Bill auto-payments are popular in traditional banking, and Visa has offered a means to replicate the service using blockchain technology.
According to payments giant Visa, cryptocurrency users may one day be able to automatically pay their electricity and phone bills using their self-custodial crypto wallets.
Visa's crypto thought leadership team offered a solution in a blog post on December 20 that would allow providers to automatically "draw" funds from customers' Ethereum-powered crypto wallets without requiring the user to manually sign off on every transaction.
Auto-payments for recurring bills are prevalent in traditional banking, allowing consumers to authorize specific service providers to withdraw funds from their designated bank accounts to pay bills such as a Netflix subscription or a monthly phone bill.
Such a system isn't conceivable for owners of self-custodial wallets, said Visa, stressing that automatic programmable payments that pull payments from a user's account at repeated intervals "needs engineering work."
Because the user is the only person in charge of the private keys in self-custodial wallets, they must manually sign off on transactions because "a smart contract cannot initiate transactions on its own."
Visa stated in its technical piece that automatic recurring payments via cryptocurrency will be enabled via a new sort of self-custodial wallet dubbed "delegable accounts," which is based on the "Account Abstraction" (AA) idea.
Ethereum co-founder Vitalik Butering put forward the concept in 2015, which essentially enables for Ethereum-based wallets and smart contracts to be merged into a single account among other use cases.
The Visa team claims that through an AA-based self-custody wallet or delegable account, user accounts will "work like smart contracts," meaning that consumers will be able to arrange transactions without having to sign off on each one.
"This application could allow a user to create a programmable payment instruction that can automatically transmit funds 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 concept is part of the crypto-friendly firm's broader investigation into new pathways for blockchain innovation and to work around tight requirements hardcoded into Ethereum transactions."
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
While the company admits that auto-payments can be integrated reasonably quickly via wallets hosted by third parties such as exchanges, the user must trust that their funds will be maintained responsibly by those parties.
This has proven to be a significant danger this year, particularly in light of the bankruptcy of FTX, Voyager, BlockFi, and Celsius, to mention a few.
The paper also mentions that AA has been offered as part of many Ethereum Improvement Proposals (EIPs) throughout the years, but has not been implemented due to its difficulty. This is owing to the numerous protocol updates and "security assurances" that must be met.
The term "responsibility" refers to the act of determining whether or not a person is responsible for his or her own actions.
As a result of being able to construct delegable accounts under StarkNets' "account model," the essay concludes that auto payments are not far away.
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