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

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

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PayPal revolutionised the payments processing sector. The financial innovation of Peter Thiel, Max Levchin, and, eventually, Elon Musk, aimed well ahead of its time, allowing customers, corporations, and others to make quick payments over the internet.

Many believe Solana (SOL) Pay to be the next big thing in payments processing, because it allows users to make payments using nonfungible tokens (NFTs) and Web3. Solana’s new payment mechanism has been dubbed the Visa or PayPal of Web3 by some. This article will explain how Solana Pay works so you can decide if the project is worth your time.

However, before diving into the Solana Pay digital payment platform, it’s critical to first comprehend Solana.

What is Solana?

Anatoly Yakovenko, a software developer with experience at Dropbox and other major internet firms, launched Solana in 2017.

While other blockchains are efficient or on their way to being efficient, Yakovenko believes that many of them fail to account for time. Rather than using a common clock, each block uses the local time of the node in question.

What is the significance of this issue? Transaction timestamps will differ for each block if there is no consistent clock, therefore the time of confirmation is another component that all nodes must verify. The slower the transaction, the more factors a node must validate.

All nodes on Solana run on the same clock, which eliminates one validation factor and speeds up the network. Proof-of-history (PoH) is a modified form of proof-of-stake (PoS) that takes time into account for verification reasons, according to Yakovenko.

In Solana’s situation, validation resembles proof-of-stake. On top of the proof-of-stake method, Solana simply uses time as a historical record of proof. As a result, Solana can process 65,000 transactions per second on average while charging very little.

Wide range of decentralised finance DApps

In addition to Ethereum, Solana is a smart contract decentralised finance (DeFi) platform (ETH). Both platforms provide a wide range of decentralised finance DApps, some of which are paired with their own coins. The Solana token is SOL, not Ether.

SOL is a cryptocurrency that may be used to transact inside the Solana network, stake for governance, and reward validators. Other than that, Solana has its own decentralised exchanges where users may trade the numerous currencies produced on its platform. Every Solana-based DApp will have its own SOL-compatible coin, and on-chain decentralised exchanges make purchasing these tokens simple.

Solana Labs is designing Solana Pay to bring that transaction power to the masses, thanks to Solana’s PoH consensus, which lets it can handle tens of thousands of transactions per second without incurring fees.

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History of Solana Pay

While Solana Labs played an important role in the development of Solana Pay, other companies were also involved. Circle, Checkout.com, Citcon, Phantom, FTX, and Slope, according to Shere, all helped lay the groundwork for Solana Pay’s digital payment infrastructure.

According to a study conducted by Visa, “73% of businesses feel accepting digital payments is vital to growth in 2022,” as stated by Team Circle. 59% of those organisations “are now using, or aim to utilise, entirely digital payments within the next two years,” according to the same research. Solana Labs, Circle, and their other partners wanted to be ready for these early adopters, therefore these figures were part of the foundation for Solana Pay. Shere began working on Solana Pay at Solare Labs in 2021.

How does Solana Pay work?

Solana Pay, a digital payment platform based on the Solana blockchain network, claims to provide businesses and customers with instant, fee-free transactions with no environmental impact. The network promises to be capable of 65,000 transactions per second and offers an easy-to-use software development kit to let enterprises incorporate the product.

Solana Pay can be integrated into DApps by developers, and traditional retailers with a Solana wallet can use it as well. Many people equate Solana to PayPal because of its accessibility, claiming that it can perform the same functions for crypto payments that PayPal did for traditional internet payments.

The Advantages

Of course, Bitcoin (BTC), Ethereum (ETH), and other cryptocurrencies claim to offer near-instant crypto payments, but these networks (particularly Ethereum) are both expensive and slow. Bitcoin, for example, has a transaction rate of seven per second, while Ethereum has a transaction rate of thirteen per second. Bitcoin and Ethereum are both environmentally unfriendly. Businesses and customers value Solana’s network because it is faster and less expensive.

Solana Pay allows its users to make real-time payments in SOL or any other supported Solana token, such as real-time payments in USD Coin (USDC), without the need for a third-party such as a bank or payment processor. As well, it also doesn’t enable chargebacks, which is an expensive problem for regular retailers.

Solana Pay, which is also great for merchants, provides complete reports on each transaction. Including the wallet destination, currency type, transaction amount, and text fields for the merchant to describe the transaction. These details are kept completely private from the rest of the network. Allowing both the customer and the merchant to conduct business without fear of prying eyes.

In his blog post launching Solana Pay, Sheraz Shere, the head of payments at Solana Labs, notes that the Solana team wants the world to see Solana Pay as more than just a way for people to “pay with crypto”. Shere sees Solana Pay as a platform where “all currencies are on-chain and used for a wide spectrum of transactions,” according to him.

The Disadvantages

Solana Pay is still in its early stages of development, as is the Solana network. Businesses who migrate to Solana Pay risk losing their assets, for example, owing to a programming error or network assault. If the company isn’t crypto-savvy, assets can be lost due to simple user errors. As handling a crypto wallet isn’t something everyone is comfortable with.

Furthermore, while Solana is faster than many of its competitors, Ethereum is a much larger platform overall. Ethereum has far more DApps and a much larger user base than Solana, and Solana’s future transition to Ethereum 2.0 could be problematic for it as well.

 Solana Pay for merchants

While Solana Pay may appear complicated, merchant connection is straightforward. To begin, a merchant must create a Solana wallet. Which they can do on their own or through the FTX exchange.

The merchant must then integrate the Solana Pay code into their website. And encode their following crypto payment request link into a QR code. Customers can now scan a QR code in their SOL-supported wallet. In order to pay for goods and services both digitally and in person.

Solana Pay for developers

While Solana Pay’s primary use case is to provide retailers with a simple way to take cryptocurrency, the Solana community can suggest enhancements and additional use cases. If users want to suggest modifications and updates, Solana Pay’s documentation encourages them to file a Github issue.

Shere points out in his blog article about Solana Pay that NFTs could help with both physical and digital transactions. The purchase of a pair of shoes is his example. A consumer may use Solana Pay to purchase a pair of shoes and leave with two NFTs.

The first NFT gives her permission to wear the shoes in the metaverse. While the second provides a receipt for her purchase. That receipt also qualifies you for membership in the retailer’s special NFT club, which grants you discounts and other perks.

Wallets that support Solana Pay

Phantom, Crypto Please, and FTX are the only wallets that presently offer Solana Pay. Phantom is a Solana-only wallet that allows you can buy, keep, and trade cryptocurrency and NFTs. Another Solana-focused wallet, Crypto Please, allows users to send cryptocurrency over Telegram, Whatsapp, and other platforms. Finally, FTX is a cryptocurrency exchange that accepts all coins, including Solana.

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