System:
For every merchant offered the Instant Payments system, the payment processor locks up a security deposit in a merchant-specific on-chain smart contract. As mentioned above, the deposit is roughly equal to the volume of payments to the merchant during a proof cycle.
Customer provides merchant with a signed payment.
Merchant verifies there are sufficient funds in the security deposit contract.
Merchant forwards payment to payment processor.
Payment processor checks customer has sufficient funds.
Payment processor counter-signs payment and returns it to merchant.
Merchant can serve customer instantly once it receives the counter-signature from payment processor.
Instead of trust, the payment processor offers the merchant a dedicated on-chain security deposit (roughly equal in value to the sum total of the merchant’s receivables during a proof cycle), and counter-signs customer payments. For counter-signed payments, the merchant is assured to receive the funds — either via the payment’s inclusion in a subsequent proof or by redeeming the payments directly from the security deposit. Much like a standard security deposit, in the normal course of affairs, it is left untouched.There are no trust assumptions between any of the parties involved in a payment’s life cycle: customer, merchant, payment processor, and StarkWare which runs the StarkPay on behalf of the payment processor.
With this functionality, a merchant such as Starbucks could offer a customer a cup of coffee instantly, knowing they are guaranteed to be paid in short order.