Crypto payments haven't been fast or cheap. Solana Pay could change that.
Circle, FTX and others are supporting an alternative for payments that works with a variety of crypto tokens, including the USDC stablecoin.
A new way for people to pay with crypto, Solana Pay, is launching Tuesday.
It’s one of many efforts to solve the crypto payments puzzle, from bitcoin’s Lightning Network to stablecoins. But Solana believes it has solved some of the problems that have held crypto payments back.
Companies that helped develop and support the protocol include Solana Labs, which initiated the project; Checkout.com; Circle; Citcon; and digital wallets from crypto exchange FTX and Solana wallets Phantom and Slope. Solana Pay’s backers are also working on an integration with Shopify that is expected to be released soon.
Solana Pay is an open protocol for developers with standardized payment specifications to build on and customize, meaning merchants can connect directly or use software built by ecommerce providers, point-of-sale software-makers or payments companies.
Bitcoin and Ethereum suffer from slow speeds and high transaction costs. While the Solana network is not as big as the bitcoin blockchain or Ethereum’s network, Solana has fast transactions (65,000 per second) and low cost (fractions of a cent per transaction). Solana Pay also has consumer-friendly features: Users can pay in person using a QR code or online using a browser plug-in. The technology works with any Solana-compatible token: Currently that includes its own SOL token as well as others like the USDC stablecoin.
It’s not quite equivalent to a credit-card payment, by design. Solana Pay is meant to be a digital version of a cash payment. That’s attractive for merchants, who can avoid the costs of intermediaries such as Visa or Mastercard or the costs of chargebacks.
“At its core, this is similar to a cash transaction. And the same way you can’t reverse a cash transaction,” you can’t reverse these payments, said Sheraz Shere, head of Payments at Solana Labs.
Still, some merchants and consumers may want protections. Shere said there’s the potential for holding funds in escrow, particularly for big-ticket items like a cruise ticket — a feature which could be built in an upcoming hackathon: “The beauty of this is that this is programmable with smart contracts.”
Solana Pay includes rich data specifications that aren’t available when just sending a token on the network. This includes a standardized destination, currency, amount, transaction identifiers and descriptive text fields so the merchant can confirm that a transaction was completed. The actual details of the transactions, such as who paid and what was purchased, are not public on chain.
Shere, who has worked for AmEx and Google, sees Solana Pay as different from other crypto offerings because of its strong stablecoin integration. He argues that Ethereum is too slow to settle and too costly and Lightning is focused more on paying with cryptocurrency versus exploiting blockchain technology. “We believe the lion's share of opportunity is thinking about this not as crypto payments, but as a new set of payment rails ... but paying in U.S. dollars, U.S. digital dollars.” Shere said.
Currently there is $4 billion of USDC on the Solana blockchain. That’s a distant second to the $44 billion on Ethereum, but it’s still substantial. Circle, the primary developer of USDC, worked on developing the Solana Pay standards, and has integrated Solana Pay with payments software it offers merchants as well as its treasury management product. Joao Reginatto, Circle’s vice president of Product, said it’s the first payment protocol that he’s seen operating on the chain level, versus privately within a company.
Meanwhile, this direct wallet connection with customers opens up new possibilities, Shere said. One example is someone buying shoes with Solana Pay and receiving a matching NFT in the same transaction. Smart contracts could also create offers or rewards that sit in a crypto wallet. That means merchants and consumers will have more incentives to take the plunge in crypto payments.