🔐CDP Auto-Repayment
Technology: CDP (Coinbase Developer Platform) Smart Wallets with ERC-4337 Status: Demo built, production-ready architecture designed Demo: apps/web-auto
Overview
CDP Smart Wallets enable automatic loan repayments without requiring users to manually approve each transaction. This is achieved through session keys - a feature of ERC-4337 account abstraction that allows pre-authorized transactions within defined rules.
The user experience: Sign once to authorize repayments, then everything happens automatically.
How Session Keys Work
Traditional Wallet (MetaMask, etc.)
Revenue arrives → Backend calculates repayment → Email borrower →
Borrower logs in → Approves transaction → Signs with wallet → Payment sent❌ High friction: 5+ manual steps, easily forgotten
CDP Smart Wallet with Session Keys
Revenue arrives → Backend calculates repayment → Smart contract executes →
Wallet validates session key → Auto-approves → Payment sent✅ Zero friction: Fully automated after one-time setup
Technical Implementation
Session Key Creation (One-Time Setup)
When a borrower takes out a loan, they create a session key with predefined rules:
const sessionKey = await smartWallet.createSessionKey({
// What contract can be called
allowedContracts: [LOAN_REPAYMENT_CONTRACT],
// What functions are allowed
allowedFunctions: ['repayLoan'],
// Spending limits
maxAmountPerTransaction: parseUnits('100', 6), // $100 max per payment
maxAmountPerMonth: parseUnits('500', 6), // $500 max per month
// Time-based expiration
validUntil: Date.now() + (90 * 24 * 60 * 60 * 1000), // 90 days
})This is the ONLY signature required from the borrower.
On-Chain Validation
Every repayment transaction is validated on-chain by the smart wallet:
function validateUserOp(UserOperation calldata userOp)
external returns (uint256 validationData)
{
// Check if transaction uses a valid session key
SessionKey memory session = getSessionKey(userOp.signature);
// Validate against rules
require(block.timestamp <= session.validUntil, "Session expired");
require(userOp.callData.target == session.allowedContract, "Invalid contract");
require(userOp.callData.value <= session.maxPerTransaction, "Exceeds limit");
require(monthlyTotal + userOp.callData.value <= session.maxPerMonth, "Monthly limit");
return 0; // Valid - auto-approve
}Automatic Repayment Flow
1. Merchant processes sale via Stripe/Square
↓
2. Webhook triggers backend
↓
3. Backend calculates repayment (% of revenue)
↓
4. Bridge API converts USD → USDC
↓
5. Smart contract calls repayLoan() with session key
↓
6. CDP Smart Wallet validates session key rules
↓
7. Auto-approves if valid (NO SIGNATURE NEEDED)
↓
8. USDC distributed to lendersKey Benefits
For Borrowers
Zero friction: Sign once, never think about payments again
Can't forget: Payments happen automatically
Stay in control: Set spending limits, revoke anytime
Still non-custodial: You control your keys
For Lenders
Lower defaults: No missed payments from forgetfulness
Predictable yield: Automated repayment schedule
No chasing payments: Everything automatic
For the Protocol
Better UX: Removes biggest friction point
Lower default rate: Automation prevents forgetfulness
Scalable: Works for 10 or 10,000 borrowers
Architecture Comparison
Setup
Connect wallet
Connect wallet + create session key
Each payment
Manual approval + signature
Automatic (no action)
Missed payments
Common (forgetfulness)
Impossible (automated)
User effort
High (every payment)
Zero (after setup)
Gas costs
User pays each time
Can be sponsored (Paymaster)
Security
Manual review each time
Pre-approved rules enforced on-chain
Security Features
1. On-Chain Rule Enforcement
All session key rules are validated on-chain by the smart wallet contract - not by your backend.
2. Spending Limits
Maximum per transaction
Maximum per month
Can never exceed these limits, even if backend is compromised
3. Time-Based Expiration
Session keys expire automatically
Borrower must renew to continue automatic payments
4. Contract Whitelisting
Can only call specific approved contracts
Cannot drain wallet to arbitrary addresses
5. User Control
Borrower can revoke session key anytime
Emergency pause function available
Still fully non-custodial
Demo Application
We've built a working demo at apps/web-auto that showcases:
CDP Wallet Connection - Connect via passkey, Google, or Apple
Session Key Creation - Configure limits and expiration
Auto-Repayment Simulation - See it work without signatures
Run the demo:
cd apps/web-auto
npm install
npm run devVisit http://localhost:3003
Production Implementation
For production deployment, see detailed implementation plans:
📄 Phase 2 Auto-Deduction Plans
Plans include:
Plan A: Chainlink Automation (decentralized triggers)
Plan B: Multi-Sig Backend (enhanced security)
Plan C: On-Chain Attestations (future)
Plan D: Crypto-Native Revenue (fully decentralized)
Trust Model
What's Non-Custodial
✅ User controls private keys via CDP smart wallet ✅ Session key rules enforced on-chain ✅ Spending limits cannot be exceeded ✅ User can revoke access anytime
What's Centralized
⚠️ Backend calculates repayment amounts ⚠️ Revenue data comes from Stripe/Square (off-chain) ⚠️ Timing of repayments controlled by backend
Protection Mechanisms
Session key limits enforce maximum amounts
Transparent on-chain logging
Dispute mechanism for incorrect calculations
Emergency pause function
Technology Stack
CDP SDK:
@coinbase/wallet-sdk,@coinbase/onchainkitSmart Wallet Standard: ERC-4337 account abstraction
Network: Base (Coinbase L2)
Token: USDC
Revenue Sources: Stripe, Square (via webhooks)
Fiat Conversion: Bridge API
Next Steps
✅ Demo Built - Working proof of concept
🚧 Smart Contracts - Deploy production loan repayment contracts
🚧 Stripe Integration - Production webhook handling
🚧 Bridge Integration - USD → USDC conversion
📅 Chainlink Automation - Decentralized triggers (Phase 2B)
Learn More
Demo Code: apps/web-auto
Implementation Plans: Phase 2 Plans
CDP Documentation: https://docs.cdp.coinbase.com
ERC-4337 Spec: https://eips.ethereum.org/EIPS/eip-4337
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