Account Abstraction Simplify Your Crypto World
Account Abstraction Simplifying Your Crypto World
On July 17th, at the Ethereum Community Conference (EthCC) held in Paris, Ethereum co-founder Vitalik delivered a keynote speech titled “The History and Future of Account Abstraction” and expressed his support for account abstraction wallets. In fact, this is not the first time he has advocated for account abstraction. In his blog in the earlier years, he stated that “account abstraction has always been a dream of the Ethereum developer community.”
So, what problems does account abstraction aim to solve? And what exactly does account abstraction abstract? This article will explore these questions in detail.
1. Starting with Ethereum’s account model
Before delving into account abstraction, we must first understand the basic Ethereum account model and understand the problems that current wallets face.
There are mainly two types of wallet accounts on Ethereum: externally owned accounts (EOA) and contract accounts (CA). Here is a comparison of the two:
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The wallets we are familiar with in our daily lives, such as Metamask, imToken, OneKey, etc., are all traditional EOA wallets controlled directly by a user’s private key.
Drawbacks of traditional EOA wallets
- High entry barriers
Cryptocurrency wallets are important gateways for users to enter the Web3 world, but they are not user-friendly for new users. Many people need to learn concepts such as private keys, public keys, addresses, and mnemonics, and may only use wallets after having a certain understanding. This is a high entry barrier for Web2 users who have long been in a single account/password system.
- Single security guarantee, high risk of asset loss
A user’s public key is randomly generated based on the private key, so there is a binding relationship between the EOA’s private key and public key. The private key is the only way for users to access the EOA. Whoever possesses the private key possesses the assets. If the private key is lost, it means that all the current assets associated with the EOA cannot be recovered. At the same time, if the private key is stolen for some reason, the user has no way to restrict it except to quickly transfer the wallet assets, otherwise the assets will be lost.
- Unable to achieve customized functions
EOAs have weak programmability and cannot achieve batch transactions, automatic fund withdrawals, or other customized functions for users. For example, if a user deposits ETH into Lido and wants to convert the obtained stETH to USDT, using a traditional EOA wallet for this operation would be a cumbersome process, greatly affecting the user experience. If a wallet that supports customized functions is used, the user only needs to make one transaction.
- Expensive and inflexible gas fees
Every transaction on the Ethereum network incurs gas fees, which makes the fees for small transactions very expensive, especially during network congestion. At the same time, users must hold ETH in their wallets at all times to pay for transaction fees and cannot use other currencies to pay for fees. These expensive and inflexible gas fees often cause troubles for many ordinary users.
The account abstraction technology that the Ethereum community developers have been exploring is aimed at solving the disadvantages of using traditional EOA wallets.
2. What does account abstraction abstract?
When we first hear the concept of account abstraction, we may wonder what exactly is being abstracted? In the context of the English language, “abstraction” also means extraction. “Extraction” means taking out the essence of one or two things separately, while discarding other burdensome things.
From this perspective, “account abstraction” is the extraction and integration of the functionality of EOA accounts’ ability to initiate transactions and the functionality of CA accounts, creating a new programmable and versatile account. As a result, we can discard the cumbersome private keys/mnemonics and log in to the account using simple identity verification methods such as email. At the same time, we can also achieve more customized account functions, more flexible gas payments, and even sponsorship by DApps.
From manual transmission cars to automatic transmission cars
If we explain the difference in user experience between using a traditional EOA wallet and using an AA (Account Abstraction) wallet, it is like transitioning from driving a manual transmission car to driving an automatic transmission car. When we learn to drive a manual transmission car, we need to understand the matching of different gears and speeds, the coordination of the throttle and clutch, and the shifting techniques, otherwise, there are risks of abnormal engine wear and stalling when we actually hit the road. However, driving an automatic transmission car is much simpler. Users only need to understand basic operations such as accelerating, braking, and parking in neutral, and it also adds many intelligent features that manual transmission cars do not have. In fact, this is the abstraction of complex operations in manual transmission cars by automatic transmission cars.
Account abstraction is similar. For users, it simplifies the original operations of the wallet and improves the user experience. Users don’t need to care about the underlying logic, they can just use it.
