Chainlink, a decentralized oracle network, recently launched Payment Abstraction on Ethereum. It aims to simplify the payment process for Chainlink services and enhance user convenience.
What is Payment Abstraction?
Chainlink Payment Abstraction is a system that enables users to pay for Chainlink services using various digital assets, such as gas tokens and stablecoins. This payment method simplifies the process by automatically converting user tokens into LINK, the native token of the Chainlink network. Through Chainlink Automation, Price Feeds, the Cross-Chain Interoperability Protocol (CCIP), and decentralized exchanges, the system facilitates seamless transactions.
How Does Payment Abstraction Work?
The Payment Abstraction process involves several steps: 1. **Users Pay with Different Tokens**: Initially, users can pay for Chainlink services using various assets, including gas tokens and stablecoins. 2. **Consolidating Tokens on a Single Blockchain**: Payments are consolidated onto a single blockchain, typically Ethereum, using CCIP. 3. **Converting to LINK Using Automation and DEXs**: Once consolidated, tokens are automatically converted into LINK using Chainlink Automation, Price Feeds, and decentralized exchanges. 4. **Distributing LINK Tokens to Providers**: After conversion, LINK tokens are distributed to service providers in the Chainlink network.
First Use Case: Chainlink Smart Value Recapture (SVR)
One of the first applications of Payment Abstraction is Chainlink Smart Value Recapture (SVR). It allows decentralized finance applications like Aave to recapture non-toxic maximal extractable value (MEV) generated from using Chainlink Data Feeds.
The introduction of Payment Abstraction aims to enhance the economic sustainability of Chainlink's network. By simplifying and broadening the payment process, Chainlink hopes to increase demand for its services, reinforcing LINK's role as a universal token.
