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VISA Ventures into Smart Contracts on Ethereum for Streamlined Payments

VISA is exploring the integration of smart contracts on the Ethereum blockchain for improved digital payments, using Account Abstraction to redesign gas fees.

VISA Taps Ethereum Smart Contracts for Digital Payments.

Global finance giant VISA has recently unveiled several major developments in its pursuit of digital asset payments and straightforward crypto adoption.

In a blog post titled "Rethinking Digital Transactions with Account Abstraction," VISA revealed its exploration of gas fee reconfiguration via Account Abstraction on the Ethereum blockchain. This development would facilitate secure and automated payments for self-custodial wallets. The firm is also actively studying Ethereum's ERC-4337 proposal to enhance digital payments.

Launched on the Ethereum mainnet in early March, ERC-4337 is central to VISA's exploration, as it allows smart contracts to conduct transactions on behalf of the user.

VISA mentioned the successful deployment of two sets of Paymaster contracts on the Ethereum Goerli testnet, demonstrating the potential for reconfiguring gas fees on the blockchain to enhance user convenience. Mustafa Bedawala from VISA's crypto department commented that the firm's initial paymaster contract is probing whether users can pay transaction fees with alternative tokens, such as dollar stablecoins or potentially CBDCs, instead of ETH.

Visa's blog post stated, "Currently, to transact on the Ethereum blockchain, a user needs to acquire ETH to cover gas fees; similarly, on the Polygon blockchain, users require the native token MATIC. Is there a solution that eliminates the need to accumulate a variety of native blockchain tokens purely for gas payment purposes?"

The other paymaster contract is designed to cover all gas fees for user transactions, tackling a significant issue in the crypto sector.

Visa further added, "Account Abstraction offers a solution by allowing users to avoid these costs if a third party, like a fintech wallet provider, agrees to cover them. Wallet providers or dApps can act as Paymasters, covering users' gas fees and substantially reducing friction. The ERC-4337 Paymaster concept may incentivize user adoption by making transactions free for users through their wallet platform."

Ethereum co-founder Vitalik Buterin has previously displayed a keen interest in Account Abstraction for gas fees, referring to it as an aspiration of the Ethereum developer community. Buterin suggests the utilization of social recovery wallets and multi-signature wallets for crypto investors to self-custody their assets.

Therefore, with the impending launch of ERC-4337 and the rise of smart contract wallets, wallet security, as well as payments, are expected to see substantial improvements for VISA users, thereby facilitating broader adoption of cryptocurrencies.