Payment Primitives
The following are the critical elements for powering Web3 payments on Fuse V2 or payment primitives.
Smart User Accounts
On Fuse, we envisage every user or merchant represented using a smart contract (Smart User Account). This smart contract architecture gives several advantages to Operators and developers for blockchain-based financial applications.
For example, in a regular blockchain wallet, the user must manage their funds and interact with protocols and smart contracts directly, i.e., sign approvals and deal with the mechanics of fund management—a daunting task, even for veterans.
Imagine this as a non-custodial decentralized "bank account" that can help consumers retrieve and manage funds more safely or add new features or tools for easier and safer self-custody.
Smart user accounts give users more power while keeping better UX and allow us to reimagine old business models underpinning the traditional digital payments industry.
We want to give Operators the tools to experiment with better payment models. When a user conducts a transaction with a merchant using fee abstraction, the transaction can automatically be programmed to process complex business logic.
Some possible innovations using this method include:
Cashback - Send a certain percentage of the transaction back to the user - instead of only paying the payment processor as the key beneficiary of the revenue generated, the users can be incentivized directly with a microtransaction for every payment.
Revenue share - Most transitional payment processors are expensive because digital payments nowadays have an extended value chain of intermediaries. Transactions usually take a long time to settle from the moment of payment until funds arrive in the merchant's account.
Subscriptions - While recurring payments are an essential primitive of credit card systems and an important tool for businesses, digital memberships can be reimagined from the ground up using contracts behind the scenes. Fee abstraction allows Operators to set rules for how payments are collected, how installments are paid, who gets access, and under what conditions by combining it with NFTs.
Fee Abstraction
Currently, in most cases, Web3 users must submit blockchain transactions they wish to execute themselves. Among other things, this means that they also have to deal with blockchain transaction fees.
With fee abstraction, the user signs a transaction with their private key while the operator handles the payment of any necessary fees behind the scenes.
This allows users to focus on the blockchain's benefits rather than worrying about the technical details of fee payment. Fee abstraction is a powerful approach that can help Operators find innovative business models. This is important for adopting Web3 payments, as most users are not accustomed to paying fees per transaction when paying in legacy environments.
By providing a range of incentives for Operators to build and experiment on Fuse, we aim to attract a vibrant community of Operators who can share tools and insights. This is a crucial part of our vision for Fuse Network.