One of the biggest challenges of adopting crypto is the tedious wallet creation process, which requires you to write down a bunch of seed phrases that you need to sign up or recover your account. Additionally, the types of transactions possible in crypto are limited compared to those possible in existing systems, not to mention the places you can use crypto as a payment.
This has been the case for a long time, but things are about to change.
The Ethereum developer community has been working on ERC-4337, a new Ethereum standard that will make crypto wallets more user-friendly with better functionality.
What is ERC-4337 and how does it work?
ERC-4337 is a standard for Ethereum aimed at making user accounts work more like smart contracts, a phenomenon known as “account abstraction”.
Currently, creating and using a wallet can be complex for people venturing into Web3. We need to use external accounts like Metamask and Coinbase Wallet to interact with blockchain specific smart contracts.
Processes like securing seed phrases and making transactions are a bit fiddly in our digital age. Additionally, the lack of user-friendly security features could easily put users off given the precarious state of the crypto space.
ERC-4337 introduces a standard interface for the Ethereum network’s custodial contracts, allowing different applications and wallets to interact with smart contracts in a standardized way.
This makes the wallets act as breathing, self-executing smart contracts, i.e. as efficient as hardware wallets with a cleaner UX and multiple account recovery options, more secure and more censorship-resistant.
With a simple code update of a wallet, you can extend its functionality to handle multi-factor authentication, conduct and maintain transactions, and perform multiple tasks.
In essence, ERC-4337 brings the convenience of banking systems to the blockchain. According to CoinTelegraph, Ethereum Foundation security researcher Yoav Weiss said:
It gives you the same features as a bank without having to trust a bank.
What problems does ERC-4337 solve and what are its use cases?
ERC-4337 irons out a number of common cryptocurrency issues.
1. Complicated process of setting up wallets
This is one of the biggest obstacles to crypto adoption. Nobody today likes to type or write down a 12 or 24 word seed phrase that they know will prevent them from accessing their crypto assets if lost.
ERC-4337 allows you to open an account on your smartphone using just a fingerprint or face scan. If you think about it, an intuitive account opening process that takes less than 30 seconds is a huge incentive that could attract the next billion crypto adopters.
2. Security risk of smartphone wallets
The current system of using smartphones as hardware wallets poses a security risk. First, the security module uses a cryptographic signature system that is different from that used in crypto. They also carry the risk of being hacked or tricked into transactions.
ERC-4337 allows easy communication between the two cryptographic systems, increasing security. More importantly, it allows you to set up two-factor authentication for transactions and spending limits.
3. Social Account Recovery
Another problem with crypto is the lack of account recovery options on most platforms. So if you lose your seed phrase, you’re toast. Isn’t that a sad state of affairs in a world where losing a phone is a common occurrence?
Account abstraction helps you recover your seed phrases if they are lost, allowing you to recover your hard-earned crypto assets. This is made possible through a time-bound recovery process (about four days) involving a group of trusted friends or a commercial service.
With further improvements, you will soon be able to recover your account in the normal “forgot password” style.
4. Zero gas fee embossing
A major obstacle to NFT adoption is NFT coin fees, which can range from a few cents to hundreds of dollars depending on the blockchain. For example, if you are a DApp developer and you want to allow some testers to try your app, your experiment will be limited by how willing your testers are to pay gas fees.
With ERC 4337 it is possible to allow users to go gas free via a purser for a specified period of time, say 30 days. A paymaster is a smart contract that runs logic to decide whether or not to pay for transactions for its users.
Paymasters allow you to sponsor users while having the gas fee deducted from an address you set after confirming the logic. Therefore, zero gas fee minting makes it easier for people to try your DApp or new NFT project.
5. Reapproval of Transactions
Eventually, ERC-4337 will allow crypto users to scrap iterative low-value transaction approvals. This feature is particularly valuable for players who need to use their tokens across sessions and for crypto traders who need to be hands-on when collecting and trading crypto assets.
For example, as a player, you can load a simple code into your account to automatically complete a transaction based on your terms and session keys. Meanwhile, automating trading by setting monthly limits and adjusting yield farming positions using AI will make trading easier and more accessible.
These are just some of the main problems that ERC-4337 solves, but there could be more.
What Does the ERC-4337 Upgrade Mean for Crypto Users?
Integrating ERC-4337 into Ethereum is a big deal for blockchain users, the EVM-compatible chain ecosystem, and the crypto space at large. For crypto users, this means:
- Easier adoption of cryptocurrencies
- Ability to restore accounts
- Bundled transactions with lower gas fees
- Pre-Approved Transactions
- DApps can sponsor gas fees for usage
Additionally, considering its potential, it might cause a bit of excitement among crypto investors. By improving wallets, i.e. smart wallets, it signals more opportunities, which means more people could come on board.
On the other hand, the introduction of more complex terminologies like “account abstraction” means that ordinary people might find the space too complex to venture into unless there’s an easier way to demystify the concepts.
Ethereum ERC-4337 will boost crypto adoption
ERC-4337 turns a complicated digital bankless payment system into a simplified system that most people can identify with and are therefore willing to adopt. As such, it’s a pretty strong proposition for the next generation of crypto adopters. While most current users would be optimistic about this, we can only wait and see where it takes us.
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