A Guide to EIP 4337; Its Use Cases and Impact on User Experience and Crypto Adoption | by Henrique Centieiro | Mar, 2023

Imagine having a scenario where you are not scared of losing access to your ETH wallets just because you lost your seed phrase. Users can now convert their noncustodial wallets into completely decentralized banks.

What is EIP-4337 all about? Let’s dig deep!

1. EIP-4337 is an AA — Account Abstraction — proposal that eliminates the need for consensus layer protocol. It uses a higher-layer pseudo-transaction object called a UserOperation instead in a separate mempool.
2. It merges the externally owned account (wallets like Metamask) and contract accounts (smart contracts wallets) and introduces a new feature in Ethereum: the Smart Accounts.
3. EIP-4337 improves the user experience on the Ethereum blockchain, as well as all the other EVM compatible chains such as Polygon, Arbitrum, Optimism, etc., as now it’s possible to abstract the keys of a wallet from the user.
4. It’s available on all layers of the Ethereum blockchain but is very compatible with layer 2 and layer 3 networks and all EVM-compatible chains.
5. In a nutshell, it helps to unlock more adoption 🍻

1. Bundlers: Nodes on the network that are capable of bundling transactions and sending them to the bundle marketplace.
2. Paymaster: Smart contract accounts that facilitate transaction sponsorship by allowing third-party-designed mechanisms to pay for transactions. They can sponsor transactions for other users. They are the backbone behind gasless transactions.
3. EVM: Ethereum Virtual Machine is a piece of software that executes smart contracts and computes the state of the Ethereum network after each new block is added to the chain.
4. Sender: The account contract sending a user operation
5. EntryPoint: A singleton contract to execute bundles of UserOperations. Bundlers/Clients whitelist the supported entrypoint.
6. Aggregator: A helper contract trusted to validate an aggregated signature. Bundlers/Clients whitelist the supported aggregators.

Ethereum Improvement Proposals (EIPs) describe the Ethereum blockchain standards: contract standards, client APIs, and core protocol specifications. All primary upgrades on the blockchain are due to the review or implementation of one EIP.

These proposals are submitted by Ethereum developers or by the community to introduce new features and protocols or upgrade the existing ones. However, the proposals are always up for debate, discussion, and review; with the full approval process taking 8 phases.

Notably, most sophisticated EIPs led to heated discussions and were implemented after being reviewed for years. Some examples of these include the introduction of ERC-20 tokens on Ethereum (EIP 20), non-fungible token standard (EIP 721), and dynamic transactional fee model with periodic token burn events (EIP 1559).

Before we dive into the details of the new proposal, which has been up for debate since 2021, let’s look into some basic information to clarify this new protocol.

Currently, there are two types of accounts on Ethereum: contract accounts or Externally Owned Accounts (EOAs).

Let’s think of a contract account as a smart contract, which is basically a piece of computer code developed to define how the account should behave. Think of EOAs as your normal wallets like MetaMask, Phantom wallet, and Trust Wallet, or even your cold storage wallet like the Ledger, Trezor or Keystone.

Of the two “account” types, you probably are already familiar with Externally Owned Accounts (EOAs), so I won’t take much time explaining that. Just a quick reminder: EOAs are made up of a cryptographic pair of keys which can be public and private keys that control activities on your account.

On the other hand, contract accounts don’t require any private key. They are computer programs defined by the code within them and not their users. In simple terms, they work based on the principle of automation which take place once the conditions provided are fulfilled.

Since you are familiar with the account types, let’s briefly tour Ethereum Transactions.

Anytime information is added to the blockchain like minting an NFT or transferring tokens, a transaction needs to occur. At its basic level, transactions are signed by the user of an EOA and attract associated gas fees.

Once a transaction is initiated on one EOA, it can either be sent to another EOA or a contract account. An example of both instances is transferring ETH from one wallet to another ETH wallet and minting an NFT from a drop, respectively.

Now, here’s where it gets tricky!

EOAs can be risky. Imagine losing all your hard-earned income just because you forget access, lost the backup of the wallet or accidentally shared your private key. You must have seen news flying around about the loss of private keys and access to one’s wallet.

At this junction, you feel the urge to question the ownership feature promised by decentralization and Web3 as a whole.

Private keys are easy to lose or forget and impossible to recover unless properly backed up.

Also, EOAs are limited in capabilities, and operations on these accounts are not exceeding one or two actions. Initiate and submit a transaction to transfer a token to another EOA or submit a transaction that executes a function on a contract account.

Another key limitation is that EOAs will never enable mainstream adoption. That is, many people will not fathom the details of cryptocurrencies and digital assets; hence they’ll prefer to stay away. The risks and limitations that come with it are also a barrier to this expected massive adoption.

Now that we know what EOAs and smart contracts are and we know how transactions get done in each account type, let’s see what solution Account Abstraction offers.

Account Abstraction on the Ethereum blockchain (and any other blockchain) is the separation of the user’s identity from the EOA itself which gives room for better privacy. EIP 4337 is an Ethereum Improvement Proposal that aims to introduce account abstraction using mempool.

