Visa, one of the world’s largest credit companies, is exploring the potential of using smart contracts and programmable payments to allow Ethereum holders to create automatic payments from their own self-custodial wallets. This means that the funds being transferred will not be controlled by a bank or other centralized third party, but rather by the Ethereum holder themselves.
To facilitate this, Visa is proposing the use of a concept called Account Abstraction, or AA. AA was originally formalized by Vitalik Buterin in 2017 as EIP-86, and it combines externally owned accounts (user accounts) and smart contract accounts into a single Ethereum account type. This allows for the integration of smart contract functionality into user accounts, as well as enabling multi-owner accounts through multi-signature verification and delegable accounts. AA also allows for the creation of a public account that anyone can transact from.
While AA has not yet been implemented on the Ethereum platform, the most recent EIP-4337 proposal in 2021 suggests a method for implementing AA without requiring any changes to the Ethereum network protocol.
Visa is working with Ethereum developers outside of the company to increase the capacity to handle large volumes of transactions, as well as to improve security and interoperability. In October 2021, Visa filed two trademark applications for its own cryptocurrency wallets, and announced a partnership with JP Morgan to collaborate on private blockchains for simplifying international payments.
This move into the realm of self-custodied cryptocurrency reflects Visa’s belief in the potential of blockchain technology to transform the way that payments are made. By allowing Ethereum holders to set up automatic payments from their own self-custodial wallets, Visa is enabling a more decentralized and secure payment system that does not rely on traditional banks or other centralized third parties.
The use of smart contracts and programmable payments is a natural progression for Visa, as the company has a long history of innovation and a commitment to staying at the forefront of technological advancements in the financial industry. By exploring the potential of blockchain technology and cryptocurrency, Visa is positioning itself to be a leader in the future of payments.
As more and more people turn to cryptocurrencies and decentralized finance (DeFi) as an alternative to traditional financial systems, the demand for secure and reliable payment solutions is only going to continue to grow. By researching the use of smart contracts and programmable payments, Visa is demonstrating its commitment to meeting this demand and staying relevant in an increasingly digital world.
Final Thoughts
Overall, the move by Visa to research and propose the use of smart contracts and programmable payments for Ethereum holders is a significant step forward in the adoption and mainstreaming of blockchain technology and cryptocurrency. By enabling a more decentralized and secure payment system, Visa is paving the way for a future in which blockchain and cryptocurrency play a central role in the way that we transact and exchange value.
