Making cryptocurrency and blockchain payments more viable remains an ongoing battle. Bitcoin’s Lightning Network offers some relief, yet opinions on this technology remain somewhat divided. StarkPay is a new solution which aims to provide scalable and non-custodial blockchain payments to everyone. The bigger question is if all of this is even viable when looking at the bigger picture. There are a lot of boxes which need to be checked correctly.
StarkWave’s StarkPay Goes Live
Although most cryptocurrency users might not be aware of StarkWare, the company is exploring a crucial business model. Their vision is to introduce scalable, inexpensive, and trustless payments. Doing so over the Ethereum blockchain will pose its own set of challenges accordingly. Ethereum isn’t exactly known for its scalability, cheap transactions, although it is not necessarily a bad choice either.
With StarkPay, the company is now introducing a valuable service to merchants. They can accept blockchain-based payments in exchange for goods and services without having to worry about risks. Particularly the instant payment solution will be of great interest. To this date, the cryptocurrency industry hasn’t seen any instant payments on a large scale. Changing that narrative would usher in an era of exciting opportunities for everyone.
On-chain Security Deposits are Crucial
What makes StarkPay different from traditional payment processors is their use of on-chain security deposits. More specifically, the service offers such deposits to merchants. Every deposit is almost equal in value to the sum of the merchant’s receivables. Moreover, StarkPay as a service will also counter-sign customer payments. That helps in guaranteeing merchants will receive the funds. It takes a lot of guessing out of the equation altogether.
Under the hood, these security deposits are locked up in on-chain smart contracts. Each contract is unique to a specific merchant. Because of this method, it becomes possible to introduce immediate payments simply because there are reserves on hand which can be redeemed immediately. All it requires is the counter-signature from the payment processor. This method would work well in both online and offline transactions.
A Different Take on Lightning
While there may be some similarities between StarkPay and the Lightning Network, there are also crucial differences. The Lightning Network has promoted instant finality of transactions, an aspect which was not present in most blockchain payment solutions at that time. StarkPay’s current iteration matches this speed of settlement, yet doesn’t involve any technical hassle and doesn’t require any trust. Merchants don’t need to trust the payment processor and vice versa.
The big difference is how StarkPPay requires a lower cost of capital. In terms of capital efficiency, the Lightning Network provides a steep financial hurdle to overcome in its current iteration. With StarkWare’s solution, the only funds to be locked up is equal to the value paid during a transaction. The bigger question is how merchants and customers will respond to this new solution. If it isn’t integrated on a large scale, all of this effort could be in vain.
Disclaimer: This is not trading or investment advice. The above article is for entertainment and education purposes only. Please do your own research before purchasing or investing into any cryptocurrency or digital currency.