Cregis Research: The Value of Ethereum Account Construction Archaeology and Account Abstraction

Author: 0xCregis

Before discussing the value of Account Abstraction (AA), we need to review the Byzantine problem and the pain points of Ethereum.

In the traditional internet, when A pays B for an online purchase, two things happen: 1. A transfers the value of money to B, which is value transfer; 2. A notifies B of the payment of one dollar. From an informational perspective, A loses one dollar, B gains one dollar, and A will receive a certain product. Only when the above three pieces of information are confirmed simultaneously can an online purchase order be considered complete. How to synchronize the confirmation of these three processes can be understood as the Byzantine problem.

Bitcoin or the Byzantine problem aims to solve the issue of achieving atomic operations in the internet or computer environment, that is, to achieve information transfer simultaneously with value transfer in the real world. However, Bitcoin, based on its decentralized philosophy, cannot construct a complex internet environment.

In this regard, in 2012, the then-unknown Vitalik Buterin proposed a plan in Bitcoin Core to add Turing completeness on top of Bitcoin to achieve more functionalities. After being ruthlessly rejected, he established the Ethereum ecosystem. Although the birth of Ethereum and smart contracts has elevated the blockchain world to a new height, Ethereum, operating in a decentralized environment, still faces the biggest pain point: a linear environment cannot execute high concurrency and complex code compilation. This is why V God has always encouraged users to enter layer 2 networks, advocated for contract wallets and account abstraction, and even encouraged users to relinquish some privacy to project parties in exchange for social login, social recovery, and other user experiences close to Web 2.0: if Ethereum does not make these changes, it will not be able to realize its vision and will forever remain an accessory to Bitcoin.

Core Topic 1: What is Account Abstraction?

Ethereum has two types of accounts: one is called an Externally Owned Account (EOA), which is characterized by being free to create and can initiate transactions directly through signatures; the other is a Contract Account (CA), which has its own code area and data area, essentially a smart contract, and therefore cannot initiate transactions directly. Since creating a contract account = creating a smart contract = executing on-chain interactions, it requires payment * (this is the causal relationship mentioned by V God in the debate about MPC wallets and CA wallets, where he referred to the creation cost of CA wallets being xx dollars)*. When an EOA sends an asset to a CA, theoretically, this CA can become an Account Abstraction wallet.

An Account Abstraction (AA) wallet can be understood as a decentralized "money house." EOA can place assets in this "money house," and when a transfer is needed, it only needs to notify the "money house," which will complete the transfer operation. Thus, value transfer and information transfer no longer occur simultaneously on the EOA but happen on an abstract account. Of course, these transactions still ultimately require the EOA to issue transaction instructions and sign for execution.

Core Topic 2: How is the functionality of Account Abstraction achieved?

With the updates to the EIP-4337 protocol, the hype (or deification) of the concept of account abstraction in the capital market has reached its peak, with the most praised concepts being 【social login】【social recovery】【stranger device recovery】【fee-less transfers】, etc.; however, the contract account (CA) itself is a decentralized product, and the operations of asset transactions on-chain still need to be executed through EOA signatures. Therefore, social login/recovery conducted through web 2.0 information, biological information, and authenticators inevitably requires centralized services to cooperate * (this is also the reason mentioned earlier that "V God even encourages users to relinquish some privacy in exchange for a user experience close to Web 2.0")*.

However, the controversial feature of 【stranger device recovery】 in EOA wallets * (e.g., the private key recovery service previously launched by Ledger wallets)* can be implemented in CA wallets by writing a backup EOA into the smart contract, without needing to provide any sensitive information to the wallet operator or relinquishing any private information, making it safer than the recovery function offered by EOA wallets.

Finally, how is 【fee-less transfer】 achieved? First, note a key point: CA wallets and Account Abstraction (AA) wallets can currently only operate on EVM-compatible public chains, with Ethereum being the main battlefield. As is well known, before the execution of the EIP-1559 proposal, Ethereum's POW miners could freely choose to package an on-chain transaction for free, but after the EIP-1559 proposal was passed, due to the deflationary burning of the base fee that must be paid, there are no truly free transactions on the Ethereum network. Next, Cregis Research will analyze in detail how AA wallets achieve 【fee-less transfers】:

Taking the USDT smart contract as an example: it contains a code area and a data area, where the data part can be understood as a table that records how much USDT each EOA owns, i.e., the balance of each EOA. During a transfer, one account's balance will be deducted, and another account's balance will be increased.

