What is Solana (SOL) Pay, and how does it work?

PayPal is a major innovation in the payment processing industry. The intellectual financial product of Peter Thiel, Max Levchin and ultimately Elon Musk aims to be ahead of its time, enabling instant payments between customers, businesses and more while using the internet. .

Solana (SOL) Pay is seen by many as the next innovation in the field of payment processing, facilitating payments while taking into account non-usable tokens (NFTs) and Web3 . Some even refer to Solana’s new payment protocol as Web3’s Visa or PayPal. This post will analyze Solana Pay and how it works so you can decide if the project is all it’s meant to be.

But first, it is important to understand Solana before joining the Solana Pay digital payment platform.

Related: What is Web3: A Beginner’s Guide to the Future of Decentralized Internet

What is Solana?

Solana was founded in 2017 by Anatoly Yakovenko, a software engineer with experience working at Dropbox and other major tech companies.

Yakovenko believes that while other blockchains work efficiently, or at least work towards efficiency, many of them don’t count on time. Instead of every block relying on a standardized clock, each block runs in the local time of their relevant node.

Why is this a problem? Without a standardized clock, the transaction timestamp would be different for each block, and confirmation time is another factor that all nodes must confirm. The more elements a node has to validate, the slower the transaction time.

On Solana, all nodes run on the same clock, resulting in the elimination of one factor of authentication and network acceleration. Yakovenko refers to this consensus method as proof of history (PoH) – a modified version of proof of stake (PoS) with a timeliness element for verification purposes.

Validation works similarly to proof of stake in Solana’s case. Solana is just using time as a record of historical evidence on the proof-of-stake approach. As a result, Solana can process an average of 65,000 transactions per second with minimal fees.

Solana is also a smart contract decentralized finance (DeFi) platform that competes with Ethereum (ETH). Both platforms offer all kinds of decentralized financial DApps, some including cryptocurrencies. Instead of Ether at the center of it all, the Solana token is SOL.

Read More:   The Pros and Cons of COIN- & USDT-Margined Contracts: How Do They Impact Your Returns?

SOL is used for transactions in the Solana network, shares for governance purposes and is given as a reward to validators. On the other hand, Solana has its own decentralized exchanges for trading various tokens built on its platform. Each DApp built on Solana will inevitably have its own SOL compatible token, and on-chain decentralized exchanges provide an accessible way to purchase said tokens.

Now, because Solana’s PoH consensus allows it to process tens of thousands of transactions per second with no fees, Solana Labs is building Solana Pay to make that transaction power available to the masses.

History of Solana Pay

While Solana Labs was an important part of Solana Pay’s development, other companies were also involved. According to Shere, Circle, Checkout.com, Citcon, Phantom, FTX and Slope all played a part in setting up the foundation for the Solana Pay digital payment platform.

Team Circle says that “73% of businesses believe accepting digital payments is fundamental to growth by 2022,” according to a study by Visa. The same study found that 59% of those businesses “have or plan to only use digital payments within the next two years”. These stats are part of the foundation for Solana Pay, as Solana Labs, Circle and their other partners want to be ready for these early adopters. Shere joins Solare Labs in 2021 to work on Solana Pay.

How does Solana Pay work?

Solana Pay digital payment platform offers businesses and customers instant free transactions that are said to have no impact on the environment by harnessing the power of the Solana blockchain network. The network claims to support 65,000 transactions per second and provides an easy-to-implement software development kit for businesses to integrate products.

Developers building DApps on Solana can integrate Solana Pay for easy transactions, just like brick-and-mortar retailers can do if they have a Solana wallet. That accessibility is why many people compare Solana to PayPal, saying that Solana can do for crypto payments what PayPal has done for traditional online payments.

Related: What is Solana (SOL) and how does it work?

Advantages of Solana Pay

Of course, Bitcoin (BTC), ETH and other cryptocurrencies claim to provide near-instant crypto payments, but these networks (especially Ethereum) are expensive and not as instant as they are. may request. For example, Bitcoin averages seven transactions per second, while Ethereum averages thirteen transactions per second. Both Bitcoin and Ethereum are bad for the environment. Solana’s network is faster and cheaper, which is very appealing to businesses and customers.

Read More:   How Does Leverage Trading In Crypto Work?

Solana Pay allows users to make real-time payments with SOL or any other supported Solana token such as real-time payments in USD Coin (USDC) without involving a third party like a bank or payment processor. Furthermore, Solana Pay does not allow for chargebacks, eliminating a costly problem that traditional merchants often face.

Also ideal for merchants, Solana Pay provides detailed reports on every transaction such as wallet destination, currency, transaction amount, and text fields for merchants to describe said transaction. These details are kept completely private from the rest of the network, ensuring that both customers and merchants can transact without prying eyes.

As head of payments at Solana Labs, Sheraz Shere, stated in her blog post announcing Solana Pay, the Solana team wants the world to see Solana Pay as something bigger allows users to “pay with cryptocurrency”. Instead, Shere sees Solana Pay as a platform where “all currencies are on-chain and used for a variety of transactions,” he said.

Disadvantages of Solana Pay

Solana Pay itself, along with the Solana network, is in the early stages of development. For example, businesses switching to Solana Pay risk losing their assets due to programming errors or cyberattacks. Assets can be lost due to basic user errors if the business is not crypto-savvy, as crypto wallet management doesn’t come naturally to everyone.

Also, although Solana is faster than many of its competitors, overall Ethereum is still a much larger platform. Ethereum has more DApps and a larger user base than Solana, and Ethereum’s move to Ethereum 2.0 could eventually prove problematic for Solana.

Solana Merchant Payments

While Solana Pay may sound complicated, the integration for merchants is pretty straightforward. To get started, merchants must set up a Solana wallet, which they can do individually or through the FTX exchange.

From there, merchants must deploy some Solana Pay codes to their website and encode their next crypto payment request link into a QR code. Customers can now pay for goods and services both digitally and in person by scanning a QR code in their SOL-supported wallet.

Read More:   How To Invest In NFTs

Solana Pay for Developers

While Solana Pay has a basic use case in providing merchants with an easy way to accept cryptocurrencies, the Solana community can suggest changes and present new use cases. Solana Pay’s documentation invites users to open an issue on Github if they want to suggest changes and updates.

In her blog post about Solana Pay, Shere notes that Solana Pay can support physical and digital transactions through NFT. His example revolves around buying a pair of shoes. A customer can buy a pair of shoes with Solana Pay and walk out of the store with two NFTs.

The first NFT allows her to use those shoes in the metaverse, and the second is her purchase receipt. That receipt doubles when you join the retailer’s exclusive club of NFT holders to receive discounts and other bonuses from the retailer.

Solana Pay Support Wallet

Solana Pay is currently supported in three wallets: Phantom, Crypto Please and FTX. Phantom is a Solana-only wallet for buying, holding and swapping cryptocurrencies and NFTs. Crypto Please is another Solana-focused wallet that allows users to send crypto via Telegram, Whatsapp and more. Finally, FTX is an exchange that supports all cryptocurrencies including Solana. More wallets that support Solana Pay are coming soon.