However, despite the many benefits of digital wallets, they are still plagued by several usability issues. One of the biggest challenges facing users of digital wallets is the complexity of the underlying technology. Many wallets require users to deeply understand blockchain and cryptography to secure and manage their assets properly.
Enter Account Abstraction, a technology that promises to make digital wallets more user-friendly and accessible. By abstracting away the complexity of the underlying blockchain technology, Account Abstraction has the potential to greatly improve the user experience of digital wallets, making them more intuitive and easy to use.
In this newsletter, we will explore the concept of Account Abstraction in more detail and examine how this technology can help to make digital wallets more user-friendly. We will discuss the benefits of Account Abstraction and explore some of the key challenges that still need to be overcome to realise its potential fully. By the end of this post, you will better understand the role that Account Abstraction can play in creating better digital asset wallets and how it can help make these wallets more accessible and intuitive for users.
Currently, most web3 users employ wallets in the form of Externally Owned Accounts (EOAs) using a popular wallet like MetaMask. EOAs have a public and private key pair, with the private key tasked with signing transactions and confirming ownership of the address’s assets. A public key is used in wallets to receive funds, as it serves as the address to which others can send the funds.
EOA
EOAs have accommodated hundreds of millions of users up to this point. But from here on, they are difficult to scale for mainstream adoption with users that may not be familiar with the blockchain environment. An EOA has an address for identification and a nonce to make transactions unique. The user owns an account by holding cryptographic keys (Signer). The account’s address is derived from the signer’s public key, and the signer’s private key can only initiate transactions from the account. In Ethereum, both the signer and the account are coupled together. If you lose the signer, you lose your account.
The complex nature of EOAs affects user experience (UX), with basic swap transactions requiring multiple signatures and approvals, leading to a steep learning curve.
The security of EOAs is inadequate. With no options for advanced security, the storage of seed phrases or private keys is problematic. Physically writing them down and keeping them off-chain lacks security, and loss, forgetfulness, or theft of a private key means a permanent loss of assets.
These are some other limitations of EOAs:
- No possibility of multi-signature schemes (centralised failure)
- No spending policies (low customizability)
- Direct gas payments from EOA (need for ETH in EOA)
- Lack of support for session keys (multiple signatures required instead of automatic signing)
- Less privacy (first ETH is generally sent from centralised exchanges)
- No way to batch operations
- Expensive on-chain reverts
Account Abstraction
Account abstraction (AA) is a solution that substitutes an EOA with a contract account. AA streamlines the process of coding hard logic into the Ethereum Virtual Machine (EVM) by enabling programmable and flexible contract accounts with similar logic to smart contracts.
The idea of AA is to decouple the relationship between the account and the signer. The account will be the smart contract that can define the validation rules like what signature scheme is to be used, the number of signers, updates to the signers of the account, etc.
That’s the most beautiful part of AA – programmable logic for the accounts. This opens up the possibility for any number of use cases that simplify the life of the end users. And dApp can create these logic based on their user actions. For example, web3 games can give certain capabilities so that user’s get a pop-up to sign for every transaction. Or users can set limits on how much they allow the wallet to spend on certain dApps without requiring their signature. AA evolves our normal web3 accounts into truly smart accounts with an ever growing list of custom capabilities.
With the help of AA, the UX of wallets is significantly enhanced because of the batched signing implementation. Batched signing minimises the number of signatures a user requires when working with dApps (approval for swap or deposit, etc.). By using AA, a user can combine multiple functions calls into a single signature, thereby consuming less gas overall.
In short, AA means every account is a smart contract that can define its rules, initiate transactions, and pay the gas fees. Other use cases of AA include –
- Flexible key management and recovery
- Arbitrary access control mechanism
- Abstracted gas payments by dApp developers
- Social recovery and dead man’s switch
Limitations or Risks of AA
- Higher gas costs: Account Abstraction may lead to higher gas costs, as more computation is required to execute smart contracts. This could make it more expensive for users to interact with the network.
