The American multinational and payments giant VISA have announced plans to allow Ethereum users to make automatic payments from their self-custodied wallets. As a result, Ethereum users will not have to manually sign each transaction. This move is a big step towards completely eliminating banks or other centralized players from the equation.
A team of engineers and researchers from VISA worked to understand the basics of different blockchain networks. In a blog post on Monday, December 19, VISA said the main focus will be on the scalability, security, interoperability, privacy and use cases of the different protocols.
To implement this automatic payment function, VISA proposed account abstraction. This is basically a feature of the Ethereum blockchain, which is currently being studied by the development team. The payments giant believes this feature will allow users to set up recurring bill payments.
Currently, this feature is not available on Ethereum at a very basic level, as automated smart contracts cannot request transactions. Therefore, user accounts must initiate and submit transactions manually. Catherine Gu, the central bank's head of digital currencies and protocols at VISA, helped draft the proposal. She stated:
If one of the major use cases for blockchain is payments, then the key requirement is that the blockchain must perform as well as it does today, if not better. We want to have the opportunity to actively contribute to the technical developments of the crypto ecosystem.
The best way to do this is to learn by doing, actually delving into Web3 infrastructure and blockchain protocols, areas that I believe will be very important for payments.
Overcoming blockchain execution challenges
VISA said running such a system with traditional bank accounts is easy, as the financial institution can write any code for its account holders. However, implementing this system on public blockchain platforms poses some serious challenges.
This development comes just after Ethereum made its successful merge upgrade in September 2022. The Ethereum blockchain is now moving towards greater scalability that meets VISA requirements.
Using the method of account abstraction, VISA has managed to combine the functions of smart contracts and user accounts into a single Ethereum account. The company has referred to this account as a “delegable account”. Using this approach, merchants will now be able to deploy smart contracts for automatic payments.
Once the user authorizes through their delegable accounts, merchants need to trigger a payment by calling the debit function of the autopayment agreement. For future payments, the user's delegable account adds these autopay agreements to the whitelist.
Although VISA has managed to produce the automatic payment solution, it has not yet commented on the arrival to customers. Speaking to Decrypt, VISA's Catherine Gu said:
This technology is very nascent right now, but there could be something in the future. A lot of research needs to be done on key aspects of payments, such as security and scalability.
It is very important to understand which is signal and which is noise. We are taking a long-term perspective on this technology. It might have some real use, which is why we're here: for invest more, to do research.