Global payments leader Visa, believes that users of cryptocurrencies may someday be allowed to automatically pay their phone and electricity bills using their self-custodial crypto wallets. A solution was put forth by Visa’s thought leadership team on cryptocurrencies in a blog post published on December 20.
It would let providers automatically draw money from customers’ Ethereum-powered crypto wallets without the user having to personally approve each transaction.
In the conventional banking industry, automatic payments for recurring bills are relatively common. Users can authorize specific service providers to withdraw money from their preferred bank accounts to pay bills, like a Netflix subscription or a recurring phone bill.
Owners of self-custodial wallets are unable to deploy such a mechanism, according to Visa, which noted that “technical effort” is necessary for automated programmable payments that periodically withdraw money from a user’s account. T
his is due to the fact that in self-custodial wallets, the user is the only one in possession of the private keys, necessitating the need for them to manually approve transactions since a smart contract cannot begin transactions on its own.
Visa’s technical ideas and plans
According to Visa’s technical article, a new class of self-custodial wallet dubbed “delegable accounts,” which is based on the “Account Abstraction” (AA) idea, would make it possible to make cryptocurrency recurring payments automatically.
The idea was presented in 2015 by Vitalik Butering, a co-founder of Ethereum, and it essentially permits the consolidation of smart contracts and Ethereum-based wallets into a single account for use in a variety of applications.
According to the Visa team, user accounts will “work like smart contracts” through an AA-based self-custody wallet or delegable account, enabling users to schedule transactions without having to approve each one individually.
“This application could enable a user to create a programmable payment instruction that can transmit funds automatically from one self-custodial wallet account to another at repeated intervals without requiring the user’s active participation each time.” according to the post.
The suggestion is part of a larger investigation by the cryptocurrency-friendly company exploring fresh opportunities for blockchain innovation and a way to get beyond strict constraints hardcoded into Ethereum transactions.
A Twitter post by Catherine Gu, which contained a technical piece on how to use Account Abstraction (AA) to set up auto-payments on a self-custodial wallet, read:
AA has many potential use cases, especially on how the user experience on a digital wallet may be substantially enhanced with more flexibility embedded into user account to function more like smart contract.
— Catherine Gu (@catgu_) December 19, 2022
In a Twitter thread, Catherine explained how the AA works with focus on the crucial payment-related areas such as security, scalability, interoperability, and privacy.
Visa’s auto-billing dreams involves third party hosts
The development team does acknowledge that, despite the ease with which auto-payments can be linked into wallets hosted by third parties, like exchanges, users must still have faith that these organizations will properly manage their assets.
This was shown to be a significant concern this year, particularly in light of the failures of FTX, Voyager, BlockFi, and Celsius, to mention a few.
The post also makes note of the fact that AA has been included in a number of Ethereum Improvement Proposals throughout the years but has eventually fallen through owing to implementation difficulties. This is because it necessitates several protocol adjustments and the fulfillment of “security guarantees.”
As the network enabled AA, the Visa team claimed that it had already successfully tested its delegable accounts on a private chain created by layer 2 scaling solution StarkNet.
Delegable accounts were successfully implemented by the Visa team under StarkNets account model, in the light of this, the piece draws the conclusion that auto payments are not far off.