- Compatibility issues: Account Abstraction may not be compatible with existing smart contracts, which could limit its adoption and usefulness in the short term.
- Adoption challenges: Account Abstraction may require significant changes to the Ethereum ecosystem, including wallets, exchanges, and other tools that interact with the network. This could make it difficult to achieve widespread adoption of the new feature.
Developments Surrounding Account Abstraction
AA has always been a part of the Ethereum roadmap (Ethereum Improvement Proposals):
- EIP-86 – Forwarding contract to abstract signature verification and nonce
- EIP-2938 – Enabling smart contracts to act as top-level accounts
- EIP-3074 – Enabling existing EOAs to behave like smart contracts by allowing users to delegate control of their accounts to the smart contracts
- EIP-4337 – Decentralizing the infrastructure needed to write and operate smart contract wallets without protocol-level deployments or hard forks needed
EIP-4337
Implementing AA in the EVM requires significant changes, including adding new EVM opcodes and a hard fork. To address this challenge, EIP-4337 has been put forth as a solution. This proposal allows for creation of programmable smart contract wallets without any changes at the protocol layer of Ethereum, providing users with an improved and more flexible experience.
Some capabilities that AA has now brought were already possible. For example, projects like Biconomy were offering gasless transactions on many major dApps; wallets like Argent and Safe had smart contract wallets. But they were all implementing it in their own way. The EIP4337 brings standardisation where everyone can agree on the implementation for these smart accounts.
In a recent update, EIP 4337 was launched on the mainnet from ETHDenver on 2nd March 2023.
Takeaway
The challenges of the existing UX in digital assets wallets, even among the most technically knowledgeable, are widely recognised. Scaling to a billion users will prove difficult with the current suboptimal design.
Fortunately, Account Abstraction aims to rectify the shortcomings of EOA wallets. However, fully replacing EOA wallets is unrealistic due to their hardcoded integration into the EVM and limited dApp support for AA. Nonetheless, the implementation of EIP-4337 and the progress in AA promise a future of improved wallet UX.
WOODSTOCK IN THE NEWS
- Prashanth Swaminathan, Partner at Woodstock Fund was selected for the Governing Council of India’s first regulatory sandbox for Web 3.0 by Emerging Technologies Wing, Govt. of Telangana. He also talked about how young builders should research and build relationships in the space to accelerate product growth and build a successful web3 startup.
- Prashanth also spoke at the Hyderabad Hack-a-TON, where he spoke about the latest infra and DeFi opportunities. He also spoke at one of dydx events, where he discussed about decentralised perp market and how early we are in the journey of DeFi.
- Woodstock’s Tech Team did two Twitter spaces on Cross Chain Bridging and interoperability ft. Router Protocol and Intricacies of staking.
- We recently published an article about Covalent: The March to be the #1 indexer and Top Ideas for Web3 for 2023.
MARKET NEWS
- Crypto exchange Coinbase (COIN) launched Base, a layer 2 network built using Optimism’s OP Stack, to attract millions of new crypto users in the coming years.
- Gaming Engine Unity Taps MetaMask, Immutable X and Solana for Web3 Developer Tools. The leading platform for game developers introduced an online storefront for decentralized tools, adding support for major Web3 players.
- Robinhood subpoenaed by SEC over crypto listings and custody. The firm said it received an investigative subpoena in December regarding its crypto listings, crypto custody and platform operations.
- The French National Assembly passed a set of licensing rules for crypto firms operating in the country as part of a broader bill to harmonise French law with European Union standards. Crypto firms in France dodged far tougher provisions proposed in response to the collapse of FTX.
- Hong Kong plans to lift the ban on retail crypto trading. A new consultation paper from Hong Kong’s financial regulator outlined several new criteria for letting retail investors back into crypto.
- A group of large Japanese companies — including Mitsubishi, Fujitsu and banking giant Mizuho — agreed to work together to create a “Metaverse Economic Zone” for the country, with the aim of building open metaverse infrastructure.
Thank you, Biconomy team, for the input on this issue of our newsletter.
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