Quarter 3 had seen so many rises and falls in the crypto market, whether in the form of the FTX and Alameda crash or the biggest banks planning to launch their digital currencies. The news that Visa is considering ways to enable automatic bill payment through cryptocurrency wallets could be the best news for crypto at the end of this year.
In a blog shared by Visa’s top leadership, it was proposed that users may someday be able to automatically pay their phone and utility bills using their self-custodial crypto wallets. This will bring in a new revolution in the traditional banking world.
In a blog that was published on the 20th of December, the visa leadership proposed a method that would enable providers to automatically “draw” money from customers’ Ethereum-powered crypto wallets without the user having to individually authorize each transaction.
Visa and Payments
In the world of traditional banking, automatic payments for ongoing bills are typical. Users can choose to give specific service providers permission to deduct funds from their preferred bank accounts in order to pay bills like a Netflix subscription or a regular phone bill.
According to Visa, such a method is impractical for owners of self-custodial wallets since automatic programmable payments that consistently withdraw money from a user’s account “demand engineering work.” In such a payment system, only the self-custodial user has access to the private keys means that all transactions must be manually approved by the user because “a smart contract cannot initiate transactions on its own.”
To counter this, Visa has come up with a new payment system. In the blog, Visa stated that a new kind of self-custodial wallet called “delegable accounts,” which is based on the “Account Abstraction” (AA) idea, would allow automatic recurring payments in cryptocurrency. This system was first introduced by Ethereum co-founder Vitalik Butering back in 2015.
This system essentially makes it possible to combine smart contracts and Ethereum-based wallets into a single account. Through an AA-based self-custody wallet or delegable account, the Visa team promises that user accounts would “function like smart contracts,” enabling users to arrange transactions without authorizing each one manually.
With the use of this application, a user may construct a payment instruction that would automatically transfer money from one self-custodial wallet account to another at regular intervals without requiring active user input each time.
The Visa team does acknowledge that, in spite of the ease with which auto-payments can be linked into wallets hosted by third parties, like as exchanges, users must still have faith that these organizations would properly manage their assets. This was shown to be a significant concern this year, particularly in light of the failures of FTX, Voyager, BlockFi, Celsius, and many more.
This is not the first time that AA has been proposed, there have been many proposals over the years, but due to technical problems, it could not be implemented. The technical problems include it necessitates of several protocol adjustments and the fulfillment of “security guarantees.”
Additionally, to enhance throughput, Visa will put the solution into use on StarkNet, a Layer-2 blockchain based on Ethereum. According to the proposal, Visa was able to develop the delegable account solution, enabling auto payments for self-custodial wallets, using StarkNet’s account architecture.
Though some risk is involved in paying the bills and other subscription things through a third party, this would ease the payment system. Additionally, this will increase cryptocurrency usage and will make them more normalized. Furthermore, it may provide some upward push to Ethereum’s overall price.