The Next Billion Users: Exploring ERC-4337 Account Abstraction — Part 1
ERC-4337 launched in March, introducing the utility of Account Abstraction into the Ethereum and EVM ecosystem. Many celebrated it as “the update that would onboard the next billion users into the blockchain ecosystem”. But what actually is account abstraction? Is it really the key to the next billion blockchain users and what does it truly enable? In this content series we will answer these questions while also looking at why Eden Network is so excited by the potential this upgrade holds.
In fact, we are so excited that we have already started to develop tooling to support it.
What is Account Abstraction?
Introduction
Account Abstraction (AA) is a method of authentication that eliminates the need for private and public keys to access accounts. Instead, it relies on smart contracts to verify the account’s identity. Similar to Web2 websites and apps, data abstraction hides all technical complexity and makes everything run smoother for a superior and natural user experience.
Stepping Back From Today to See the Impact of Tomorrow’s Change
If you’re currently reading this article, chances are you’re already a seasoned blockchain user, and interacting with DeFi apps or minting NFTs has become second nature to you. However, when it comes to introducing others to the crypto world, they may quickly zone out or become overwhelmed by simply just getting started. Add on top concepts like seed phrases, private keys, gas auctions, hot and cold wallets, and other technical details can be confusing and intimidating for the uninitiated.
It’s not surprising that the majority of the planet have not even attempted to enter the crypto world.
Even amongst today’s users, the majority stop at popular exchanges like Coinbase or Binance, and can we really blame them? Storing seed phrases and private keys on paper or hardware wallets can sound scary, one piece of paper away from losing large sums of money. Add to that the need to understand and navigate gas auctions, transaction approvals, and other technical details, and it’s easy to see why the average person might feel discouraged from exploring the world of blockchain.
Imagine a world now where you tell that exact same friend that they can log in or sign up to your favorite dapp using their Google account, just like they would for any other website or app. There’s no need to worry about storing private keys or seed phrases, as users can recover their wallet through 2FA, just like their Gmail account. And the technical details of gas auctions and other operations are abstracted away, so users can focus on enjoying the benefits of blockchain in the same way they use the rest of the internet.
That is what Account abstraction (ERC-4337) enables. Instant access to Web3 dapps, apps, and games with an order of magnitude less complexity for the average person.
To contextualize the true impact of account abstraction and why it enables the above, it is helpful to first look at how Ethereum works today.
Ethereum’s Status Quo
Today, Ethereum has two types of accounts: Externally Owned Accounts (EOAs) and Contract Accounts. EOAs are controlled by private keys and interact with contract accounts to perform transactions. Contract accounts, on the other hand, are controlled by the code deployed on the network.
This structure however, has limitations. For one, it requires users to manage their accounts and private keys manually with no path to recovery if lost or compromised. This is a very real problem with misplaced seed phrases responsible for an estimated loss of 20% of all bitcoin in circulation.
Additionally, it imposes a fixed transaction format, which can be restrictive for certain applications as it requires users to pay gas in specific tokens and approve every transaction individually.
This all results in a confusing and clunky user experience where the learning curve is extremely steep. New users cannot take advantage of existing acquired online habits and behavior, and apply it to blockchain-focused websites and applications.
In the words of Ethereum Foundation security researcher, Yoav Weiss, “The next billion users are not going to write 12 words on a piece of paper. Normal people don’t do that …. We need to give them better usability, they shouldn’t need to think about cryptographic keys.”
Account Abstraction was specifically built to solve this as well as many other similar onboarding issues.
How Does Account Abstraction Improve This?
Account Abstraction unifies EOAs and Contract Accounts by making user accounts programmable. It enables the ability to remove the logic of signing transactions from the account and abstract it out.
This opens up numerous possibilities. It’s now possible to add custom logic to accounts like 2FA, social recovery, gasless transactions, transaction bundling, and connection with external services, to name a few.
