Chainlink, a decentralized oracle network, has introduced Payment Abstraction, a new system designed to streamline payments for Chainlink services and enhance the user experience.
What is Payment Abstraction?
Chainlink Payment Abstraction allows users to pay for network services using various digital assets, such as gas tokens and stablecoins. This system automates the conversion process of different tokens into LINK, Chainlink's native token, reducing friction in payments and making services more accessible.
How Does the System Work?
The operation of Payment Abstraction involves several steps. Users can pay with various tokens, such as ETH. After payment, the tokens are consolidated onto a single blockchain, typically Ethereum, using CCIP. They are then automatically converted into LINK via Chainlink Automation, Price Feeds, and decentralized exchanges like Uniswap V3. After conversion, LINK tokens are distributed to Chainlink service providers.
The First Use Case: Chainlink Smart Value Recapture
The first practical application of Payment Abstraction is Chainlink Smart Value Recapture (SVR), allowing DeFi applications to capture Maximal Extractable Value (MEV) generated through Chainlink Data Feeds. Aave, a leading DeFi protocol, is the first to integrate SVR, receiving part of the liquidation MEV for its community and the Chainlink ecosystem.
The aim of Chainlink Payment Abstraction is to enhance the economic sustainability of the network, simplifying payments and making Chainlink services more accessible to diverse users. Chainlink plans to expand the system and add features like Build tokens for ecosystem participants.
