Visa, the multinational that invented plastic money, is eyeing Solana to push payment tokenization.
The U.S. company has long been exploring cryptocurrencies and blockchain technology. They search for innovations that will enable them to improve and expand their financial services. Much of its experimentation and development used the Ethereum ecosystem, as in the case of EIP-4337, where Visa actively participated. It was in 2022 when VISA and Ethereum presented EIP-4337: Account Abstraction using alt mempool. It is a document that shows the collaboration of both for the development of automatic payments with cryptocurrencies.
Visa has also shown great interest in the Solana blockchain, whose ecosystem has grown significantly. They highlight the synergies between the traditional payments sector and emerging blockchain platforms. They think Solana could be better positioned than Ethereum to address the technical and scalability needs required to bridge both sectors.
Contents
Solana, Efficiency, and Scalability
To understand Visa’s interest in Solana, it is worth considering Visa’s capabilities as a global payments network. The multinational company can execute more than 65,000 transactions per second. The number positions it as a payment network with enormous scalability, more than any other blockchain.
Networks such as Avalanche claim to have a capacity of 140,000 transactions per second. Lightning Network claims to be able to process 1 million transactions per second. However, Avalanche and Lightning Network have never reached such levels in production. The figures they allude to have been obtained in testing processes. The numbers give an idea of the capabilities of both networks, which are not yet operational.
VISA and int Interest in Blockchain
Visa has always been close to Ethereum. This blockchain can only process about 14 transactions per second, and its Layer2 (Polygon, Arbitrum, or Optimism) also does not exceed 100 transactions per second. These data underline the Visa problems in linking traditional and crypto payments. It is in this context that Visa has expressed interest in Solana.
First, in its current state of operation, Sola has been able to process high transaction volumes. Solana records an average of about 400 transactions per second. It registered peaks of up to 4,000 transactions per second in production usage. In tests, it has reached 60,000 transactions per second. This situation places this network in a privileged position for its high efficiency and scalability in production use cases, as seen in Solana Compass.
An image from Solana Compass shows Solana’s solid performance with an average of 4000 TPS.
Attractive Features for the Payments Industry
Visa has conducted a study on Solana’s capabilities as a blockchain network, where it comments:
“There will likely be multiple blockchain networks utilizing the payments ecosystem. There is a potential for Solana’s blockchain network to become one of the networks that could help drive conventional payment flows. It holds promise for payments due to its speed, scalability, and low transaction costs. It is becoming a good candidate for efficient blockchain settlement pathways using stable currencies such as USDC. The Solana blockchain network incorporates several key features and novel innovations worth analyzing for anyone interested in payment technologies.”
Solana Netwotn attribute highlighted by VISA
High transaction performance: Solana has gained attention for its ability to process significant transaction volume. It averages 400 transactions per second (TPS) and peaks at over 2,000 TPS at times of high demand.
Low and predictable transaction costs: With transaction fees typically less than $0.001, Solana offers an attractive and stable cost structure that is crucial for payment transactions
Fast transaction completion: Solana’s technology enables optimistic transaction confirmation, reducing the wait time for transaction completion, a critical factor in the consumer payment experience.
Parallel transaction processing: Solana introduces an innovative approach to processing transactions in parallel, which boosts network efficiency and makes it particularly suitable for payment and settlement scenarios where transactions typically occur between two different parties.
Localized fee markets: Solana’s local fee market ensures that congestion in one account does not affect costs in others, allowing for a more predictable and cost-effective user experience.
Solana still holds the fastest transaction completion of all public blockchains.
VISA-Solana Collaboration
Visa continues seeking a platform to deploy its entire payment tokenization infrastructure. Visa partnered with Circle in 2020, allowing users to manage the USDC stablecoin on selected Visa cards to make payments. This collaboration is the first step taken by Visa in its payment tokenization strategy.
The strategy experienced a breakthrough with the arrival in 2022 of ERC-4337 in Ethereum, an enhancement known as Account Abstractions, where Visa was one of the main drivers. The enhancement has gradually gained new spaces, but it has a critical problem: the limited scalability of Ethereum and its Layer2s.
USDC Payments through Solana
Visa recognizes Solana’s potential to become the network that could boost conventional payment flows regarding scalability. Visa expanded its stablecoin settlement pilot to include transactions through the Solana network. In this way, the multinational is seeking to validate the network’s ability to meet the demands of modern corporate treasury operations. Recently, Visa added support for USDC transaction payments across the Solana network, further enhancing Visa’s level of collaboration and interest in Solana.
1/🏦Breaking: Visa Expands Stablecoin Settlement Pilot to Solana@Visa is scaling their USDC settlement pilot to include the Solana blockchain, enabling enterprise-grade throughput at virtually no cost for Visa issuers and merchant acquirers on Solana. https://t.co/rF5ouZaISM
— Solana (@solana) September 5, 2023
Solana, which has advanced Smart Contract capabilities, recently added the ability to translate Solidity Smart Contracts into Solana code using Hyperledger Solang. In addition, projects to bring Ethereum Virtual Machine (EVM) to Solana through NeonEVM drive interest in this blockchain.
With a long-term vision, Visa positions itself to lead the convergence between fiat money and cryptocurrencies, leveraging blockchain technology to expand and enhance its services. The collaboration with Solana is a step towards building new infrastructures for commerce and money movement that could revolutionize the global payments industry. A strategic alliance between Visa and Solana represents a significant advance in integrating traditional payment systems.