The ERC-4337 standard is fresh in the world of cryptocurrencies.
Simply and briefly put, ERC-4337 is a new standard for cryptocurrency accounts that use smart contracts. It offers completely different functions than the smart wallets we have known so far. ERC-4337 is influencing the entire Ethereum ecosystem quite a bit.
What is ERC-4337 actually? How does it work, and what are its functions? Are they really that different from smart wallets? We invite you on a journey through the ERC-4337 standard today!
What is the ERC-4337 standard?
ERC-4337 is the so-called Smart Wallet standard on the Ethereum blockchain. The concept itself originated back in 2021, but availability for use was only announced in March 2023 during WalletCon in Colorado. That is why we mentioned at the beginning that the topic of the ERC-4337 standard is relatively young.
The technical definition of ERC-4337 is quite complex. The standard allows us to create a new Ethereum account that can have any verification logic. It can be implemented on any blockchain, of course compatible with the Ethereum Virtual Machine (EVM).
Sounds complicated? Here’s a simpler definition: the ERC-4337 standard allows us to perform complex actions directly from our wallet. A wallet using the ERC-4337 standard does not rely solely on the possession of private keys, but opts for a smart contract solution.
This enables a better user experience, as the user can determine how transaction fees are paid, for example.
How does the ERC-4337 work?
The ERC-4337 smart wallet injects data containing certain information and enabling certain functions into the Ethereum ecosystem.
We are talking about the ‘UserOperation’ function. The user who initiates this function sends it to the so-called mempole, where transactions come in for approval. In the case of ERC-4337, it is a thoroughly different mempol than the one used to process transactions on the Ethereum core network.
In the Ethereum ecosystem, all transactions must be initiated and paid from an external account (EOA). Using a separate mempol allows users to bypass these rules without affecting the main Ethereum network. Mempol also has different requirements than the mainnet. This means it has more flexibility in the details of its transactions.
Unfortunately, there are still fees to be paid for UserOperations through the EOA. However, with ERC-4337, it does not have to be the same user who commissioned the transaction in question. This makes the whole process more efficient and faster and minimizes fees for users.
Account abstraction – what is it, and how does it relate to ERC-4337?
When we mention the new Ethereum standard, we need to take a moment to look at account abstraction. It allows people to use smart contracts as their main accounts. In practice, this creates smart wallets.
Account abstraction is responsible for important things that are particularly relevant to the user of a particular account:
- It enables most functions to be performed already from the wallet.
- Such a wallet determines itself how high the transaction fee is and who pays it.
- The account abstraction also takes care of more extensive security functions.
- It configures transactions that require multiple signatures.
- Very importantly, it enables data recovery without centralized assistance.
- It allows quantum-secure cryptography, which means that even a quantum computer will not be able to hack the system!
ERC-4337 and Account Abstraction – the main differences
The ERC-4337 standard allows us to perform many functions and gives us more flexibility in who pays the transaction fees. Yet, this standard does not achieve true account abstraction.
So, what is all the fuss about the ERC-4337 standard? It is essentially a transaction relay. It allows users to organize transactions in an off-chain order book outside the blockchain and then pass the final transaction to the blockchain.
A true account abstraction offers many more features. It changes the way externally managed accounts interact with the Ethereum blockchain.
It will be some time before this functionality is included in the ERC-4337 standard. Nevertheless, ERC-4337 is an important step and goes in the right direction.
ERC-4337 – what is it used for?
- Allows us to perform multiple actions in a single transaction.
The ERC-4337 standard permits us to combine multiple transactions. This allows you to validate, initiate and execute your transactions with a single click. Moreover, this is made possible by combining multiple functions into one and is ideal for users who need to sign multiple transactions just to complete one action.
- The ERC-4337 allows us to perform a single transaction with multiple people.
Firstly, with the ERC-4337 we can quickly sign a transaction that requires multiple signatures – for example, from you and another user. This is possible even before the transaction is approved.
ERC-4337 also enables so-called sponsored transactions. What does this mean? That an entity such as a dApp or a wallet provider can pay the transaction fee for you.
- The new standard affects the user experience.
It will make blockchain subscriptions possible. And why? Because the new standard enables the processing of automated and recurring payments. So, you can set up a recurring payment to an online shop with this standard.
- ERC-4337 improves and enhances security.
The standard we are talking about today allows us to define rules for expenses, or how they are approved. For example, with ERC-4337 you can limit the amount you spend on monthly subscriptions.
It also allows you to set up more complex methods of accessing your funds, requiring 2FA or a hardware wallet signature for transactions that exceed the amount you set.
As mentioned in the paragraph above, ERC-4337 can help you recover your wallet. If you lose access to your account, smart wallets will allow you to recover it using Social Recovery. With the ERC-4337 standard, you can do something similar, but in a more decentralized way.
Security of smart wallets
It’s true that a smart wallet has more features than a traditional wallet. However, it still contains your valuable digital assets, so it should be secured accordingly.
The first thing you should do is configure your smart wallet with a hardware wallet. A hardware wallet keeps your private key away from the internet and its threats. This is a good way to protect your smart wallet from cyberattacks. Combining your hardware wallet with a smart wallet is a great way to protect your assets!
Summary
- The ERC-4337 standard increases the functionality and usability of Ethereum without changing the core protocol.
- ERC-4337 transactions are called UserOperations. They enable advanced options for cryptocurrency transactions.
- ERC-4337 allows fees to be paid with ERC-20 tokens.
- The standard is available on Ethereum Virtual Machine compatible networks: Polygon, Avalanche or even Arbitrum.
- The standard enables automatic approval of transactions. You no longer have to do this manually as with most wallets.
- ERC-4337 enables the use of smart accounts, which are more user-friendly, especially for inexperienced users.
- The standard allows transactions to be signed biometrically by fingerprint or face scan. This speeds up the entire process.
Bring your knowledge up to date!
Security in the crypto market – what rules to follow? [BASIC LEVEL]
What is a smart contract? [BASIC LEVEL].
What is the Ethereum Virtual Machine (EVM)? [MASTER LEVEL]