Operation principle of ERC-4337
Since Vitalik proposed the first account abstraction proposal EIP-86 in February 2017, the Ethereum community has iterated many specific ideas for account abstraction operations. However, these proposals were not comprehensive enough or required changes at the consensus level, which was not ideal for Ethereum. It was not until the proposal of EIP-4337 in September 2021 that it became possible to implement account abstraction without changing the Ethereum consensus protocol.
The EIP-4337 proposal was officially authorized as the standard ERC-4337 in March of this year, and developers can use this standard to build AA (Account Abstraction) wallets.
So, how to understand the operation principle of ERC-4337? When users initiate transactions with traditional EOA accounts, it can be metaphorically understood as sending the “transaction” to the memory pool (Mempool) and then waiting for block validators (Validators) to include it in the blockchain.
Under the ERC-4337 standard framework, users do not initiate transactions, but initiate “UserOperations”. We can liken it to a package because compared to a “transaction”, a “UserOperation” contains more information such as the sender’s address, identity signature, payer’s address, and more complex user instructions. Users first put this package in a dedicated package transfer station (UserOperation Mempool), and then it is organized and packaged by the station’s courier (Bundler) before being sent to the memory pool (Mempool).
Therefore, we can fully compare the operation of ERC-4337 to a process of helping users deliver packages.
Faced with so many packages, the courier (Bundler) in charge of the transfer station can choose to prioritize the packages of those who pay higher transaction fees, similar to how validators prioritize transactions. Once a bundle of packages (bundle transactions) is packaged, the courier does not directly put this bundle into the memory pool for two reasons: the instructions written in the package by the user have not been executed yet, and the hardworking courier has not received the money yet.
Because the transaction fees paid by users are not directly given to the courier, but are still in their own smart contract wallet. In order for the courier to receive this money, they must first invoke the EntryPoint smart contract, which we can liken to an entry execution machine. Only when the user’s package enters this machine will the machine automatically transfer the money from the user’s smart contract wallet to the courier.
So, what does this entry execution machine do to the package internally? First, the machine will open the package internally and verify whether the user’s identity and the estimated amount of money the user has stored are sufficient to compensate the courier’s fee. If the verification passes, the machine will pay the user’s transaction fee to the courier, distribute the user’s instructions for execution (regardless of whether the execution is successful or not, a tip will be paid), and return any excess transaction fee to the wallet. If the verification fails, the package will be discarded.
When the machine pays the courier, there is another situation. If the user’s package includes the address information of the payer, the execution machine will check whether the corresponding payee (LianGuaiymaster) has stored enough money in a dedicated place. If there is enough money, the user does not need to pay this fee. Because of the existence of this function, in practical application scenarios, DApps can sponsor Gas to gain user favor, or users can use other ERC-20 tokens to pay the payer to achieve flexible Gas fee payment.
However, it is worth noting that the courier needs to pay for starting the entry execution machine, and the process is irreversible. Regardless of how many valid packages there are in the end and whether the estimation of the fee by the entry execution machine is accurate, the courier’s money will not be refunded. Therefore, to avoid losses, smart couriers will use a device similar to the entry execution machine to simulate the entire process before letting the packages enter the real machine, in order to estimate whether the fee they receive in the end is sufficient.
Thus, under the ERC-4337 standard framework, the account abstraction has been successfully implemented, not only without changing the underlying protocol of Ethereum, but also enabling accounts to achieve complex functions such as batch transactions, social recovery wallets, and gas fee subsidies.
3. AA Wallet based on the ERC-4337 Standard
Different Wallet Solutions
Prior to the adoption of ERC-4337, there were other solutions on the market to address the drawbacks of traditional EOA wallets: Contract Account (CA) wallets and Multi-Party Computation (MPC) wallets. Below, we will briefly introduce these two types of wallets and compare the advantages of Account Abstraction (AA) wallets.
- Contract Account (CA) Wallets
Essentially, it is a contract. Multi-signature wallets are the most common type of smart contract wallets, where users deposit funds into the smart contract and it is controlled by multiple EOA accounts. All transactions are executed through the contract. Because the contract has logic, it can securely control assets. Such wallets have limited use cases for individuals, but are very effective for companies and organizations. Examples include Gnosis Safe and other wallets. Of course, there is another type of smart contract wallet that does not use the ERC-4337 standard but achieves similar account abstraction functionality through other technical means, such as Argent.
