No more manual payments on Web3: VISA’s solution for automated transactions on Ethereum
VISA is taking steps to make it easier for people to make automatic payments using self-custodial wallets, which are digital wallets that a user has full control over and can access using their own private keys. Currently, it can be difficult to set up automated payments on blockchain networks like Ethereum, but VISA is working on a solution that involves the use of smart contracts. The concept was introduced by Ethereum co-founder Vitalik Buterin in 2015.
Using smart contracts and account abstraction to streamline recurring payments
Smart contracts are self-executing contracts with the terms of the agreement between buyer and seller being directly written into lines of code. They can be used to facilitate, verify, and enforce the negotiation or performance of a contract. In this case, VISA is proposing the use of smart contracts to enable automated programmable payments on self-custodial wallets.
— Catherine Gu (@catgu_) December 19, 2022
Visa’s Head of Central Bank Digital Currencies and Protocols, Catherine Gu, emphasized the company’s focus on growing its core competencies in Web3 infrastructure layers and blockchain protocols, including security, scalability, interoperability, and privacy. Gu stated that the goal is to create real-world use cases for payments with a great user experience. By exploring AA and other blockchain innovations, Visa is positioning itself as an active player in the cryptocurrency market and could potentially help drive mainstream adoption.
How smart contracts and account abstraction will make recurring payments a breeze on Ethereum
To understand the problem VISA is trying to solve, consider the following scenario: It’s February 25th and Alex is going on vacation to the Alps. Alex has a number of bills that need to be paid by the 5th of every month, but she won’t have enough money to pay them until she gets her paycheck on March 1st. In a traditional banking system, Alex could simply set up recurring payments on her VISA card to take care of these bills automatically. But on a blockchain network like Ethereum, this process is more complicated.
Visa’s focus on Web3 infrastructure layers and blockchain protocols demonstrates the company’s commitment to growing its core competencies in the cryptocurrency space. The move towards supporting auto payments on Ethereum wallets shows that Visa is positioning itself as an active player in the cryptocurrency market and could potentially help drive mainstream adoption.
How smart contracts and proxy contracts can help simplify blockchain payment
On Ethereum, there are two types of accounts: Externally Owned Accounts (EOAs) and Contract Accounts (CAs). EOAs, also known as user accounts, are controlled by private keys and can be used to send transactions. CAs, or smart contracts, have associated code that can be executed when certain conditions are met. In order to enable automated payments on self-custodial wallets, VISA is proposing the use of a concept called Account Abstraction, which would allow smart contracts to be written in such a way that they can pull funds automatically from a user’s account at regular intervals.
VISA’s solution involves the use of a proxy contract, which acts as an intermediary between the self-custodial wallet and the smart contract responsible for handling the automated payments. The proxy contract contains the logic for executing the payment and is responsible for forwarding the payment request to the smart contract. This allows the user to set up the payment once and have it automatically executed at the specified intervals without having to manually initiate each payment.
While VISA’s solution for automated payments on self-custodial wallets is still in the early stages of development, it has the potential to make it much easier for people to manage their recurring payments on blockchain networks. This is especially important as blockchain adoption continues to grow and more people are looking for ways to use these networks for real-world applications. By streamlining the process for setting up automatic payments, VISA is helping to make it easier for people to take advantage of the convenience and security of self-custodial wallets.