PayPal is a huge innovation in the payment industry. The financial idea, co-founded by Peter Thiel, Max Levchin and Elon Musk, uses the internet to connect customers, businesses and more Instant payment, its goal is far ahead of the era when it was founded.
Solana (SOL) Pay is considered by many to be the next innovation in payments, making payments easier with Non-Fungible Tokens (NFTs) and Web3 in mind. Some are even calling Solana’s new payment protocol the Visa or PayPal of the Web3 era. This post will provide an analysis of Solana Pay and how it works, allowing readers to gauge whether the project is what it claims to be.
But first, before introducing the digital payment platform Solana Pay, it is crucial to understand Solana.
Solana was founded in 2017 by software engineer Anatoly Yakovenko, who has worked at Dropbox and other big tech companies.
According to Yakovenko, while other blockchains are efficient, or at least trying to be efficient, many blockchains do not take time into account. Instead of relying on a standardized clock, each block runs on the local time of its associated node.
Why is this a problem? Without a standardized clock, transaction timestamps would be different for each block, and confirmation times are another factor that all nodes must verify. The more factors a node needs to verify, the slower the transaction time.
On Solana, all nodes run on the same clock, removing a factor of verification and increasing the speed of the network. Yakovenko calls this consensus method Proof of History (PoH), an improved version of Proof of Stake (PoS) that takes into account the time factor for verification purposes.
Validation in Solana works similar to Proof of Stake. Solana is only based on proof of stake, using time as the history of proof. As a result, Solana can handle an average of 65,000 transactions per second with low fees.
Solana is also a smart contract decentralized finance (DeFi) platform that competes with Ethereum (ETH). Both platforms offer various decentralized finance DApps, some of which also offer cryptocurrencies. Solana's token is SOL.
SOL is used for transactions within the Solana network, for governance purposes, and given as a reward to validators. Besides that, Solana has its own decentralized exchange to trade various tokens built on its platform. Every DApp built on Solana will surely have its own SOL-compatible token, and an on-chain decentralized exchange provides an accessible way to purchase that token.
Now, because Solana's PoH consensus allows it to process tens of thousands of transactions per second without fees, Solana Labs is building Solana Pay to bring this transactional capability to the masses.
While Solana Labs was an important part of the Solana Pay development process, other companies were also involved. According to Shere, Circle, Checkout.com, Citcon, Phantom, FTX and Slope have all laid the groundwork for digital payments platform Solana Pay. Shere joined Solare Labs in 2021 to work on Solana Pay.
According to Team Circle, according to a study by Visa, “73% of businesses believe that accepting digital payments will be fundamental to growth in 2022”. The study also revealed that 59% of businesses "already or plan to use only digital payments within the next two years". This data is part of the foundation of Solana Pay as Solana Labs, Circle and their other partners hope to prepare these early adopters.
Digital payments platform Solana Pay leverages the power of the Solana blockchain network to provide businesses and customers with instant, free transactions that purportedly have no impact on the environment. The Solana network claims to support 65,000 transactions per second and offers businesses an easy-to-implement software development kit to integrate the product.
Developers building DApps on Solana can integrate Solana Pay to facilitate transactions, just like traditional retailers can achieve this function if they have a Solana Wallet. This accessibility is why many are comparing Solana to PayPal, saying Solana can serve crypto payments what PayPal has done for traditional online payments.
Sure, Bitcoin (BTC), ETH, and other cryptocurrencies all claim to offer a near-instant crypto payment, but those networks (Ethereum in particular) are costly and not as instant as they might claim. For example, Bitcoin has an average of 7 transactions per second, while Ethereum has an average of 13 transactions per second. Both Bitcoin and Ethereum are bad for the environment. Solana's network is faster and cheaper, which is attractive to both businesses and customers.
Solana Pay allows users to make real-time payments using SOL or any other Solana-supported token, such as USDC, without involving third parties such as banks or payment processors. Additionally, Solana payments do not allow chargebacks, eliminating the costly chargeback issues traditional merchants often face.
Solana Pay is also ideal for merchants, providing detailed reports for each transaction, such as wallet destination, currency type, transaction amount, and a text field for merchants to describe the transaction. These details are kept completely private from the rest of the network, ensuring that both customers and merchants can transact without prying eyes.
Announcing the news of Solana Pay on his blog, Sheraz Shere, Head of Payments at Solana Labs, stated that the Solana team wants the world to see Solana Pay as more than just allowing users to "pay with cryptocurrencies." Instead, Shere sees Solana Pay as a platform where “all currencies are on-chain for all kinds of transactions.”
Both Solana Pay and the Solana network itself are in the early stages of development. For example, businesses switching to Solana Pay risk losing assets due to programming errors or cyberattacks. If a business is not familiar with cryptography, it can lose assets through basic user error, as managing a crypto wallet is not something that comes naturally to everyone.
Also, while Solana processes transactions faster than many of its competitors, Ethereum is still a much larger platform. Ethereum has more DApps and a larger user base than Solana, and the eventual migration of Ethereum to Ethereum 2.0 may also bring more challenges to Solana.
While Solana Pay sounds complicated, merchant integration is very simple. First, merchants must set up a Solana wallet, which they can create individually or through the FTX exchange.
There, merchants have to deploy some Solana payment code in their website and encode their subsequent encrypted payment request link into a QR code. Afterwards, consumers can pay for goods and services by scanning QR codes in SOL-powered wallets.
While the basic use case for Solana Pay is to provide a way for merchants to easily accept cryptocurrencies, the Solana community can propose changes and present new use cases. The Solana Pay documentation invites users to file issues on Github if they want to suggest changes and updates.
In a blog post about Solana Pay, Shere pointed out that Solana Pay can facilitate physical and digital transactions through non-IM technology. He uses the example of buying a pair of shoes. A customer might buy a pair of shoes with Solana Pay and walk out of the store with two NFTs.
The first NFT allows the user to use the shoes in the Metaverse, and the second NFT is her receipt for the purchase. Another function of this receipt is to join the retailer's exclusive club for NFT holders, and club members can receive discounts and other rewards from the retailer.
There are currently three wallets that support Solana Pay: Phantom, Crypto Please, and FTX. Phantom is a Solana-only wallet for buying, holding and exchanging cryptocurrencies and NFTs. Crypto Please is another Solana-focused wallet that allows users to send encrypted messages via Telegram, Whatsapp, and more. Finally, FTX is an exchange that supports all types of cryptocurrencies including Solana. More wallets supporting Solana Pay are coming soon.
Cointelegraph Chinese is a blockchain news information platform, and the information provided only represents the author's personal opinion, has nothing to do with the position of the Cointelegraph Chinese platform, and does not constitute any investment and financial advice. Readers are requested to establish correct currency concepts and investment concepts, and earnestly raise risk awareness.
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