March 6, 2023

Ethereum Account Abstraction: All you Need to Know

Account abstraction is a proposal to increase flexibility in the management and behavior of Ethereum accounts. Read this blog to know Ethereum account...

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Introduction

Have you ever wondered about new methods of increasing the adoption of the Ethereum blockchain? Ethereum account abstraction may be the answer.

Ethereum account abstraction is a new way of representing users on the ever-popular Ethereum blockchain. Ethereum account abstraction allows for a more user-friendly experience when interacting with decentralized applications (DApps).

Ethereum account abstraction is set to change how wallets in Ethereum work, providing users with more autonomy and flexibility. According to Yoav Weiss, a security fellow at the Ethereum Foundation, the feature could work in different ways for different users.

For example, Ethereum account abstraction may work in a way so as to help you recover your wallet account when you lose your password. For experienced users, the new feature could offer more control and flexibility to their accounts.

In this post, we will explore Ethereum account abstraction, how it works, and why it is a significant development for the Ethereum ecosystem.

What is Ethereum Account Abstraction and ERC-4337?

Ethereum accounts can be either Contract Accounts or Externally Owned Accounts (EOAs). Contract accounts are smart contracts that are controlled by the contract’s code, while Externally Owned Accounts are controlled by public and private keys.

Over the years, EOAs have had several disadvantages over Contract Accounts. The process of performing your first action on a DApp, right from signing a transaction with your EOA, is too long and cumbersome. EOAs have also proved very risky when people lose their private keys.

Ethereum Account Abstraction aims to solve this very same problem. The idea of account abstraction is to enable users to utilize smart contract wallets rather than EOAs. Smart contracts are codes that prompt the contract to self-execute once all conditions are met, so you can implement many changes to your wallet according to your code, increasing your flexibility.

After a host of inactive Ethereum Improvement proposals (EIP), ERC-4337 was agreed upon and implemented due to its non-requirement of consensus layer tweaks to the Ethereum protocol itself. It was instead implemented by simply adding a smart contract as a layer above Ethereum’s mainnet. There will be more upgrades done both at the ERC and EIP level later, considering the network has more important priorities to focus on in the immediate future. As soon as this feature is upgraded optimally, it will eventually be integrated into the protocol layer.

How does Ethereum Account Abstraction Work?

Ethereum account abstraction works on the basic concept of smart contracts. This feature will allow users to create and manage their accounts more securely and efficiently by aiming to transfer user authentication from the network to the smart contract and give wallet creators control over how to authenticate users. This smart contract will act as a user’s account manager.

The smart contract will be able to create new accounts, manage existing accounts, and transfer funds between accounts. The smart contract will also handle multiple signatures for each account. This will allow for more security and efficiency when managing accounts on the Ethereum platform.

Now, let’s see how ERC-4337 finally came about after a host of inactive or still-processing Ethereum Improvement Proposals.

What are the Proposed EIPs for Account Abstraction?

Here are the many EIPs that were proposed for Ethereum account abstraction before ERC-4337.

1. EIP-86 (Status: inactive)

The first EIP (Ethereum Improvement Proposal) aiming at account abstraction was EIP-86, proposed in 2016. The EIP-86 recommended introducing improvements that would abstract out signature verification and the nonce method after an initial proposal to build a security abstraction. These modifications would enable users to construct ‘account contracts’ that may be designed to handle transactions using any signature or nonce scheme rather than being hard-coded to adhere to the conventional methods.

The EIP-86 would have converted all accounts into contracts, enabling them to pay gas fees and authorizing users to make their own decisions regarding the security model. Users would have stored their ETH in contracts under the EIP-86.

2. EIP-2938 (Status: inactive)

Under EIP-2938, it was proposed to divide account abstraction (AA) into two categories: single-tenant AA, which was meant to support wallets or other use cases with a small number of participants, and multi-tenant AA, which was meant to enable applications with a large number of users.

EIP-2938 came about because of several limitations existing at that time in terms of Ethereum account abstraction, and to include smart wallets that used other signature verification than ECDSA and those which had multisig verification or social recovery features. It was also an attempt to increase the gas efficiency of DeFi protocols.

A new kind of transaction called “AA transactions” was also introduced, with two new opcodes.

3. EIP-3074 (Status: in Review Stage)

EIP-3074 took a slightly different path by adapting EOAs, instead of trying to convert smart contracts to EOAs. “Sponsored transactions” were the primary driving force behind this EIP. This occurred when an account other than the one that made the call provided the fee for a transaction.

It allowed users to shift control of their EOA to a smart contract, giving developers a flexible platform to create new transactional models for EOAs. Any EOA could behave like a smart contract wallet without using a contract. Moreover, it allowed customers with EOA accounts the advantages of account abstraction without forming new accounts or moving their assets.

