Account Abstraction (AA) is a technology that expands the capabilities of cryptocurrency wallets, provides a high level of security, and enhances user experience. The ERC-4337 standard, introduced in March, implements the concept of AA, allowing wallets to be transformed into smart contract accounts. Many developers believe that widespread adoption of this technology will accelerate the transition from Web 2.0 to Web3 and attract a multitude of users to the Ethereum network.
Contents:
- What is Account Abstraction?
- How Does Account Abstraction Work (AZE)?
- What Opportunities Does AZE Open Up?
- How Does Account Abstraction Improve Wallet Security?
- How Does AZE Improve User Interaction?
- What Stage is the Implementation of Account Abstraction in?
What is Account Abstraction?
Account abstraction is a strategy for configuring a blockchain network in which users' financial resources are stored in smart contracts rather than external owned accounts (EOAs). Under this approach, a typical cryptocurrency wallet is transformed into a unique smart contract that can be programmed for various purposes.
In March 2023, Ethereum introduced the ERC-4337 standard, implemented through the EntryPoint smart contract. This standard, successfully audited by Open Zeppelin, introduces account abstraction to the Ethereum network as well as to Polygon, Optimism, Arbitrum, BNB Smart Chain, Avalanche, and Gnosis Chain. It allows the transformation of user wallets into smart contract accounts, making addresses more convenient and protecting against key loss.
The ERC-4337 standard integrates into the blockchain infrastructure without modifications and aims to address the limitations of user interaction with Ethereum. It streamlines batch transaction processing and eliminates the need to hold a large amount of ETH in wallets for fee payments. This approach enhances account security, improves user experience, and expands opportunities for developers.
How Does Account Abstraction Work (AZE)?
According to the description in the ERC-4337 standard, the key components of AZE are:
- UserOperation
- Bundler
- Sender
- EntryPoint
- Paymaster
- Aggregator
These components work together to provide Web3 developers with the ability to create smart contract-based wallets that easily interact with the new ecosystem of decentralized applications (dApps).
Component Description UserOperation A structure that describes user actions in the system. It contains parameters such as sender, recipient, call data, gas fee, and more. It enables programmatic authentication of transactions. EntryPoint A contract for verifying and processing UserOperations received from Bundlers. It checks the sender's funds for gas payment and interacts with the account using calldata. Bundler A specialized bundler that combines user operations into a complex transaction and directs it to the EntryPoint contract. It receives compensation for this process and gas fees. Aggregator An auxiliary contract for verifying aggregated signatures. It optimizes the processing of UserOperation batches and saves resources when working with calldata. Paymaster A smart contract based on ERC-4337, providing flexibility in gas usage. It allows paying fees in various cryptocurrencies, including stablecoins, and enables sponsorship of gas fees.
ERC-4337 combines concepts from previous EIPs, specifically EIP-2938 and EIP-3074. EIP-2938 introduced the concept of transforming smart contracts into "first-class accounts" capable of paying fees and initiating transactions. This approach was developed by Vitalik Buterin, one of the co-founders of Ethereum, among others.
EIP-3074 introduced the idea of "delegating control of an external address (EOA) to a smart contract."
ERC-4337 incorporates key concepts from both previous EIPs while complementing them with the creation of an alternative mempool. This allows the new standard to be used without changes at the consensus level.
What Opportunities Does AZE Open Up?
Vitalik Buterin presents account abstraction as a catalyst capable of attracting a massive number of users to the Ethereum ecosystem. He believes that implementing this technology will open doors for fee payments not only in ETH but also in other cryptocurrencies chosen by the user for transfers. Furthermore, this extension will enable decentralized applications to effectively "sponsor" transaction fees for their users.
Using the "signature abstraction" technology, rollup developers will be able to combine signatures, significantly reducing gas fee costs.
Additional benefits include:
- Enhanced security methods that offer new possibilities.
- Account recovery options in case of key loss to enhance user security.
