Erik Weijers, a month ago

Visa works on auto payments for crypto wallets

Visa is diving deeper into crypto payment infrastructure. The company recognizes the need for auto payments on crypto rails and has proposed a solution. Currently, Ethereum users can only schedule future payments if they use a custodial wallet, in other words a third-party wallet. Initiating a series of payments using your private keys just once would indeed be a great new option. 

Another way to frame the problem with the current situation is that Ethereum supports push payments but not pull payments, of which auto payments are an example.

To tackle this, Visa organized an internal hackathon challenge. This event resulted in a solution called 'account abstraction'. It uses smart contracts to enable automated payments on Ethereum. The system will be implemented on Ethereum layer 2 network StarkNet. 

The core problem that needed to be solved was an apparently simple one: a smart contract can't initiate a transaction on its own - only a normal account on Ethereum can (a smart contract is a different type of account, called a contract account). So, if you want to initiate a series of automatic payments from your own crypto wallet, it can't be done. You would need to sign each transaction, which makes it obviously non-automatic.  

Account Abstraction (AA) is Visa's proposed solution - which by the way was already envisioned by Vitalik Buterin in 2015 - that combines user accounts and smart contracts into a single type of account on Ethereum. This account abstraction will make it possible to create a smart contract that can initiate transactions on behalf of a regular account. This enables the creation of a self-custodial wallet that can make automatic recurring payments. 

Conclusion

Innovation in Web 3 doesn't only come from crypto companies: traditional finance is also in the mix. A company like Visa apparently feels like it needs to innovate. It feels the heat from on the one side the crypto space and the upcoming government payment systems like central bank digital currencies on the other side. In their own words:  

"Visa will continue to explore these evolving technologies and concepts — including common consensus mechanisms, privacy and scaling solutions, and other possible blockchain use cases — to create a bridge between crypto ecosystem and our global network of clients and merchant locations."

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