On February 28, 2023, the Account Abstraction Standard Protocol ERC-4337 was deployed on the Ethereum mainnet and subsequently expanded to over 20 EVM-compatible blockchains. As of January 20, there were approximately 2.05 million Abstract Accounts and 8.34 million UserOps, showing rapid growth. So what exactly is the Account Abstraction that Vitalik values so much? And why is it important? Which key projects are worth paying attention to?
Table of Contents:
1. Why is Account Abstraction important?
2. Overview of mainstream Account Abstraction projects
3. How will Account Abstraction develop in the future?
4. Conclusion
(Preface:
Vitalik and Glen Weyl appeared at Taipei TempoX! “Plurality Salon” gathering experts from various fields, marking a milestone in open collaboration.
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(Background:
Vitalik once again mentions DVT (Distributed Verification Technology), aiming to solve the centralization problem in Lido.
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Account Abstraction has the potential to bridge the gap between Web2 and Web3 applications, making Web3 accounts as convenient as traditional bank accounts. The following will explain what Account Abstraction is.
In 2023, Vitalik Buterin frequently expressed his support for smart contract wallets based on Account Abstraction. For example, in a Twitter AMA in June 2023, when asked about the difference between MPC-based EOA wallets and smart contract wallets, he believed that MPC-based EOA wallets have fundamental flaws because they cannot revoke keys, and smart contract wallets are the only choice. It can be said that Vitalik Buterin is a major advocate for the upgrade and adoption of the ERC-4337 protocol. Vitalik Buterin has stated that this upgrade could be one of the main catalysts for global Web3 adoption. In order to improve efficiency and censorship resistance, people are increasingly hoping to directly incorporate partially abstracted accounts (such as ERC-4337) into the protocol. At the same time, the importance of ensuring a smooth transition for existing EOA users and integrating innovative features such as biometric signers.
So what exactly is Ethereum Account Abstraction? The Ethereum account system can be simply divided into Externally Owned Accounts (EOA) and Contract Accounts (CA). EOA is the native account of Ethereum used to trigger Ethereum transactions. CA, on the other hand, is essentially a smart contract, which provides flexibility and programmability, resulting in a better user experience. However, CA cannot directly initiate Ethereum transactions, and when using CA, users still face the challenges brought by EOA, such as private key risks. In the ERC-4337 Account Abstraction standard, users can have complete control over their CA, verifying it in any way they wish, while the task of initiating Ethereum transactions is executed by the Bundler.
What is the current development status of Account Abstraction? Due to the fact that Account Abstraction based on ERC-4337 calls more contracts, it creates additional gas burden. Therefore, most UserOps occur on Layer 2, with Polygon, Arbitrum, and Optimism occupying the majority share. Looking at the development of Account Abstraction, its user base has mainly experienced three growth phases: the first phase was driven by the learning-to-earn project The Capx App, which attracted a large number of users by utilizing the advantages of Account Abstraction (AA) for token transfers; the second phase of growth came from CyberConnect’s Cyber Trek event, which incentivized users to create Cyber Accounts based on AA; the third phase of growth was ZepetoX (ZTX), a metaverse project on Arbitrum. Overall, the development of Account Abstraction is on an upward trend, but it is still in the early stages as many mainstream projects have yet to adopt it, and the speed of user migration needs to be further improved.
Currently, in the Account Abstraction field, there are four leading projects: Pimlico, Alchemy, Biconomy, and Stackup.
Pimlico: Pimlico is an infrastructure platform for building the next generation of smart accounts. It provides bundlers, verification paymasters, ERC-20 payers, etc., to developers developing ERC-4337 smart accounts, enabling the development of more user-friendly decentralized applications or dApps. On September 25, 2023, Pimlico announced the completion of a $1.6 million pre-seed funding round, led by 1confirmation, with participation from Safe, Consensys, and dozens of angel investors. On November 7, 2023, Account Abstraction developer Pimlico announced the completion of a $4.2 million seed funding round, led by a16z crypto.
Alchemy was founded in 2017 and is a blockchain infrastructure company that provides blockchain development platform services to blockchain developers, enhancing user experience. By building development tools and computing infrastructure, Alchemy aims to achieve the future of MultiChain.
Biconomy provides plug-and-play API services, allowing anyone to access DApps without the need for a certain level of experience and knowledge. Currently, Biconomy’s multi-chain relayer infrastructure processes nearly 50,000 transactions per day for over 70 Web3.0, DeFi, and NFT DApps. It has three main functions: Hyphen (real-time cross-chain protocol), Gasless (gasless), and Forward (flexible gas fee payment). Biconomy’s investors include DACM and Mechanism Capital, Coinbase Ventures, Huobi Ventures, Bain Capital, NFX, Ledgerprime, Huobi Innovation Labs, Primitive Ventures, etc.
Stackup has bundler services on various chains, with a leading profit on Arbitrum and Ethereum, but slightly inferior in other aspects.
The above introduces the current status of Account Abstraction, so what are the future business prospects of Account Abstraction? Let’s first briefly understand the working process of Account Abstraction:
First, users initiate UserOperations (UserOps) using CA and send them to a separate UserOp mempool (Note: UserOp is a new transaction type proposed by ERC-4337).
2. The Bundler will bundle the UserOps in this mempool into a transaction and initiate a transaction with their EOA account to the entry point contract. Since it is a transaction initiated by the Bundler, the gas will also be paid by them.
3. The entry point contract is used to standardize transaction execution and prevent Bundlers from being subjected to DoS attacks from malicious transactions. All Bundlers need to call it to execute UserOps.
4. Users need to deposit gas in advance in the entry point contract to pay the Bundler, or it can be paid by a Paymaster, which can be any third party willing to pay for gas.
5. If users have not created a contract wallet, the wallet factory contract will automatically create a smart contract wallet for the user.
In Account Abstraction, the Bundler is essentially an EOA. With the Bundler, users can trigger transactions with smart contract wallets without having to create and remember EOA private keys. The Bundler is used to verify UserOperations, bundle a set of UserOperation objects into a single “bundle transaction,” and broadcast the validated UserOperation content to a public or private memory pool. After executing UserOperations, the Bundler pockets the difference between the highest priority fee and the actual gas fee. In addition, similar to relayers in regular transactions, Bundlers can capture MEV by sorting the UserOperations in the bundle transaction. In the long run, the commercial opportunities for payers mainly include traffic entry, automatic conversion, integration with DeFi gaming projects, and macro-scale innovation similar to the payment industry. Paymasters have a more singular innovation direction, but it is the most stable part of capturing value and lowering the barrier for Web2 users to enter Web3. There may be a large number of Web2 institutions deploying Paymaster services.
As an Account Abstraction strongly promoted by Vitalik, it has grown rapidly since its launch, and many projects have started to deploy abstract account wallets. However, overall, its development is still in the early stages, with many mainstream projects yet to be launched, and the speed of user migration needs to be further improved. In the long run, Account Abstraction has the potential to bridge the gap between Web2 and Web3 applications, making Web3 accounts as convenient as traditional bank accounts. This is also an important step in promoting the mass adoption of Web3, so the development prospects of this field are very promising and worth investors’ attention.
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