The Future Of Crypto Wallets Is (Maybe) Here
ERC-4337, better known as Account Abstraction (AA) will now allow Ethereum wallets to operate the same way that smart contracts do.
Since the day Satoshi published the bitcoin white paper, poor user experience (UX) has plagued crypto.
Although the days of buying bitcoin through shady sites are (thankfully) long-gone, it’s still difficult for people to get on exchanges, let alone on-chain. And, above all else, keeping crypto safe from loss is challenging for most people.
People in crypto always preach the value of self-custodying your crypto – and for good reason – it's the best way to fight against hackers and other people seeking to swipe your digital assets.
But, in order to self-custody your crypto, you have to move it into what is known as cold storage. In plain English, this means moving your coins to a flash-drive that is disconnected from the internet, hence cold. These flash-drives are then sealed with a seed phrase, which is a collection of 12 random words that can be used to recover the coins from the blockchain.
If you remember your seed phrase, you have full control over your money. It’s really a beautiful thing. But, if you forget it, your crypto goes poof 💨, and there’s no way to recover it.
Does anybody really believe that a billion people will trust their life savings to 12 random words on a piece of paper? Besides being extremely inconvenient in the modern world where banks are everywhere, it’s also quite unsafe. Just look at the people who have lost their fortunes because they forgot their seed phrase.
Thankfully, there is a new Ethereum update that finally aims to solve this problem.
The update is called ERC-4337, better known as Account Abstraction (AA).
The simplest way to understand AA is that it allows Ethereum wallets to operate the same way that smart contracts do.
The Way Wallets Work Today
Ethereum wallets today can be put into one of two buckets:
Externally Owned Accounts (EOAs). EOAs are the wallets we all know and (rarely) love, like Metamask and Coinbase Wallet. These wallets are secured by the user, hence why they are known as EOAs. If that user forgets their seed phrase or is compromised in any way, they can likely kiss their funds goodbye.
Smart Contract Wallets. Smart contract wallets are wallets that are controlled by code. This makes user error literally impossible, which is ideal for keeping funds safe. The only problem is they can’t operate on their own. An EOA needs to send a transaction to a smart contract wallet in order for it to make transactions of its own.
What AA does is merge the two wallets to create the optimal UX.
The Benefits Of AA
The nitty-gritty of how AA is implemented is extremely technical, so we won’t bother you with it. Instead, we’ll discuss a few examples of how AA changes the wallet game:
Recover lost keys. AA enables a social recovery system in which several people have the ability to return an account to its owner should the owner lose their seed phrase. Basically, it is crypto’s first version of password recovery.
Better security. AA enables multi-sig wallets, meaning several people would have to sign off on a transaction for it to go through, adding another layer of security. No longer could a hacker steal funds by compromising just one person.
Flexibility: AA enables more flexibility in how users interact with the blockchain. For example, with AA, you could change how you pay gas fees. So, if for some reason you wanted to pay gas fees in SHIB instead of ETH, AA makes it as easy as a few clicks.
If you’re subscribed to CoinSnacks, we probably don’t have to convince you of crypto’s vast potential to improve the financial system.
But, crypto will never reach these lofty heights with its current UX.
AA is a great step forward by making wallets much easier and safer to use, paves the way for mass adoption, and for more people to become their own bank.