Chainlink has launched Payment Abstraction on the Ethereum mainnet to simplify payments for its services and enhance user experience. In this article, we will look at what Chainlink Payment Abstraction is, how it operates, and its first application with Chainlink Smart Value Recapture (SVR).
What is Payment Abstraction?
Chainlink Payment Abstraction is a system enabling users to pay for Chainlink services using various digital assets, including gas tokens and stablecoins. This payment method reduces friction by automatically converting tokens into LINK, Chainlink's native token. Through automation, price feeds, the cross-chain interoperability protocol, and decentralized exchanges like Uniswap, the system facilitates seamless transactions without requiring manual conversions.
How Does Chainlink Payment Abstraction Work?
Payment Abstraction operates through a multi-step process: 1. Users pay with different tokens, such as gas tokens and stablecoins. 2. Tokens are consolidated onto a single blockchain, typically Ethereum. 3. Consolidated tokens are automatically converted into LINK using Chainlink Automation and DEXs. 4. Converted LINK tokens are sent to a smart contract and allocated to Chainlink service providers.
The First Use Case: Chainlink Smart Value Recapture (SVR)
The first application of Payment Abstraction is within Chainlink Smart Value Recapture (SVR), allowing DeFi applications to recapture non-toxic Maximal Extractable Value. Aave, a leading DeFi protocol, has integrated Chainlink SVR and receives a portion of liquidation MEV. During the initial period, 65% of the fees go to Aave, with the remaining shared within the Chainlink ecosystem.
The goal of introducing Chainlink Payment Abstraction is to enhance the economic sustainability of the Chainlink network by simplifying the payment process. Chainlink plans to expand the use of this system for additional services in the future and integrate new features, increasing the value and demand for LINK.
