? Without a common clock, transaction timestamps for each block would vary, and the time of confirmation is another component that all nodes must check. The longer it takes a node to verify a factor, the slower the transaction.
On Solana, all nodes operate on the same clock, which eliminates one validation element and speeds up the network. Yakovenko refers to this consensus approach as proof-of-history (PoH), which is a modified form of proof-of-stake (PoS) that takes time into account for verification.
In Solana’s situation, validation operates similarly to proof-of-stake. On top of the proof-of-stake technique, Solana is just employing time as a historical record of evidence. As a consequence, Solana can handle an average of 65,000 transactions per second while charging just a few cents each transaction.
In addition, Solana is a smart contract decentralized finance (DeFi) technology that competes with Ethereum (ETH). Both platforms provide a wide range of decentralized financial DApps, some of which are backed by cryptocurrency. Instead of Ether at the heart of it all, the Solana coin is abbreviated as SOL.
SOL is used to trade inside the Solana network, to stake for governance, and to reward validators. Otherwise, Solana has its own decentralized exchanges where users may trade the numerous currencies developed on its platform. Every DApp created on Solana will have its own SOL-compatible coin, and on-chain decentralized exchanges make it easy to acquire those tokens.
Because Solana’s PoH consensus enables it to handle tens of thousands of transactions per second without incurring fees, Solana Labs is developing Solana Pay to provide that transaction power to the public.
Solana Pay’s History
While Solana Labs played a significant role in the creation of Solana Pay, other firms were also engaged. Circle, Checkout.com, Citcon, Phantom, FTX, and Slope, according to Shere, all helped set the groundwork for the digital payment network Solana Pay.
According to a Visa research, “73 percent of firms feel accepting digital payments is vital to development in 2022,” according to Team Circle. According to the same report, 59 percent of those organizations “currently utilize or aim to employ entirely digital payments over the next two years.” These figures formed the basis for Solana Pay, since Solana Labs, Circle, and their other partners want to be prepared for these early adopters. In 2021, Shere joined Solare Labs to work on Solana Pay.
So, how exactly does Solana Pay work?
Solana Pay, a digital payment platform, claims to provide companies and consumers with instant, fee-free transactions that have no impact on the environment by using the power of the Solana blockchain network. The network promises to accommodate 65,000 transactions per second and offers a simple software development kit to let enterprises incorporate the product.
Solana Pay can be integrated by developers creating DApps on Solana, same as conventional stores can if they have a Solana wallet. Because of this ease of use, many people compare Solana to PayPal, claiming that Solana can accomplish for crypto payments what PayPal did for regular online payments.
The Benefits of Solana Pay
Of course, Bitcoin (BTC), Ethereum (ETH), and other cryptocurrencies promise to allow near-instant crypto payments, but these networks (particularly Ethereum) are expensive and not as quick as they claim. For example, Bitcoin has an average transaction rate of seven transactions per second, whereas Ethereum has an average transaction rate of thirteen transactions per second. Bitcoin and Ethereum are both destructive to the environment. Solana’s network is quicker and less expensive, which appeals both companies and consumers.
Solana Pay enables its users to pay in real-time in SOL or any other supported Solana token, such as real-time payments in USD Coin (USDC), without the involvement of a third party, such as a bank or payment processor. Furthermore, Solana Pay does not enable chargebacks, which eliminates an expensive problem that conventional businesses often encounter.
Solana Pay is also perfect for businesses since it provides complete statistics on every transaction, including wallet destination, currency type, transaction amount, and text fields for the merchant to explain the transaction. These facts are completely hidden from the rest of the network, allowing both the consumer and the merchant to trade without being watched.
As Solana Labs’ director of payments, Sheraz Shere, notes in his blog post unveiling Solana Pay, the Solana team wants the world to see Solana Pay as more than just a way for customers to “pay with crypto.” Shere, on the other hand, sees Solana Pay as a platform where “all currencies are on-chain and utilized for a broad spectrum of transactions.”
Solana Pay’s Drawbacks
Solana Pay, like the Solana network, is still in its early stages of development. Businesses who migrate to Solana Pay risk losing their assets due to a programming mistake or a network assault, for example. If the company isn’t crypto-savvy, assets might be lost due to simple user mistakes, since keeping a crypto wallet doesn’t come easy to everyone.
Furthermore, although Solana is quicker than many of its rivals, Ethereum is a much larger platform overall. Ethereum has much more DApps and a bigger user base than Solana, and Solana’s future transition to Ethereum 2.0 might be problematic as well.
Merchants may use Solana Pay
While Solana Pay may seem to be complicated, merchant integration is rather straightforward. To begin, a merchant must create a Solana wallet, which may be done either individually or via the FTX exchange.
The merchant must then include some Solana Pay code into their website and encode their following crypto payment request URL into a QR code. Customers may now pay for products and services both online and in person by scanning a QR code inside their SOL-enabled wallet.
Developers are compensated by Solana
While Solana Pay’s primary use case is to provide retailers with an easy method to take cryptocurrency, the Solana community may make enhancements and present additional use cases. If users wish to offer improvements and updates, Solana Pay’s documentation encourages them to file a Github issue.
Shere mentions Solana Pay in his blog post, noting that it might simplify physical and digital transactions using NFTs. His example is purchasing a pair of shoes. A shopper may purchase a pair of shoes with Solana Pay and leave the business with two NFTs.
The first NFT enables her to utilize those shoes in the metaverse, while the second serves as a receipt for her purchase. That receipt also serves as admission to the retailer’s private club of NFT holders, who get discounts and other perks.
Solana Pay-compatible wallets
Phantom, Crypto Please, and FTX are the three wallets that presently offer Solana Pay. Phantom is a Solana-only wallet for purchasing, keeping, and exchanging cryptocurrency and NFTs. Crypto Please is another another Solana-focused wallet that allows users to transmit cryptocurrency over Telegram, Whatsapp, and other platforms. Finally, FTX is a cryptocurrency exchange that accepts all cryptocurrencies, including Solana. More wallets that enable Solana Pay are on their way.