This feature allows smart contract-based Ethereum accounts, which would add some new features to the Ethereum core proposal and increase the usability of Ethereum. The main benefit of EIP 4337 is that it will enhance and create new features for Ethereum wallets, especially targeted at end-users who prefer self-custodial wallets.

Some of the new features include gasless transactions, account recovery with multi-signature wallets and social recovery features, and hardware signers. This will make it easy for users to sign crypto transactions with security enclave chips (aka TEEs) in their mobile phones.

The proposal enables more gas-efficient arbitrage trading and reduces the gas cost of account creation. Above all, EIP-4337 is expected to improve the user experience and improve Ethereum wallets’ functionality.

In the study of the proposal’s architecture, its components include; EntryPoint contract, paymaster contract, UserOperation, Bundler, Miner, and client library. The launch of the new ERC-4337 standard at WalletCon in Denver has enabled the use of “smart accounts” on Ethereum, which is expected to make crypto more user-friendly and help mainstream adoption.

The standard, also known as “account abstraction,” enables the use of cryptographic keys for cryptocurrency to be stored on standard smartphone security modules and also enables two-factor authentication, monthly spending limits, and social recovery of accounts.

The core contracts for ERC-4337 have passed an audit by OpenZeppelin and will be available on every Ethereum Virtual Machine (EVM) compatible network. Additionally, the technology has been incorporated natively into zk-Rollup and layer 2 solutions from StarkWare and zkSync, and Visa has designed an automated crypto bill payment system that makes use of it.

The development team was funded via grants from Ethereum Foundation, and the standard has been in development for over two years.

1. Gasless transaction: The user pays the transaction cost in non-ETH tokens like USDC or other ERC20 tokens, and the block producer will then swap any USDC to ETH behind the scenes to cover the gas cost.
2. Security: Since all transactions on the blockchain are made visible to the public, it is easy to trace the flow of funds and track the parties’ identities. This can expose targeted users to malicious actors using the information for illegal purposes. Smart Contract Wallets integrate with applications and trading platforms, bringing additional layers of security and reducing the risk and cost associated with transactions.
3. Usability: EIP 4337 aims to solve usability problems by introducing an Ethereum Improvement Proposal that allows users to send transactions using human-readable names instead of long and complex Ethereum addresses. With EIP 4337, users can create a human-readable name for their Ethereum address, which is referred to as an Ethereum Name Service (ENS) name. Hence, rather than inputting a long string of characters when sending transactions, users can enter a short and easy-to-remember name.
4. Enhanced Privacy and Confidentiality: Account Abstraction and EIP 4337 aim to solve the problem of privacy associated with blockchain-based payment systems. They aim to solve this problem by introducing a new kind of account abstraction to the Ethereum network. This type of abstraction separates the transaction’s signature from the account address, allowing users to more securely interact with one another on the Ethereum blockchain. Doing so gives room for users to protect their account while still taking active part in the network.
5. Scalability: One of the main issues bedeviling the blockchain payment system is the lack of scalability. Transactions from different EOAs need to wait in a queue before getting executed and uploaded to the chain. In other words, the existing blockchain networks can handle a limited number of transactions per second. This results in high transaction fees and long confirmation times, making the payment system unsuitable for mass adoption. EIP 4337 seeks to improve the scalability of the Ethereum network. The introduction of Smart Contract Wallets, a type of account abstraction, enables wallets to secure and manage assets stored in the Smart Contract. This reduces the amount of time and effort required for wallet management.
6. Account Recovery: EIP 4337 has multi-signature wallets with social recovery features that make signing in and password authentication and recovery easier.
7. Unlocking mass adoption: All the aforementioned use cases make EIP 4337 attractive for businesses and other users alike, allowing for more widespread adoption of crypto and web3 technology.

As much as it’s at its maiden stage, there is still a need to explore the potential limitations of the proposal. While EIP 4337 is a step in the right direction for improving the usability of Ethereum network, it comes with its own set of limitations and challenges.

1. Complexity: Without mincing words, EIP 4337 is complex to implement. The documentation, APIs, and technical details are complex and require some level of experience and familiarity with the update. This makes it harder for new web3 developers to implement it.
2. Adoption and implementation: As a new standard, this is not supposed to be a limitation. However, adopting and implementing EIP 4337 may take time since it requires coordination and collaboration among various stakeholders in the Ethereum community, including developers, validators, and users.

In summary, the integration of account abstraction and EIP 4337 presents an exceptional opportunity for the future of payments. It provides users with greater control over their finances and offers businesses an extremely secure and efficient platform for conducting transactions.

This technology is revolutionizing the way we conduct virtual payments, and it will be fascinating to witness its integration, use cases, and massive adoption. Succinctly, EIP 4337 paves the way for a more scalable, efficient, and private payment system on the Ethereum network.

As an Ethereum enthusiast, what do you think about account abstraction and EIP 4336?

Don’t forget to share this article with your friends. Let’s all be part of the future of digital payments on the Ethereum blockchain.

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