Visa is looking into ways to enable automatic bill payment through cryptocurrency wallets. The cryptocurrency market has experienced several ups and downs in the third quarter, whether as a result of the FTX and Alameda crashes or the announcements of the biggest institutions to introduce their own digital currencies.
It was suggested that customers may one day be able to utilize their self-custodial cryptocurrency wallets to automatically pay their phone an utility bills in a blog post posted by Visa’s top executives. The traditional banking industry will undergo a fresh revolution as a result of this.
Recently, the American FinServ multinational Visa published a proposal explaining how Ethereum users may set up automatic payments straight from their own, self-custodial wallets. Banks and other centralized organizations will be removed from the equation.
The foundations of multiple blockchains are being examined by a group of researchers and engineers from Visa. Included in the focus areas are security, scalability, interoperability, privacy, and use cases for various protocols.
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According to the company, consumers can utilize this to set up recurring bill payments. Due to the fact that automated smart contracts are unable to request transactions, Ethereum does not fundamentally support this. User accounts must manually start and send transactions.
Although setting up automatic payments in bank accounts and custody-only cryptocurrency wallets is simple, Visa observed that doing so on a blockchain is “not as straightforward to implement.” As a result, it can be difficult to implement the feature in a self-custodied wallet where the user has all control over their money.
The business claimed that as part of its internal Crypto Hackathon challenge this year, it investigated a potential resolution.
Visa to Combine Ethereum Accounts
Visa highlighted that it was able to merge the features of user accounts and smart contracts into a single type of Ethereum account by employing account abstraction. The resulting account was referred to as a “delegable account” by the corporation.
The proposal was co-written by Catherine Gu, Visa’s head of central bank digital currencies and protocols. “If one of the major use cases of blockchain is for payments, then the basic requirement is that the blockchain function just as well as it does today, if not better,” she said.
Account Abstraction is a novel concept used in the proposal. Furthermore, it is one of the leading Ethereum developer proposals for achieving automatic payments through smart contracts.
Externally owned accounts (user accounts) and smart contract accounts are the two types of Ethereum accounts. Visa intends to combine them into a single Ethereum account type using account abstraction. Furthermore, Ethereum user accounts would gain smart contract functionality as a result of this.
Currently, there are two different types of accounts on the Ethereum network: Contract Accounts (CA), which are effectively smart contracts, and Externally Owned Accounts (EOA), which are controlled by a private key.
EOAs, but not CAs, can start transactions. The establishment of a self-custodial wallet with the ability to make recurrent payments is made feasible, according to Visa, by leveraging Account Abstraction to create a smart contract that can start transactions on behalf of an EOA.
Account Abstraction
Account Abstraction (AA), a proposal on the Ethereum blockchain, proposes to merge user accounts and smart contracts into a single type of account. It is made possible by enabling the development of validity guidelines for specific transactions.
The development of “delegable accounts,” which enables the automation of payments through the use of smart contracts, is one application for AA.
According to Visa, a user can provide a pre-approved smart contract, known as a “auto payment contract,” the authority to start payments using a delegable account.
Here’s an example of how it might operate: The address of the auto payment contract is added to the user’s allow list if they visit a merchant’s website and consent to auto payments.
As a result, the user’s account could initiate a payment that would be valid because it was on the allow list by invoking the charge function of the auto payment contract, which the merchant could then use to activate a payment.
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