Account Abstraction can be compared to the evolution from the Bitcoin blockchain to Ethereum. Bitcoin introduced us to the storage and transfer value without the need for a centralized third party. Ethereum built upon bitcoin’s fundamentals, where along with the storage and transfer of value, it made blockchain programmable, allowing applications to live and function on top of the chain.
AA will do for wallets and accounts, what Ethereum did for blockchain composability. More dynamic, compatible and user friendly products, while still maintaining the core tenet of self custody.
Why is This so Relevant Now?
While it is the blockchain with the largest user base and network effect, some fundamental issues still exist on Ethereum that prevent it from being ready for true mass adoption. The recent launch of Layer 2 solutions such as Arbitrum and Optimism, addressed some of these issues in cost, speed and scalability. Layer 2 solutions have taken transaction fees down to a point that it makes sense for the average person to transact on blockchain while still maintaining the security guarantees of Ethereum mainnet.
Ethereum’s economic model is finally ready for the next wave of rational user adoption.
Making user onboarding and experience is the next big challenge, which account abstraction has been designed to solve.
As Julien Nisel from Argent pointed out, “account abstraction is really about scaling the user experience (UX) of self-custody.”
What Actual benefits Does it Bring?
The implementation of AA creates the value opportunity at the contract or protocol level, but to extract that value opportunity we must now build on top of it.
Potential Benefits for the Average User
By removing signature verification logic from the protocol and allowing different account contracts, AA enables these potential application-layer features:
- Easy, instant and familiar account creation: Onboarding can now be similar to online services using email or social accounts (e.g, Google, Apple ID).
- Integrated frictionless mobile compatibility: No need to swap in between apps, wallets or browsers. AA means users could now sign in to their wallet using a browser like Google Chrome and verify or execute transactions with FaceID or fingerprint.
- Simple and reliable account recovery: Users can set up social recovery, reducing reliance on seed phrases if keys are lost or forgotten.
- Enhanced security: Multi-factor authentication creates familiar, flexible and enhanced account security. Note: we use the phrase 2FA as it’s most common, but users could set up 5FA if they wanted.
- Permission controls: Users can create different account types with customized roles, subscriptions, spending permissions and limits. For instance, any spend over $1000 requires multi-factor authentication.
- Fraud monitoring: Transactions can now be simulated before execution, warning users of compromised addresses.
- Non-signed gas fee payment: Paymasters can now sponsor a transaction on behalf of users or natively take payment of any ERC-20 tokens (such as USDC) in exchange for paying for the user’s gas.
Benefits for the Protocol
By creating a separate execution scheme on the protocol, we have flexibility utilize various payment models:
- Sponsored gas fees: To encourage adoption, dapps, wallets, and services can sponsor gas fees for users e.g., account creation and initial usage. Imagine an NFT card game that makes your first mint and pack opening for free without having to sign wallet permissions — just click and mint for free.
- Bundle transactions: Transactions can be bundled to save on gas fees.
- Streamlined payments: Programmable accounts enable scheduled payments for crypto-native one step Face ID subscription services, event-driven flows for automated trading, and more.
Eden Network’s Outlook and Commitment
As a team and community of crypto native users, we have adapted to complex onboarding and user interfaces, and we take the technical knowledge required for blockchain-based websites and dapps for granted. For the average user, this complexity is simply overwhelming and too high a barrier to entry in order to use and see the benefits blockchain brings.
Account abstraction became part of Ethereum’s execution layer in March. It unlocks the potential to create a user experience that harnesses the power of learned online behavior with an order of magnitude lower barrier to entry. Now that the potential exists, it is time to build and realize it.
Eden Network is dedicated to advancing the blockchain industry through research, education, and practical tooling. Today, we are actively working on building out robust infrastructure tooling to fully support the implementation of ERC-4337. Follow us on Twitter or join our Discord to be the first to hear about this new product set.
If you are a team or individual building for account abstraction, we want to hear from you and see if we can collaborate. Please reach out on Discord and send our partnerships team a message.
