What is Ethereum ERC-4337 and what does it mean for crypto users?
One of the biggest challenges to crypto adoption is the annoying wallet creation process, which requires you to write down a series of seed phrases you need to log in or restore your account. Additionally, the types of transactions possible in crypto are limited compared to those possible in existing systems, let alone the places you can use crypto as payment.
Although this has been the case for a long time, things are about to change.
The Ethereum development community has been working on ERC-4337, a new Ethereum standard that makes crypto wallets more user-friendly with better functionality.
What is ERC-4337 and how does it work?
ERC-4337 is a standard for Ethereum that aims to make user accounts work more like smart contracts, a phenomenon known as “account abstraction”.
Currently, creating a wallet and using it can be complicated for people venturing into Web3. We need to use externally owned accounts like Metamask and Coinbase Wallet to interact with blockchain specific smart contracts.
Processes like securing seed phrases and making transactions are a bit difficult in our digital age. Additionally, the lack of user-friendly security features can easily deter users, considering the precarious state of the crypto space.
ERC-4337 introduces a standard interface for the Ethereum network’s deposit contracts, allowing various applications and wallets to interact with smart contracts in a standardized way.
It makes the wallets work as breathing, self-executing smart contracts, i.e. as efficient as hardware wallets with a cleaner UX and more account recovery options, more secure and censorship resistant.
With a simple code update of a wallet, you can extend its functionality to handle multi-factor authentication, make and maintain transactions, and perform multiple tasks.
Essentially, 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 that a bank would without having to trust a bank.
What problems does ERC-4337 solve and what are its uses?
ERC-4337 solves a number of common problems with cryptocurrency.
1. Complicated process of setting up wallets
This is one of the biggest barriers to crypto adoption. Nobody today likes to write or write down a seed phrase containing 12 or 24 words, which they know, if lost, will prevent them from accessing crypto assets.
With ERC-4337, you will be able to open an account on your smartphone with just a fingerprint or face scan. If you think about it, an intuitive account opening process that takes less than 30 seconds is a great incentive that can draw the next billions of crypto adopters.
2. Security Risks of Smartphone Wallets
The current system of using smartphones as hardware wallets poses a security risk. First, the security module uses a cryptographic signing system that is different from that used in crypto. They also come with the risk of being hacked or tricked into making transactions.
ERC-4337 enables easy communication between the two cryptographic systems, which increases security. More importantly, it allows you to set up two-factor authentication for transactions and spending limits.
3. Recovery of social account
Another issue in crypto is the lack of account recovery options on most platforms. As a result, if you lose your seed set, 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 restore your hard-earned crypto assets. This will be made possible through a time-locked recovery process (around four days) involving a group of trusted friends or a commercial service.
With several improvements, you will soon be able to recover your account in the usual “forgot password” style.
4. Zero-Gas Fee Minting
A major deterrent to NFT adoption is NFT mining fees, which can range from a few cents to hundreds of dollars depending on the blockchain. For example, if you’re a DApp developer who wants to let some testers try your app, your experiment will be limited by how willing your testers are to incur gas fees.
With ERC 4337, it is possible to allow users to go gas-free for a certain period, such as 30 days, using a payment master. A paymaster is a smart contract that performs logic to decide whether to pay for transactions for its users.
By using paymasters you can sponsor users while getting the gas tax collected from an address you enter after confirming the logic. As such, zero gas fee minting makes it easier for people to try your DApp or new NFT project.
5. Repeated approval of transactions
Finally, ERC-4337 will enable crypto users to do away with low-value iterative transaction approvals. This feature is especially valuable for players who need to spend their tokens across sessions and crypto traders who need to be convenient in collecting and trading crypto assets.
For players, you can load a simple code into your account, for example to automatically perform a transaction based on your terms and session keys. Meanwhile, automating trading by setting monthly limits and adjusting yield positions using AI will make trading easier and more accessible.
These are just some of the main problems ERC-4337 solves, but there may be more.
What does the ERC-4337 upgrade mean for crypto users?
ERC-4337’s integration into Ethereum is a boon for the blockchain’s users, the EVM-compatible chain ecosystem, and the entire crypto space. For crypto users, that means:
- Easier cryptocurrency adoption
- Ability to recover accounts
- Aggregate transactions that come with lower gas fees
- Pre-approved transactions
- DApps can sponsor gas fees for usage
Additionally, considering its potential, it could cause a bit of a frenzy among crypto investors. By virtue of making wallets better, i.e. smart wallets, it signals more opportunities, meaning more people can come on board.
On the other hand, introducing more complex terminologies such as “account abstraction” will mean that ordinary people may find the space too complex to enter unless a simpler way of demystifying the concepts is available.
Ethereum ERC-4337 will boost crypto adoption
ERC-4337 transforms a complicated digital bankless payment system into a simplified system that most people can relate to and thus be open to adopting. As such, it’s a pretty powerful proposition for the next generation of crypto adopters. Although most current users will be positive about it, we can only wait and see where it takes us.
