According to payments giant Visa, cryptocurrency users may someday be able to automatically pay their phone and electricity bills using their self-custodial crypto wallets.
Visa’s thought leadership team on cryptocurrencies put forth a solution in a blog post on December 20 that would let providers automatically “pull” money from users’ Ethereum-powered crypto wallets without requiring the user to manually approve each transaction.
In the traditional banking world, auto payments for recurring bills are commonplace. 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.
According to Visa, such a mechanism is not feasible for owners of self-custodial wallets because automated programmable payments that periodically withdraw money from a user’s account “require engineering work.”
This is due to the fact that, in self-custodial wallets, only the user has access to the private keys, necessitating their manual approval of all transactions because “a smart contract cannot initiate transactions on its own.”
In its technical article, Visa stated that a new kind of self-custodial wallet called “delegable accounts,” which is based on the “Account Abstraction” (AA) concept, would allow automatic recurring payments in cryptocurrency.
The idea was proposed by Ethereum co-founder Vitalik Butering in 2015. It essentially enables the combination of smart contracts and Ethereum-based wallets into a single account, among other use cases.
The Visa team claims that user accounts would “function like smart contracts” through an AA-based self-custody wallet or delegable account, meaning that people could schedule transactions without signing off to initiate each one individually.
“This application could allow a user to set up a programmable payment instruction that can push funds automatically from one self-custodial wallet account to another at recurring intervals, without requiring the user’s active participation each time,” the post reads.
The proposal is a part of a larger investigation by the blockchain-friendly company into fresh opportunities for blockchain innovation and a way to get around strict constraints hardcoded into Ethereum transactions.
The development team does acknowledge that, despite the ease with which auto-payments can be integrated into wallets hosted by third parties, such as exchanges, users must still have faith that these parties will properly manage their funds.
This was shown to be a significant risk this year, particularly in light of the failures of FTX, Voyager, BlockFi, and Celsius, to name a few.
The article also makes note of the fact that AA has been included in a number of Ethereum Improvement Proposals over the years, but has ultimately fallen through due to implementation difficulties. This is because it necessitates numerous protocol adjustments and the fulfillment of “security guarantees.”
The Visa team claimed that, because the network supports AA, it has already successfully tested its delegable accounts on a private chain from the layer 2 scaling solution StarkNet.
Since the Visa team was able to integrate delegable accounts within StarkNets’ “account model,” the post concludes that auto payments are not far off.