Visa to leverage Ethereum's account abstraction tech to fund gas fee payments using fiat, how this is game changing

Ethereum might just have made a major hit with the release of ERC-4337, an Ethereum standard that enables social recovery, multi-signature security and improved transactions(basically allowing transaction bundling).

As many of us have already noted a couple of times, Ethereum will be the bankers chain, but whilst we've mostly believed that this implied that the network would stay the same in terms of its tech limitations, this is usually supported with the narratives that the banks won't care about "cost" but that can't be true, if there's any institutions that doesn't play with determining the line between profit and loss, it would be the banks.

That said, Visa is leveraging the "transaction bundling" function of Ethereum's abstraction technology to fund gas fee payments using fiat. In as much as this tech appears fancy, I'd say it isn't quite fancy, literally, although its application to the Ethereum blockchain(directly) may have had some complexity, don't know, I'm no developer.

Now the reason I am saying this is because Ethereum's layer two solutions have basically been doing this. An example I am quite frank with would be "Optimism with it's optimistic rollups" which is basically a tech that allows the Optimism side-chain to compress data and lower storage requirements and transactions costs.

This process is what is referred to as "roll-ups" or "rolling up", it's quite a catchy name to say the least. Notwithstanding, Ethereum's implementation of this tech via ERC-4337 allows the network to battle one of its largest flaws which is "high gas fees", although not directly, it battles this in a way that cost can be lowered by bundling up different transactions into one, also, this gives run for third-parties like parent protocols or Visa now for example to cover the cost in chain front.

Visa move into crypto : the big and the bigger picture

Crypto will grow exponentially, but fiat might forever remain the ultimate "unit of account".

Visa, with a concept it dubs paymasters, a solution flow that demonstrates how to enable users to pay their onchain gas fees in fiat money through a card on file.

This innovative and adaptable approach is believed to help streamline the onboarding process for new crypto users and improve the experience for current users, but how would it work exactly?

First, what is a paymaster?

A paymaster is a specialized type of smart contract account that can sponsor gas fees for user Contract Accounts (think of these as user-centric smart contracts). Our proposed solution liberates users from the need to hold native blockchain tokens or constantly engage in bridging tokens merely to cover gas fees. - Visa

Again, we've seen similar tech on enterprise-inclined chains like Vechain and its fee-delegation tech which enables individual accounts act as gas-payers for designated transactions or transaction accounts.

Visa leveraging this aims to solve for increased flexibility on blockchain networks because it typically is a work against user experience when one has to consistently think of acquiring ETH for example to pay for gas when trying to move some other asset like USDC on Ethereum, it simply increases cost and lengthen the operations process.

Visa happens to be building something very unique here in a way that it would eliminate certain weaknesses on-chain.

How it works

A paymaster’s role is to abstract away the complexities of the gas fee mechanism while offering alternative ways for fee funding. Our experimental implementation does this by accepting the user’s gas fee payment offchain from a Visa card and covering the equivalent amount onchain, on behalf of the user.

The gas fee experience on the user's end is as simple as a regular card payment. Users can choose to use such a paymaster when sending User Operations. User Operations are like regular blockchain interactions, in that they specify the action the user wants to take on the blockchain. But unlike transactions, User Operations don’t need to be signed by an Externally Owned Account and can be verified and executed directly by a Smart Contract Account.

The setup we implemented to enable the offchain gas payment capability is centered around a Verifying Paymaster.

A Verifying Paymaster is a smart contract that delegates all necessary checks and sourcing of information to an offchain component. The onchain paymaster smart contract can then use the data and approval provided by the offchain component to authorize and pay for the gas fee. The way to reliably transfer this information from the offchain service to the paymaster contract is through public-key cryptography: Offchain web service uses a secret key to produce a digital signature to send along with the information.

The paymaster smart contract can in turn use the corresponding public key to verify the signature and therefore the authenticity of the information. For our experiment, we used the Verifying Paymaster sample smart contract⁴ provided by ERC-4337 core team.

For further reading, see this post by Visa.

The benefits of this is quite simple "flexible on-boarding". Think of dApps, projects, protocols with their different set of users are coming to the blockchain space to execute different transactions, with Ethereum's account abstraction technology, each project can simplify operations processes without bugging the users with external requirements like gas(resources) for transactions required the execution of multiple other transactions.

With Visa, this is simply several steps better. Given that many people own visa cards, it's then easier to cut the cost and bullshit and bridge traditional finance with decentralized finance.

However, you must know that this integration comes with a cost and that cost is "data matching" which is what I dub the process of third-party services leveraging their bridge in various networks to build connections across user data, basically mining user data.

The cost here in simple terms is that the relationship between your Visa card being used to cover gas and your Ethereum wallets will deanonymize your on-chain accounts so these companies will automatically be able to know who is interacting with what on-chain.

So before using this feature, you gotta ask yourself if you want that traceability.

Posted Using LeoFinance Alpha