63. What Is EIP-4337? Will Ethereum Account Abstraction Change Web3 Forever?
Account Abstraction (AA). This is the topic of our lesson today. This proposal completely removes changes to the consensus layer protocol. It does not add new features or change the transaction type. Instead, it introduces a pseudo-transaction object from a higher layer, called UserOperation.
For this whole process, we need to use ERC-4337. Of course, this is the Ethereum standard that makes such account abstraction possible. ERC-4337 appeared on the Ethereum mainnet in March 2023. The standard allows developers to transact and create contracts on a single contract account.
Like the Secret Garden, it opens the gateway to user-friendly cryptocurrency wallet projects, facilitating greater adoption of digital assets.
EIP-4337
Ethereum Improvement Proposals (EIP), are improvement proposals that describe certain standards. This could be a basic protocol specification or smart contract standards for the Ethereum network.
Ethereum Request for Comment (ERC) is a type of EIP that is responsible for defining application-level standards (contract and token standards). An EIP becomes an ERC only when validators approve such a change.
This is how EIP-4337 became ERC-4337, which is the latest ERC standard implemented on the Ethereum mainnet. ERC-4337 is a stepping stone to creating the long-awaited account abstraction. In this case, we use EIP-4337 interchangeably with ERC-4337 – both terms mean the same thing. However, you need to know that EIP-4337 was proposed in 2021 and was approved in 2023 as ERC-4337.
Discussing the highlights of today’s lesson, let’s further mention account abstraction. It moves digital assets into smart contract wallets. This is an improvement in wallet design, as such a wallet can be customized to suit all your needs, just with a smart contract.
What Is the ERC-4337 Standard and Why Do We Need It?
As we mentioned in the paragraph above, ERC-4337 was proposed in 2021, as EIP-4337. Its goal was to establish account abstraction. It was implemented on the Ethereum mainnet in 2023, already in the form of the aforementioned ERC-4337. A high bar was immediately set for it. This standard is expected to introduce user-friendly cryptocurrency wallets.
In the Ethereum network, account abstraction merges two existing accounts: an external account (EOA) and a smart contract account. This merger results in a single contract account that is capable of executing transactions and creating contracts at the same time. ERC-4337 provides high functionality of the wallet already at the level of smart contracts. It also facilitates the configuration of services such as multi-component authentication and automatic payments.
Now it’s time to answer a very important question – why do we need this new standard? Before the answer is given, let’s look at the Ethereum network itself. The protocol of this ecosystem uses an account-based model. What does this mean? That the protocol itself tracks and updates available account balances as transactions are confirmed.
You also need to know that there are two types of accounts in the ecosystem:
- External accounts (EOA), which are owned and controlled by users.
- Smart contract accounts, which are in practice smart contracts. They are also implemented on the network.
The common function of these accounts is that they can store and send assets. Most of the existing and known wallets, operating on the Ethereum network, are EOA wallets. So they are limited regarding private keys, signing of all transactions, etc. The configuration procedures of such a wallet and security measures are not user-friendly. Worst of all – losing the seed means losing access to the entire wallet. ERC-4337 is tasked with removing such a limitation altogether. Contract wallets are wallets managed by smart contract accounts. The new standard combines the function of two accounts, removing virtually all constraints.
Benefits of ERC-4337
First of all – decentralization. ERC-4337 enables account abstraction with all the features of decentralization. It prevents instability, has no single points of failure and is immune to censorship.
No hard forks. Thanks to its mempool structure, ERC-4337 can be adopted in any network. It does not cause changes to the consensus protocol.
Signature support. This is another feature of ERC-4337. The standard supports signature schemes that are more efficient and user-friendly (Schnorr, BLS, Lamport, Winternitz).
Gas abstraction. ERC-4337 allows users to have network fees paid with ERC-20 tokens, instead of ETH. Moreover, with this standard, we can request any third party to cover such fees in full.
What Does the New Standard Mean for New Users?
It solves all the complications associated with cryptocurrency wallets. No such problems equals increased adoption of digital assets. What else does the EIP-4337 make possible?
- Faster and more secure wallet setup. In this case, you don’t have to write down your seed phrase. Setup is quick and easy with just a few clicks.
- You can easily recover your account. Lose the seed? No problem! Multi-factor authentication and recovery of your account is now easily possible.
- A cryptocurrency wallet that is user-friendly. You can also personalize such a wallet easily. Automatic payments? Here! Pre-approval of transactions? No problem! These and other possibilities with ERC-4337 are endless!
- Improved safety. The ERC-4337 standard reduces the risk of human error. You no longer need to hide your seed phrase and fear losing your wallet if it gets into the wrong hands!
- Gas abstraction, otherwise known as gas flexibility. Any wallet that is powered by ERC-4337 allows you to pay gas fees with ERC-20, other tokens, and even fiat currency!
Summary
Let’s not kid ourselves – cryptocurrency wallets are problematic. And we’re not just talking about new users, for whom it can seem like alien space, but about even the more experienced ones.
Worrying about the seed phrase or private keys – many of us spend sleepless nights. Behind the scenes, we hear that the whole process should be more pleasant and simpler.
ERC-4337 arrives to do away with all that we mentioned above. The impact of this standard on users and their experience will be huge. It is definitely something worth paying attention to and following.