Chainlink recently announced the launch of its Payment Abstraction system on Ethereum, designed to simplify the payment process for services using various digital assets.
What is Payment Abstraction?
Chainlink Payment Abstraction is a system allowing users to pay for Chainlink services using various digital assets. This payment method simplifies the process by automatically converting user tokens into LINK, Chainlink's native token.
How Does Payment Abstraction Work?
The Payment Abstraction process involves several steps to convert user tokens into LINK tokens.
1. Users pay using different tokens, including gas tokens and stablecoins. 2. Tokens are consolidated onto a single blockchain, typically Ethereum, using CCIP. 3. Tokens are converted into LINK automatically using Chainlink Automation and decentralized exchanges like Uniswap. 4. After conversion, LINK tokens are distributed to Chainlink Network service providers.
The First Use Case: Chainlink Smart Value Recapture (SVR)
The first practical application of Payment Abstraction is found in Chainlink Smart Value Recapture (SVR). This solution allows DeFi applications to recapture non-toxic MEV from using Chainlink Data Feeds. Aave is the first protocol to integrate Chainlink SVR, allowing them to receive a portion of liquidation MEV.
Chainlink's launch of Payment Abstraction is a significant step towards improving the accessibility and convenience of payment processes, further supporting the economic sustainability of the Chainlink network.
