Payments Giant VISA Proposes Auto-Payments for Ethereum Wallets 

Payments Giant VISA Proposes Auto-Payments for Ethereum Wallets 

Visa has proposed a concept for initiating automatic recurring payments on self-custody wallets. The payments giant will use Ethereum’s Layer-2 scaling solution StarkNet to implement a unique method called “Account Abstraction” to trigger automated payments on the blockchain. 

On December 19, global payments services giant Visa proposed plans for a new system that will enable recurring auto-payments on self-custodial Ethereum (ETH) wallets. The paper published by the ‘Visa Crypto Thought Leadership’ aims to utilise a novel concept known as ‘Account Abstraction’ to explore how Ethereum-based smart contracts can be programmed to conduct automated real-world transactions. 

The solution will write a program for smart contracts on self-custody wallets that can pull funds from users’ accounts without them having to manually initiate payments on a blockchain each time. The payments giant analysed the limitations of blockchain technology when it came to recurring payments. While Visa enables auto-payments through cheques via Automated Clearing House (ACH) or Visa acceptance – which allows merchants to accept Visa cards by setting up automatic payments for recurring bills from their customers; rents or mortgage payments, such capabilities are currently not available on Ethereum. 

At present, the world’s largest blockchain network by transaction volume has two types of accounts: Externally Owned Accounts (EOA) and Contract Accounts (CA). EOAs are user accounts or wallets controlled by a private key through which they can perform transactions on the blockchain. On the other hand, CAs are smart contracts with an associated code that are executed once a transaction is triggered. However, a smart contract is not able to initiate transactions on its own and depends on user wallets signing a transaction with their private keys first, which is then validated by the smart contract. 

Payments Giant VISA Proposes Auto-Payments for Ethereum Wallets 

According to Visa, Ethereum natively supports pull payments – transactions initiated by payee, and not push payments – transactions triggered by the payer. This is where Visa’s Account Abstraction (AA) concept plays its role. The AA protocol attempts to combine users accounts and smart contracts into a single Ethereum account that will make the self-custody wallet function similar to a contract account. This allows the company to design a “neat solution” for auto payments on the blockchain.

At present, transactions on the Ethereum network are only processed if they have a valid ECDSA (Elliptic Curve Digital Signature Algorithm) signature, purpose and sufficient account balance to cover the cost of transaction (gas fee). With the AA solution, Visa is proposing a mechanism that will be much more flexible when it comes to validating transactions. The system allows for ‘Programmable Validity’. Meaning, instead of hard coding a set of validity conditions into the Ethereum protocol that applies to all transactions, different sets of validity conditions can be programmed into a single smart contract based on the purpose of transactions conducted by users. AA will enable auto-payments using a type of self-custody wallet that can set up validity rules which no longer require signature verification. 

One way this system can be implemented is by creating a new type of smart contract called a ‘delegable account’. This gives users the ability to initiate push payments to pre-approved smart contracts, known as “auto payment contracts”. 

Visa also gave an example on how this system could work: When a user with a delegable account visits a merchant website, they can choose to add the merchant’s auto-payment smart contract to their pre-approved list of addresses. The merchant could then trigger a payment by calling the charge function of the auto-payment contract, that will automatically initiate and validate payments on the user’s account by verifying its presence on the allow list.

Since Ethereum does not yet support Account Abstraction, Visa implemented its delegable accounts solution on Ethereum’s Layer-2 scaling network, StrakNet. The protocol built on top of Ethereum allows for increased transaction throughput on the mainnet, thus enabling auto-payments for self-custodial wallets on the blockchain. 

At the time of writing, ETH is trading at $1,216 – up by 0.6% in the last 24-hours. 

Also Read BlockFi Files Petition in Court to let Customers Withdraw Blocked Funds

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