- Multi-Party Computation (MPC) Wallets
Multi-Party Computation (MPC) wallets refer to the distribution of the control of an EOA’s single private key into smaller fragments held by multiple parties. When conducting transactions, the fragments are combined together. Because the private key is distributed across different servers, it is more secure. Examples include Fireblocks, ZenGo, and other wallets.
- Comparison of Different Wallet Solutions
In order to intuitively compare the differences and advantages of different wallet solutions, we divide wallets into MPC wallets, multi-signature wallets, ERC-4337-based AA wallets, and non-ERC-4337-based AA wallets.
From the above comparison, it can be seen that ERC-4337-based AA wallets are overall superior to other types of wallets in terms of usability, security, and functionality.
Inventory of ERC-4337-based AA Wallets
In May of this year, uniLianGuaiss and hardware wallet Keystone announced a merger to form Account Labs, focusing on the direction of account abstraction and jointly developing Web3 account abstraction solutions. The CEO of Account Labs is Liu Lixin, the founder of Keystone, and the former founder of uniLianGuaiss serves as the COO.
uniLianGuaiss has already implemented features that allow users to log in and recover wallets using social methods, and allows flexible payment of gas fees. It is currently compatible with ERC-4337 and has revealed plans to further upgrade uniLianGuaiss in the second half of this year, accelerating the realization and implementation of account abstraction capabilities.
- Echooo Wallet
Echooo Wallet is an AA wallet built on the ERC-4337 standard, combining MPC and AI technology. It supports multiple functions such as multi-signature and social recovery. Echooo Wallet was founded in 2022 and completed a $15 million financing with a valuation of $100 million on July 17. A&T Capital and others participated in the investment. On the same night, it launched the “limited-time claim of AA wallet” activity, attracting attention.
- OKX Web3 Wallet
Currently, OKX’s AA smart contract accounts can be easily created in the new version of the OKX app, and various functions such as flexible payment of gas fees, one-click DEX exchange, one-click DeFi mining, and one-click batch NFT listing have been implemented. In order to incentivize users, a limited-time gas-free activity has also been launched, with a maximum reward of 5U.
IV. Reflection and Conclusion
In Vitalik’s vision, he hopes to make managing cryptographic wallets as simple as managing email accounts through account abstraction. The vision of account abstraction is indeed very attractive, and some supporters even believe that a successful AA wallet will attract a large number of Web2 users to the cryptocurrency industry and promote the emergence of new ecosystems.
However, in the cryptocurrency world, the more something is hyped, the more we need to analyze it calmly. According to data from Dune, although the mechanism of ERC-4337 is quite mature, some on-chain Bundlers have still suffered high losses this year. As shown in the chart, except for the considerable Bundler income on Optimism and Ethereum in July, there is no significant gain on other chains.
In the value logic of blockchain, all actions are regulated by objective incentive and punishment mechanisms. If the high losses of Bundlers cannot be effectively resolved, it will obviously weaken the initiative of their behavior, which is detrimental to the overall operation of the system.
Another question worth considering is whether AA wallets can lower the threshold for users to use wallets, but does it necessarily attract more users? In the “2023 Cryptocurrency Wallet Report” released by imToken, a survey was conducted on 180 cryptocurrency users, and it was found that 63% of users prefer to use exchange-hosted wallets because they are cheaper, more convenient, and have less risk of funds being stolen by hackers.
AA Wallet may be able to attract users of custodial wallets such as exchanges, but it may not necessarily attract more Web2 users to join the crypto industry on its own. From the success of previous DeFi, NFT projects, or applications like StepN, we can see that what attracts Web2 users is either specific use cases that address certain pain points, or strong wealth effects. Improving the user experience of wallets is indeed a bonus, but whether it can play a role in helping during the current bear market is still uncertain.
Therefore, if we really want to achieve the desired effect of account abstraction, it requires not only the efforts of AA Wallet, but also the efforts of AA’s ecosystem, from the application layer to the infrastructure.
Let’s wait and see.
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