The Next Huge Narrative
Smart Contract Wallets on Ethereum — A game changer
This news is a bit under the radar, as most crypto pundits are not yet discussing it. Odds are you have not heard of the latest Ethereum Improvement Proposal. It changes the fundamental way that crypto wallets will work, making them fully programmable and therefore orders of magnitude easier to use, more secure, and with the potential for mass-adoption-ready UIs.
It was announced last week at the ETH Denver Conference, and is an absolute game changer for the entire crypto industry. EIP-4337 allows for account abstraction, a fancy name for wallets that are in fact smart contracts. This is an innovation that has been discussed for many years, and only now is finally being deployed. This is THE advancement in Ethereum that will allow for mass adoption via sleek and programmable user interfaces that even Grandma and Grandpa can easily use.
What is EIP-4337?
The biggest hurdle to mass adoption are the current crypto user interfaces (UIs), and the limitations of EOA wallets. They are generally clunky and complex to use, with room for errors and exploits at every turn. Certainly, they are not ready for mass adoption. EIP-4337 changes this, and will forever change the way crypto wallets function.
Current wallets function as what is knows as an Externally Owned Account (EOA), and can only interact with a smart contract or perform a send transaction. This is what your crypto wallet really is. It allows an owner/user to use a seed phrase to generate a public and private key, and therefore sign transactions using that key pair. Every action requires that signature by the authorized EOA owner, and only actions taken by that owner can be performed.
EIP-4337 allows a wallet to become a smart contract, rather than simply an EOA. This means wallets become fully programmable just the way the multitude of dApps are, and allows endless possibilities to improve the user experience and allow for very important improvements, both for ease of use and safety.
Benefits and Innovations of EIP-4337:
- Wallets can be multi-signature at a native level (eg. 3 of 5 signatures for transactions)
- Wallets can have approval tiers (eg. 1 signature for small transactions, 3 signatures for larger transactions)
- Wallets can have 2FA and other forms of authentication and recovery
- Wallets DO NOT have private keys any longer ( at least not the wallets themselves). No more remembering a seed phrase for recovery.
- Can implement spend limits
- Can implement time restrictions and subscription-like payments
- Set account spending conditions
- Transactions become simpler and can be aggregated together for simpler use. (eg. no more approve, swap, remove approval … can all be in a single batch of transactions). Grandparent-ready.
- Conditional account lockdown (in the event of hack or loss of access, can set a condition for freezing of transaction).
- Transaction time-delays for security
- Can grant permissioned access to family or colleagues (think 2nd credit card user)
- Can delegate gas costs to other wallets (think corporate accounts, DAOs, etc)
- Can set protective measures to prevent Honey-pot tokens (scam tokens), or limit dodgy NFT drops.
Basically, any logic you can program into the wallet can now become a reality, and ease of use and safety is limited only by the imagination of the developer programming the wallet.
How to Profit?
EIP-4337 is very new, and smart contract wallets are still a twinkle in most developer’s eyes. That said, I see two ways to set yourself up to profit substantially for some serious potential home runs.
The first angle is to look for existing wallet projects that do a phenomenal job with the user interfaces and development, and invest in their NFTs or Tokens if they have them. I will do a deeper dive in the coming weeks on some of these options, but top of the list would be projects like Zerion, ZapperFi, XDefi(maybe), TrustWallet, etc. The investments here are a combination of NFTs, Tokens and airdrop interactions. The projects that implement proper iterations of smart contract wallets first will pull 100X’s in short order, particularly for early investors. Some of these plays will also be investments in hopes of future token airdrops, such as using platforms with built-in swaps and bridges like ZapperFi, Zerion and Metamask.
My recommendation would be to set up accounts will all of the above, as they are free and quite handy even in the event you do not invest in them. Use them all, buy some of the NFT’s or Tokens if it suits your investment goals, and then narrow down the platforms you like best and begin investing into those. I am currenty looking to accumulate Zerion Genesis NFT’s (deep dive here), as the rare ones have lifetime free user fees as well as potential airdrop rewards down the road (speculation).
The second way to invest in the smart contract wallet (SCW) narrative is with upcoming SCW projects that are not yet listed. This will be a more complicated route given that smart contract wallets are still brand new and if you do find a suitable investment, it may require jumping through hoops to find whitelist allocations, or launchpads that are offering those tokens. I would consider this more of a side project to keep informed about the developments, and potentially hop into one of the presales if it checks all the boxes.
Conclusion:
Given the early stages of this soon-to-be-massive narrative, it is difficult to identify specific investments that will lead the run up. Now is the time to dig deep and find the potential moon shots, and over the coming weeks I will be doing just that. Look for upcoming articles as I deep dive into top prospects and provide additional details into some hot Altcoin prospects for the Smart Contract Wallet narrative.
Stay safe out there and see you on the next one!
Sovereign Crypto
References:
- Credit to Jarrod Watts for an amazing technical article on EIP-4337
- EIP-4337 Techincal Overview
