Introduction
In the world of cryptocurrency, self-custodial wallets are an increasingly popular choice for users who want to have complete control over their funds.
These wallets give users the ability to hold their own private keys, which means that they are in charge of their own security and are responsible for initiating transactions themselves. However, as cryptocurrencies continue to gain mainstream adoption, the need for more user-friendly solutions has also grown.
This is where the concept of automated programmable payments comes in. With this system in place, users can set up their self-custodial wallets to automatically pull funds from their accounts at predetermined intervals, without having to actively initiate each payment.
While this may seem like a convenient solution, it's important for users to be aware of the consequences of giving up control over their cryptocurrency payments.
In this article, we'll explore the potential risks and drawbacks of using smart contracts for automated payments, and discuss why it's important for users to carefully consider their options before making a decision.
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Summary of Visa’s Custodial-Wallet
The white paper discusses the use of smart contracts to enable automated programmable payments for self-custodial wallets on the Ethereum blockchain.
The white paper defined self-custodial wallets to be digital wallets in which the user has sole control over the wallet and private keys.
The paper proposes a solution for enabling automated payments from self-custodial wallets using smart contracts, which would allow users to set up recurring payments and make other transactions automatically.
One potential danger is that smart contracts are open source, meaning that their code is visible to anyone. If the contract code contains vulnerabilities or is not properly audited, it could potentially be exploited by malicious actors.
The use of automated payments may also reduce the user's control over their digital currency, as they will not have to actively initiate each payment.
Overall, users who value privacy and control over their digital currency may be hesitant to use a solution that involves the use of smart contracts for automated payments.
Sacrificing Control over Streamlined Payments
The authors of "Auto Payments for Self-Custodial Wallets" white paper have presented a method for using smart contracts to enable automated payments from self-custodial wallets. This is achieved through the implementation of Account Abstraction and the creation of a smart contract that allows for automatic fund withdrawal instead of requiring manual input from the user for each payment.
While this may seem like a convenient solution for users, it also raises concerns about the loss of control over their cryptocurrency payments. With this system in place, users will no longer have to actively initiate each payment, as the smart contract will automatically pull funds from their account at predetermined intervals. This means that users will have to trust that the smart contract will correctly execute the payment and that their funds will be used as intended.
Additionally, the use of smart contracts also introduces the potential for technical issues or vulnerabilities that could compromise the security of the user's funds. While smart contracts have the potential to greatly improve the efficiency of certain processes, it is important for users to carefully consider the risks and consequences of giving up control over their cryptocurrency payments.
Some Disturbing Statements from Visa’s White Paper
There are several statements and highlights in the white paper that suggest that the proposed solution would reduce the user's control over their digital currency as they will not have to actively initiate each payment:
"We propose a new solution towards a real-world application of auto payments to demonstrate how to write a smart contract for a self-custodial wallet that can pull funds automatically, instead of requiring the user's active participation each time to instruct and push payments on a blockchain."
"Auto payments allow users to set up recurring payments for their bills, such as a mortgage, rent, and utility bills, and other transactions automatically."
“One solution is for Alex to use what is known as a custodial wallet. With a custodial wallet, another party controls Alex’s private key. ”
"Auto payments allow users to easily and efficiently make payments for their recurring bills or other transactions without having to actively initiate each payment."
"This solution allows users to set up and automate payments for their recurring bills, saving them the hassle of manually initiating each payment."
These statements suggest that the proposed solution would allow users to set up and automate payments without the need to actively initiate each payment, which would reduce their control over their digital currency.
Why you should Learn Web3 Development
Smart contract and the web3 world has a lot to offer as you can see that even VISA wants to get a market share from it. All of the processes needed to develop a production-ready smart contract are already packaged inside this book, in an easy-to-understand manner.
Grab a copy of my book titled, “capturing smart contract development” to become an in-demand smart contract developer.
You may also find this video interesting for transitioning into a web3 developer.
Conclusion
In conclusion, while the proposed solution for automated programmable payments may offer convenience for users, it also introduces the risk of loss of control and potential security vulnerabilities. It is important for users to carefully weigh the pros and cons before implementing such a system and to thoroughly research and understand the potential risks and consequences.
I offer private and specialized classes for serious folks who want to learn one-on-one from a mentor. Book your Web3 classes here.
About the Author
Gospel Darlington is a full-stack blockchain developer with 6+ years of experience in the software development industry.
By combining Software Development, writing, and teaching, he demonstrates how to build decentralized applications on EVM-compatible blockchain networks.
For more information about him, kindly visit and follow his page on Twitter, Github, LinkedIn, or on his website.
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