Visa Proposes Automatic Payments Using Ethereum Layer 2 System StarkNet

Payments processor Visa (V) recently proposed a system known as “account abstraction” that uses smart contracts can be used to enable automated programmable payments on Ethereum, per a crypto thought leadership post.

This solution involves the creation of a smart contract that acts as an intermediary between a user account and a contract account, allowing for the creation of a self-custodial wallet that can make automatic recurring payments without requiring the active participation of the user.

Such a move would allow recurring payments to be conducted entirely over blockchain networks, which currently are devoid of such capability, Visa said. The company proposed deploying the system on the Ethereum layer 2 network StarkNet.

Currently, there are two types of accounts on the Ethereum network: Externally Owned Accounts (EOA) controlled by a private key, and Contract Accounts (CA), which are essentially smart contracts.

EOAs can initiate transactions, but CAs cannot. However, by using Account Abstraction it is possible to create a smart contract that can initiate transactions on behalf of an EOA, enabling the creation of a self-custodial wallet that can make automatic recurring payments, Visa said.

Account Abstraction (AA) is a proposal that aims to combine user accounts and smart contracts into a single type of account on the Ethereum blockchain. This is possible by allowing for the creation of validity rules for individual transactions.

One use case for AA is the creation of "delegable accounts," which allow for the automation of payments through the use of smart contracts.

With a delegable account, a user can delegate the ability to initiate a payment to a pre-approved smart contract, known as an "auto payment contract,” Visa said.

Here’s how it could hypothetically work: When a user visits a merchant's website and agrees to allow for auto payments, the auto payment contract's address is added to the user's allow list.

The merchant could then trigger a payment by calling the charge function of the auto payment contract, causing the user's account to initiate a payment that will be valid due to its presence on the allow list.

As of Tuesday, Visa did not reveal any plans to use the system as part of its offered services.