What Ethereum’s Latest Upgrade Means for NFTs

For most of us, NFTs have been our gateway to Web3. However, the process of buying, storing and securing these NFTs is still relatively complicated for the average person. Also, the experience of creating a wallet – the necessary precursor to any Web3 activity, NFT or otherwise – is a major inhibitor to mass adoption.

This is where ERC-4337 comes in.

This new Ethereum upgrade has the potential to make blockchain technology more accessible to non-crypto natives and provide benefits such as lost key recovery, no seed phrases, gasless transactions and more.

Let’s explore what ERC-4337 is, why it’s important, and what it could mean for the future of NFTs.

What is ERC-4337?

ERC-4337, short for “Ethereum Request for Comment 4337,” is an Ethereum upgrade that enables account abstraction. Simply put, account abstraction allows Ethereum wallets to function as smart contracts.

That means each crypto wallet can have customized authorization logic to meet the needs of individual users or applications. This upgrade was proposed by Ethereum co-founder Vitalik Buterin and others in September 2021 and announced at ETHDenver on March 1, 2023.

Until now, creating and using a wallet has been cumbersome, confusing and intimidating for many entering Web3. The process of securing seed phrases, sending the first finger-shaking transactions, and the lack of user-friendly security features are all significant barriers to entry for new users. ERC-4337 makes the creation and use of wallets much easier and thus more accessible.

For NFTs, this is particularly important. NFTs have helped bring mainstream, traditional brands and legacy IPs into the space. But if wallet creation remains user-friendly, it will continue to discourage people from buying their first NFTs.

What does ERC-4337 do?

ERC-4337 solves four main problems in current wallet structures:

1. Recovers lost private keys

Losing your wallet private keys is one of the biggest risks and fears in the crypto space.

The only thing worse than buying an NFT that goes to zero is holding a valuable NFT that you lose. It’s a scary reality in Web3. ERC-4337 enables a “social recovery system” where designated users can restore access to your wallet if you lose your private keys.

2. Secure wallets without seed phrases

ERC-4337 also allows secure wallets without seed phrases, which may be difficult for some users to remember and store.

With this upgrade, users can use 2FA (two-factor authentication) and biometrics to protect their wallets, making them much more secure and user-friendly. However, some people are in Web3 specifically to protect themselves from the kind of institutional intrusion that security measures such as biometrics represent. Also, seeding provides an extra layer of security that these users and others may not want to give up.

Nevertheless, this feature can still make it easier and more accessible for the many NFT-curious users who are happy to set up 2FA or biometric account access.

3. Automated trading

One of the most challenging parts of collecting and trading NFTs is how practical you have to be. Tracking calculations, timing, analyzing floor prices – all require almost constant effort.

However, ERC-4337 allows for automated trading, including a monthly spending limit, AI trading and adjustment of return positions. These features can make trading NFTs much easier and more accessible to users of all levels.

4. Gas-free transactions

Finally, ERC-4337 enables gas-free transactions. With this feature, NFT pools and their DAOs can sponsor gas fees for users to make their transactions cheaper. Likewise, this feature allows bundling of transactions, making them faster and more efficient.

This feature also allows transaction fees to be paid with a program’s tokens, which can also significantly reduce transaction costs. Entire blockchains, such as Avalanche and its subnet, are set up to enable this as a primary feature.

How might this change in the future?

Overall, ERC-4337 offers many features that traditional banks usually offer their customers, all without having to rely on a financial institution.

As a result, ERC-4337 could lead to a significant boost in the adoption of NFTs. By making it easier to buy, store, secure and recover NFTs, this upgrade could be a game-changer for the market.

However, the features are not enough to lead to mass adoption by themselves.

The key to achieving the potential of ERC-4337 lies in how we communicate about it. Even the term “account abstraction” and other technical jargon won’t be helpful to those who aren’t already familiar with the space. In fact, we may even have to remove the word “wallet” and instead choose languages ​​that more closely mimic web2: account creation, login, password recovery, and the like.

No one outside of our Web3 world knows what the seven alphanumeric characters in ERC-4337 mean. And they don’t need to, as long as everything else is easy for them.