Visa proposal will bring Ethereum users one step closer to being their own bank

Credit giant VisaV
today launched a proposal that would allow owners of the ether cryptocurrency to set up automatic payments directly from their own self-managed wallets, a proposal that does not require banks or other centralized entities to be part of the picture.

While the service is far from groundbreaking for most anyone with a bank account, the proposal, the result of an internal hackathon hosted by Visa earlier this year, would go a long way toward making the often obtuse world of crypto more accessible to consumers.

Coming at a time when more than $2 trillion has been wiped off the cryptocurrency market cap and following numerous high-profile bankruptcies of centralized exchanges and lenders, the proposal is the latest in a string of promising attempts to align digital assets with early advocates’ vision of a banking system fringed by layers of fee-charging intermediaries.

Visa’s Head of Central Bank Digital Currencies and Protocols, Catherine Gu, who co-wrote the proposal, says that “If one of the most important use cases of blockchain is for payments, then the basic requirement is that blockchain must work as well as it does today, if no better.”

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Suggestion, published on Visa’s website today, emerged from a competition among the company’s employees in February to solve the problem of how a ether owner could pay a bill with crypto at a future date while temporarily out of internet service.

With a bank, the process of pre-approved payments is easy because the financial institution can write whatever rules it wants for the account holders. But it’s much more complicated in the world of public blockchains, where a single codebase of basic tools, called blockchain primitives, is available to everyone. EthereumETH
Network currently offers externally owned accounts (EOA), or user accounts, and contract accounts, which automatically run code known as smart contracts.

The Visa proposal would essentially merge the two into a single account, turning the smart contract for executing commands into a software wallet for storing cryptocurrency. A process called account abstraction (AA). The idea of ​​turning the smart contract itself into a wallet was proposed in 2015 by Ethereum creator Vitalik Buterin and formalized in 2017 as ethereum improvement proposal (EIP) 86. Currently marked as “dormant” as a result of more than six months of inactivity, Visa proposal could rejuvenate interest, if Buterin marked it as a draft, or if one of several newer proposals sees traction.

“The truth is that there is still debate about how AA should be implemented on Ethereum,” the paper authors wrote.

In addition to the research on automating payments, the Visa team is working with Ethereum developers outside the company to increase its capacity to handle large volumes of transactions, provide increased security, interoperate with other blockchains, and do it all while ensuring user privacy. protected, according to Gu. “We are committed to continuing to research and do more education, in blockchain primitives and protocols around things that will potentially be important for payments,” she says. “So I think this is an ongoing effort.”

Although Visa was among the first traditional payment giants to take digital assets seriously, it is now competing against the likes of Mastercard with the launch of its first crypto-linked card in 2015.MA
PayPalPYPL
and Block (formerly known as Square), to bring such payments to ordinary users.

The account abstraction hackathon predates the crypto market collapse by several months, but the timing of this announcement coincides with a greater push by crypto developers to emphasize the early “not your keys, not your crypto” mantra, opposing centralized exchanges and other entities that maintain custody of digital assets owned by their customers.

Since FTX filed for bankruptcy in November, centralized exchange volume has decreased to $14 billion from $34 billion, according to Forbes analyst and co-founder and CEO of investment manager NovaBlock, Leeor Shimron, but after an initial bump in decentralized exchange volume, transacted on codebases that connect traders directly, numbers have eased due to “lower asset prices and thus less interest heading into the holidays,” says he.

Similarly, hardware wallets, visually similar to USB sticks, which provide users with additional layers of protection while still holding their own private access keys have also increased, but not without controversy. In November, Czech Republic-based Trezor reported that unit sales rose 300% from the previous quarter’s monthly average, although there are potential vulnerabilities stemming from the role hardware developers play in providing security for customers’ assets.