VISA Explores the Potential of Smart Contracts for Payments with Ethereum ⋆ ZyCrypto

Global financial services behemoth VISA recently shared a range of significant milestones in its ongoing pursuit of digital asset payments and seamless crypto onboarding.

In a blog titled “Rethinking Digital Transactions with Account Abstraction” earlier this week, the firm disclosed it is now exploring how gas fees can be redesigned using Account Abstraction on the Ethereum blockchain, enabling secure and automatic payments for self-custodial wallets. It then added that it is deeply engaged in studying Ethereum’s proposal ERC-4337 for digital payments.

Rolled out on the Ethereum mainnet in early March, ERC-4337 is a key component of VISA’s exploration, as it adds the ability for smart contracts to transact on behalf of the user.

The firm also noted that it has successfully deployed two sets of Paymaster contracts on the Ethereum Goerli testnet, a move aimed at showcasing the potential for redesigning gas fees on the blockchain to improve user convenience. Mustafa Bedawala of Visa’s crypto department observed that the firm’s first paymaster contract is focused on investigating whether users can pay transaction fees with alternative tokens, like dollar stablecoins or, potentially, CBDCs apart from ETH.

“To transact on the Ethereum blockchain today, a user needs to acquire ETH to pay for gas fees; similarly, to transact on Polygon blockchain, a user needs to acquire the native token MATIC. Is there a solution that eliminates the need to accumulate a different range of native blockchain tokens solely for the purpose of paying for gas?” wrote Visa.

The other paymaster contract is aimed at completely covering gas fees for user transactions, addressing a major pain point in the crypto space.

“Account Abstraction offers a solution by allowing users to bypass these costs if a third party, such as a fintech wallet provider, is willing to cover them. In this case, the wallet provider or dApps can act as Paymasters, covering gas fees for users and significantly reducing friction. The ERC-4337 Paymaster concept can be a potential way to incentivize user adoption by making it free for users to transact through their wallet platform,” the firm added.

Ethereum co-founder Vitalik Buterin has previously expressed his longstanding interest in gas fees Account Abstraction, calling it a dream of the Ethereum developer community. Buterin recommends the use of social recovery wallets and multi-signature wallets for crypto investors to achieve self-custody of their assets.

Thus, with the imminent implementation of ERC-4337 and the emergence of smart contract wallets, wallet security, as well as payments, are expected to improve significantly for VISA users opening doors to wider adoption of cryptocurrencies.