4. EIP-4337 (Status: Likely to be Changed Before Activation)

Finally, the EIP-4337 was proposed for the complete removal of EOAs and replacement with smart contracts. The most beneficial factor of the EIP-4337 was that it did not require any consensus changes to the Ethereum network. Decentralization was also one of the major proponents of EIP-4337, with users not needing to be aware of the direct communication addresses while working with all activity occurring over a public mempool.

EIP-4337 also does away with the requirement for sending transactions, substituting it with a set of UserOperations. The ability to utilize smart contracts as your wallet opens up a world of opportunity, and EIP-4337 is the most recent account abstraction proposal that doesn’t call for a modification to the consensus layer.

Why do Certain Upgrades Need EIP on Top of ERC?

You may be wondering why upgrades also need so many EIPs on top of ERCs. When it comes to certain upgrades on the Ethereum network, developers may opt to create what’s called an Ethereum Improvement Proposal, or EIP. An EIP is a standard format for proposing improvements to the Ethereum network.

While an EIP is not required for every upgrade or change, it is generally seen as a good practice, as it allows for community feedback and discussion around the proposed change.
Through an EIP, the network will be able to bring a more advanced, sustainable, and comprehensive form of an intended feature for its vast ecosystem, creating standard practices and documents on the way for the developers to follow

EIPs are also important because they allow the Ethereum community to come to a consensus about protocol upgrades before they’re implemented. This process helps to ensure that upgrades are compatible with the rest of the network and don’t cause any major disruptions or forks,

👉Want to know about the key processes of Ethereum? Check the article on Ethereum Merge

What are the Use Cases of Ethereum Account Abstraction?

The use cases of Ethereum account abstraction are listed below:

1. Wallets

Presently, a self-custodial wallet requires simultaneous approval of every transaction, but with Ethereum account abstraction, transactions may be planned either in accordance with event-driven flows or with a time delay. This would let you set up regular payments on a self-custodial wallet.

Account abstraction has also been termed the future of wallets, with sophisticated security features like multi-sig and smart recovery, as well as the ability to change keys without changing wallets due to account abstraction. Account abstraction is also likely to make Web3 accessible to everyone through a more user-friendly interface and also for a contract that requires multiple signatures or to create a contract that can be used by multiple parties.

2. Sponsored Transactions

Account abstraction will make it possible for organizations or their affiliates to carry out a variety of transactions, including paying fees on behalf of users and letting users pay gas fees using ERC-20 tokens that will then be converted and sent as ETH to the blockchain.

One of the main hurdles for new crypto users may be eliminated if DApp developers decide to subsidize the transaction costs as part of their onboarding procedure. To test out the majority of DApps, prospective users now need to visit a centralized exchange, wait for KYC, buy Ethereum, and then transfer it to their wallet.

3. Meta-Transactions

Users can engage with a smart contract without having to pay for gas expenses by using meta transactions, sometimes referred to as “gasless” transactions. Although the expenses in gas costs may easily pile up, this can be especially helpful for applications that need users to make frequent or modest transactions.

Users can accept meta-transactions (gasless) and pay for gas without having to believe in a relayer, thanks to Ethereum account abstraction.

Conclusion

We’ve finally reached the end of this article, and we do hope the concept of Ethereum account abstraction is clearer to you, along with its working, the benefits of smart contracts over EOAs, and the various EIPs for account abstraction. The several use cases of Ethereum account abstraction were also outlined, which are only expected to grow in the near future.

Ethereum Account Abstraction is an exciting development that has the potential to improve the security and usability of Ethereum-based applications greatly. The benefits of this are immense, and with proper implementation, Ethereum account abstraction has the potential to drastically change the way we interact with Ethereum-based applications, and more importantly to help onboarded more users to Web3

Frequently Asked Questions (FAQs)

1. What is Account Abstraction in Ethereum?

Ethereum Account Abstraction aims to replace EOAs in Ethereum with contract accounts and enable users to undertake transactions through their smart contracts. Account abstraction results from “abstracting out” the logic of signing transactions from the account.

With considerably greater flexibility, you might program an account to support multi-signature, two-factor authentication, withdrawal limitations, and key expiration. Ethereum account abstraction plans to make Ethereum accounts much safer. It is also expected to drive up the adoption of Ethereum, and crypto in general.

2. Is Ethereum Account Abstraction the Next Massive Change for the Network?

Ethereum Account abstraction is a promising feature that could have a significant impact on the Ethereum network. Despite the fact that account abstraction has been discussed since Ethereum’s infancy, several workable implementation suggestions are now emerging.

Ethereum Account Abstraction will undoubtedly provide direction on what is feasible when we consider the design of the next generation of wallets. It is the most likely route to bring about a significant UX improvement so that Ethereum can drive the broad adoption of cryptos.

3. What is EIP for Account Abstraction?

The term “EIP” refers to an Ethereum Improvement Proposal, which is the primary mechanism used to make updates and decisions on the Ethereum blockchain. There are a few EIPs that have been put out to address the account abstraction difficulties, EIP-4337 among them.