At this point, we can think from the perspective of game-fi or social-fi: project parties want to lower the participation threshold, allowing users to participate without holding gas fees. Although the current Ethereum EOA cannot achieve this, clever scientists have still thought of an indirect solution: Meta Tx & Gas Station Network (GSN). The principle is that the token trader (Zhang San) signs and executes a structured data (mdata) similar to a transaction, then sends it to someone willing to pay the gas fee (Li Si). Li Si sends the transaction containing mdata to a smart contract compatible with GSN for execution and pays the on-chain gas fee to complete the transfer, with the consensus nodes of the Ethereum network confirming that the initiator of the transfer is Zhang San.

The above solution is an important component of the EIP-4337 proposal. The EIP-4337 proposal is a transaction optimization plan that does not change the Ethereum consensus layer: when a user wants to initiate a transaction, they only need to pass a msg, but this msg is not sent to the Ethereum mainnet, so the user does not need to pay gas fees; this msg will be sent to a memory pool, where it will be authenticated according to the standards of EIP-4337. If confirmed, it will be published on the Ethereum chain by the operator's EOA, and finally recorded in a block by POS nodes. In addition, the EIP-4337 proposal also includes standards for what benefits packagers can obtain and how refunds are handled in case of packaging failures; PS. If a method to hide the association between the operator's EOA and the msg is added to the EIP-4337 proposal, it could also achieve privacy transaction functionality.

The mystery is solved: Account Abstraction (AA) wallet = Contract Account (CA) + Off-chain Communication Standards

By this point in the analysis, I believe everyone understands: although the content of the EIP-4337 proposal may take 11 to 13 months to complete, Account Abstraction (AA) wallets are not only achievable through the EIP-4337 protocol. Therefore, there are indeed genuine AA wallet products in the market, but the EIP-4337 protocol is likely to be the most recognized operational standard and solution.

As a well-established enterprise-level wallet, Cregis can certainly provide CA and GSN services: CA can be selected in private deployment, while GSN was deployed on the TRON network in April this year, saving customers 1.93 million TRX to date; however, Cregis has not rushed to publicly launch AA wallet services, precisely because the industry standards mentioned above have not yet been implemented, and a hasty launch may lead to future products being incompatible with mainstream standards.

The well-known multi-signature wallet operator Gnosis · Safe also implements multi-signature functionality through Contract Accounts (CA) and has similarly not rushed to launch AA wallets, possibly due to similar concerns.

Core Topic 3: Is the AA wallet really perfect? What are its drawbacks?

The AA wallet has many advantages, but it is not perfect. A week ago, V God commented on CA and MPC-based EOA in his Twitter AMA, and various experts discussed it deeply under this tweet. Here are a few objective drawbacks summarized for everyone:

• The cost of creating a CA is very high; the more prosperous (and congested) the Ethereum network, the more expensive it becomes;

• The security of CA relies on the builder of the smart contract. If there are vulnerabilities in the smart contract or the builder leaves a malicious backdoor, the security of user assets could be at risk. Cross-chain bridge staking contracts are also CAs, and the frequent headlines about cross-chain bridge hacks and the stolen massive assets serve as warnings about CA wallet risks;

• Currently, CA can only operate on EVM chains and does not support token receipts from BTC and non-EVM public chains. This is also the reason why Cregis can provide CA but must offer other wallet solutions to accommodate the diversity of enterprise-level user receipts.

• Calling a CA wallet relies on EOA signatures, and the EOA generated by the seed phrase requires a private key for signing. Improper management of the private key can still lead to theft, and the security logic has not been upgraded;

As one of the onlookers of this popular AMA, Cregis Research believes that there is no absolute security path in the blockchain world. Balancing convenience and security is the responsibility of each user; while providing tools that are both secure and convenient for users choosing Cregis is Cregis's responsibility: offering a fully self-custodial MPC (Multi-Party Computation) wallet + optional private deployment solutions (including CA) + rich financial SaaS functionalities, providing a new asset collaboration management platform for Web 3.0 entrepreneurs.