Visa offers automatic payments for Ethereum accounts

Visa will ship in full new instant payment system. This is for account holders. Ethereum. Let’s see together how this service works.

Payments made easily with Ethereum

The world leader in credit Visa has researched smart contracts and programmable payments. The company wants to let Ethereum holders pay through automatic payments.

Visa presented on its website a solution aimed at allowing Ethereum holders to set up programmed payments from their own wallets. In addition, the concept traditional banks and centralized third parties would be eliminated from transactions.

Setting up automatic payments on regular bank accounts was relatively simple. However, the banks control the system and the funds are ultimately transferred. Visa is entering the field of independent cryptocurrencies. The company starts with the second main digital asset: Ethereum.

In fact, it has proven itself in terms safety and reliability. Vitalik Buterin, co-founder of Ethereum, continues to improve the blockchain, especially last September with the upgrade of The Merge.

Despite the huge fall in the cryptocurrency market, the company continues to invest in the field of crypto.

VISA discusses Ethereum account abstraction (EIP 4337)https://t.co/96Betl5Bnz
— harry.eth 🦊💙 (whg.eth) (@sniko_) December 20, 2022

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Using account abstraction

The proposal was co-authored by Catherine Gu, head of digital currencies and central bank protocols at Visa. She said that “If one of the main use cases for blockchain is for payments, the basic requirement is that the blockchain has to perform as well as it does today, if not better.”

The proposal uses a new concept calledaccount abstraction. In other words, this is one of the main recommendations of Ethereum developers using smart contracts to make automatic payments.

Ethereum accounts are third-party owned accounts (user accounts) or smart contract accounts. Visa wants to use account abstraction. Using this technique, Visa will be able to merge bank and Ethereum accounts into one account. Concretely, this would bring smart contract functionality to Ethereum user accounts.

Example situation

Paypal has described an example case for using their new payment system.

A user named Alex has an account where his salary checks are deposited. From which he wants to pay his mortgage, TV subscription and utility bills. Today, in order to pay his bills, Alex must initiate a transaction that transfers tokens from his EOA to a user account owned by the recipient.

Specifically, Alex’s EOA relates to a secret or private key known only to Alex. Alex uses this private key to generate an ECDSA (Elliptic Curve Digital Signature Algorithm) signature, which is critical to creating a valid transaction. If Alex is on vacation, who will generate this signature to create the transaction that will make his payment?

One solution is for Alex to use something called a cache wallet. With a cache wallet, another party controls Alex’s private key. In other words, Alex trusts a third party to secure his funds and return them if he wants to exchange them or send them elsewhere.

The advantage is that Alex can automatic payment arrangement linked to your deposit wallet. Since the custodian, who is the party that manages his wallet, has access to his private key, he will be able to create the signature needed to create the transactions for his scheduled automatic payments.

With a self-hosted wallet, where the user has full control over their wallet, Only Alex has control over his private key. Not having to trust a third party when using an e-wallet also means Alex won’t be able to set up an automatic payment. In fact, she is the one who must use her key to generate the signature required for the payment transaction.