How the ERC-4337 standard is revolutionizing the Ethereum ecosystem

Why is the ERC-4337 standard so unique and what is its impact on the ETH ecosystem? Is this the key to the next wave of blockchain adoption?

Widespread adoption of Decentralized Finance (DeFi) and Non-fungible Tokens (NFT's) on Ethereum and other blockchains has so far been elusive. It is now expected that the new ERC-4337 standard and accountabstractie will take the ecosystem to the next level. But what's behind it and how can it succeed?

Account abstraction explained simply

To understand why the new Ethereum standard is so interesting, you first need to know what account abstraction means. Imagine you have a classic wallet. Depending on what you want to pay with, you choose a secure environment to perform a transaction. In many cases, however, the recipient only accepts certain types of payments. If you pay with a card, the amount to be paid often has to be above a certain limit. Cash is mainly accepted for small amounts, and vouchers can usually only be used at special retailers and under certain conditions.

Now imagine an improved version: Your wallet is now a smart wallet. It now has only one environment, but this environment can really do everything. It combines all your possessions, physical or digital, into one wallet and adapts like a chameleon, no matter what payment method you need at the time.

How does account abstraction and ERC-4337 work on the blockchain?

It works the same way at the blockchain level. ERC-4337 enables account abstraction on Ethereum and makes ETH wallets stronger by cleverly combining functions of externally owned accounts (EOA) and smart contracts.

An EOA is basically an individual account, like your bank account. You manage it with your private key and can send and receive Ethereum or tokens (self-hosted wallets like MetaMask). A "smart contract account wallet" on the other hand, is more of a wallet with a built-in assistant that makes it easy to interact with apps and blockchain networks using smart contracts. ERC-4337 combines these two types of crypto wallets into one.

To understand it better, think of a mobile fueling station for decentralized applications (dApps). Imagine you have a car (your dApp) that needs gas (gas on Ethereum) to drive. Normally, you would have to drive to the nearest gas station (exchange where you can buy ETH) to get gas.

But with ERC-4337, things are much smoother. You just place an order and poof, someone (a "paymaster") comes by and fills your car right in your garage. In this analogy, your car is the dApp, the gas is the gas you need to transact, and the "paymaster" is the ERC-4337 standard that ensures the gas is delivered directly to your dApp.

This makes using Ethereum wallets much easier for users. You only need enough money in your wallet, and everything else - such as swaps, buying and selling NFTs, creating wallets and paying fees - is automatically done for you in the background by ERC-4337 with account abstraction.

Here are the benefits of the new Ethereum standard

ERC-4337 offers a number of benefits that can greatly simplify the user experience when dealing with blockchain networks and NFTs in particular. Here are some of the key benefits of ERC-4337:

1. Gasless transactions

Ethereum's "gas crisis" is a well-known problem for many users in the crypto world. ERC-4337 allows users to conduct transactions without ETH or other cryptocurrencies in their wallet, thanks to account abstraction.

Instead of paying ETH gas fees, this new standard allows users to conduct transactions without ETH in their wallet. One could also pay with other cryptocurrencies such as USDC, DAI, WBTC, etc. An interesting way to attract new users who are still inexperienced in the world of NFTs and cryptocurrencies.

2. Bundled transactions

Moreover, ERC-4337 allows you to bundle multiple on-chain operations into just one transaction. Imagine you want to send NFTs to another wallet, while also atomizing other tokens at the same time in the same transaction. You can do that thanks to ERC-4337. All in just one transaction. This greatly reduces both the complexity and duration of transactions.

3. Easier and more secure Ethereum wallets.

Another aspect that sets ERC-4337 apart is the simplification of account management. Instead of struggling with a complex cryptographic key pair, you can now easily manage your wallets with your Apple or Google account.

4 Temporary access to wallets and tokens

Finally, ERC-4337 enables the use of "session keys." These are temporary keys that allow a cryptowallet to communicate in a specific way with a specific app for a certain period of time. One can imagine session keys becoming very popular in the NFT gaming scene, where they can be used in conjunction with a game to ensure that one does not have to sign many transactions or worry about revoking token privileges later.

5. Customize wallet permissions.

Last but not least, ERC-4337 allows users to customize the permissions of their accounts. For example, one can request transactions with multiple signatures, allow only certain addresses to perform transactions on their own behalf, or even restrict certain activities completely. This feature offers NFT users and NFT-centric DAOs more control over their on-chain accounts.

Conclusion

ERC-4337 has the potential to significantly improve the user experience when dealing with cryptocurrencies and NFTs. It offers benefits such as simpler and more secure accounts, gasless transactions, bundled transactions, authorized activities and the use of session keys. Because of these features, ERC-4337 could lead to greater adoption of NFTs.

Overall, ERC-4337 offers many features that traditional banks offer their customers, all without the need to trust a financial institution. As a result, ERC-4337 could lead to a significant increase in the use of NFTs. By making it easier to purchase, store, secure and recover NFTs, the upgrade is undoubtedly another milestone on the road to mass adoption.

Although there is little information so far on the dissemination of the ERC-4337 standard, some wallet developers, such as Stackup and MetaMask, are already showing interest in using it. However, it is clear that this standard has the potential to significantly simplify and improve interaction with blockchain networks. Therefore, it seems likely that the standard will become more widespread in the Ethereum ecosystem this year.