Chainlink, a decentralized oracle network, has launched Payment Abstraction—a system enhancing payment processes in the network. It is live on the Ethereum mainnet, aiming to streamline payments for Chainlink services.
What is Payment Abstraction?
Chainlink Payment Abstraction is a system enabling users to pay for network services using various digital assets like gas tokens and stablecoins. It minimizes payment friction by automatically converting tokens into LINK, the native token of Chainlink. Combining Chainlink Automation, Price Feeds, Cross-Chain Interoperability Protocol, and decentralized exchanges, the system facilitates seamless transactions.
How Chainlink Payment Abstraction Works
The system operates through a multi-step process: 1. **Payment with Different Tokens**: Users can pay for Chainlink services with various assets, including gas tokens and stablecoins. The first supported asset is Ethereum (ETH). 2. **Token Consolidation on Blockchain**: After payment, the tokens are consolidated onto a single blockchain, usually Ethereum, optimizing liquidity. 3. **Conversion to LINK**: Tokens are converted into LINK using Chainlink Automation and DEXs like Uniswap V3. 4. **Distribution of LINK Tokens**: Converted LINK tokens are allocated to service providers in the network, including node operators.
First Use Case: Chainlink Smart Value Recapture (SVR)
The first practical application of Payment Abstraction is the Smart Value Recapture (SVR) solution, allowing DeFi applications to recapture non-toxic Maximal Extractable Value (MEV). Aave, a leading DeFi protocol, is the first to integrate Chainlink SVR.
The launch of Payment Abstraction is crucial for the economic sustainability of the Chainlink network, simplifying payments and optimizing reward distribution among participants.