- Combining different transactions, allowing the bundling of stages, such as confirmation and execution of exchange operations, in one click.
- Extensive tools to improve wallet and application developer experiences, as well as user interfaces.
- Transaction scheduling and batch processing for process optimization.
- The ability to pay gas fees with stablecoins.
- Alternative transaction signature methods for more flexibility.
- Automation of operations, including rebalancing of investment portfolios and dollar-cost averaging strategies.
However, the implementation of AZE comes with certain challenges. After converting user accounts into smart contracts, it is necessary to ensure the stable operation of the function in second-layer networks. There are also potential issues with integrating biometric technologies and wallets, as stated by Buterin himself.
How Does Account Abstraction Improve Wallet Security?
In today's environment, the security of users' funds directly depends on the reliability of private key management and associated seed phrases. Any unauthorized access to these valuable data gives malicious actors complete control over cryptocurrency assets.
This situation means that in case of losing a private key, access to digital assets is lost forever—either they go to the attacker or remain inaccessible. It's clear that there are widespread phishing attempts in the network aimed at uncovering seed phrases.
The principle of account abstraction helps address this problem by using smart contracts to manage assets and authorize transactions, significantly improving user convenience as well.
For example, additional backup keys can be created in case of potential loss of primary ones. Additionally, the storage of wallet data can be delegated to trusted parties, increasing the complexity for potential attackers trying to gain full control over a user's funds.
This system can also organize scenarios where small transactions are approved by a single signer, while larger ones require multiple signatures.
Smart wallets offer the following capabilities:
- Creating "whitelists" of trusted addresses for receiving cryptocurrency, enhancing asset protection in case of private key theft.
- Freezing an account from another authorized device if the primary device for storing digital assets is lost.
- Adding pre-approved accounts that can authorize new devices in case of old device loss or password reset (the "social recovery" process).
- Setting limits on the amount of transfers from an account within a day, week, or month.
Thus, using account abstraction technology and smart contracts enhances the security and convenience for cryptocurrency users, providing them with more reliable tools to manage their digital assets.
How Does AZE Improve User Interaction?
Account abstraction implies the integration of wallets through smart contracts at the protocol level, allowing developers to experiment with improving user interaction (UX).
One obvious way to enhance UX is to group transactions to increase operational speed and efficiency. This enables users to complete token exchanges on a DEX and approve expenditures with a single click.
Users no longer need to worry about having enough ETH for gas fees. When necessary, a smart contract will automatically exchange tokens for ether and use it to pay fees.
This abstraction also opens the door to trusted sessions, useful in gaming applications where multiple small transactions require quick approval.
Optimizing the purchasing process is another advantage of account abstraction. It will make the experience similar to interacting with traditional marketplaces, allowing users to add items to a "cart" and purchase everything with a single click, with the smart contract handling intermediate transactions and approvals.
What Stage Is the Implementation of the Account Abstraction System At?
Currently, active attention is being devoted to the development of wallets based on smart contracts. New developments prioritize security and enhancing user experiences.
In early March, the development team behind the platform for managing digital assets, Safe (previously known as Gnosis Safe), introduced a developer toolkit (SDK) that is already available for use on various blockchain networks.
This innovative product, named Safe{Core}, offers the option to use social media account-based authentication as an alternative to traditional cryptocurrency storage methods using public and private keys.
This tool was developed in active collaboration with major payment provider Stripe, as well as Web3 infrastructure providers Gelato and Web3Auth.
In July, ERC-4337 was integrated into the account abstraction of Safe{Core} developers version 1.4.1.
Representatives of the Safe project noted that the new ERC-4337 provides a more user-friendly interface, including features such as formless login, social recovery, batch transactions, hybrid storage customization, and other enhancements. Additionally, authorization-related solutions are also in development by projects such as Alchemy, Starkware, and ConsenSys (MetaMask Snaps platform).
