Author: Intern, TechFlow

On July 17, the Ethereum Community Conference (EthCC) officially opened in Paris, where Ethereum co-founder Vitalik Buterin delivered a public speech, once again endorsing smart contract wallets, focusing on the history and future of account abstraction.

This year, Vitalik has frequently voiced his support for smart contract wallets based on account abstraction. For instance, during a Twitter AMA in June, when asked about the comparison between MPC (EOA) wallets and smart contract wallets, he expressed that MPC-based EOA wallets have fundamental flaws because they cannot revoke keys, making smart contract wallets the only option.

In Vitalik's view, account abstraction is "very elegant" because it does not require changes to the underlying protocol like previous upgrades.

Account abstraction itself is a relatively abstract concept.

Currently, Ethereum accounts are tightly coupled with key pairs to the extent that they are essentially the same thing. That is, if you control the private key, you control an account.

Account abstraction will decouple the entity (account) in the EVM from the entity (key pair or signer) that owns the moving assets. As long as a CA supports specific functions (such as verifying signatures), it can be an account.

Account abstraction essentially allows users to define the security model of their accounts, making Ethereum more suitable for different use cases.

For example, this feature allows users to set their own transaction validation rules, such as multi-signature requirements or spending limits, and they can also make their accounts compatible with future cryptographic algorithms.

Vitalik describes account abstraction as allowing Ethereum accounts to be controlled by smart contract code rather than private keys.

His vision is that in the future, everyone will switch from current EOA wallets to smart contract-based wallets. If successful, managing crypto wallets will become as simple as managing email accounts.

Early Stages of Account Abstraction

Vitalik stated that the idea of allowing code to control accounts rather than just keys has been present in Ethereum's design from the beginning.

The Ethereum yellow paper outlines two types of accounts: externally owned accounts (controlled by private keys) and contract accounts (managed by smart contract code). However, some challenges arose in the early stages of implementing account abstraction.

In the first proof-of-concept version of Ethereum, there was an optimistic belief that users would adopt multi-signature wallets more. However, this did not happen immediately, and multi-signatures made it more difficult to detect deposits on exchanges. There were also complexities in paying miner fees from smart contract wallets. The initial vision was that all transactions would be simple "calls," but issues like non-unique transaction hashes made things complicated.

Evolution of Account Abstraction

Over the years, the Ethereum community has iterated on many ideas for account abstraction. Suggestions have been made around standardizing signatures, using "breakpoint" opcodes, and restricting access during transaction validation. However, progress has been slow due to the complexity of changing the underlying protocol and concerns about providing proof of stake. It wasn't until 2020 that a specific account abstraction EIP (proposal) was put forward.

Independent projects like Gas Station Network and Argent Wallet have driven further innovation. They found creative ways to enable meta-transactions and abstract accounts using only smart contracts. However, solutions relying on "wrappers" also have drawbacks, such as higher overhead for each transaction.

It wasn't until later that EIP-4337 was proposed, providing a universal account abstraction standard using only smart contracts, avoiding changes to the underlying protocol.

The Ethereum (ETH) upgrade will allow users to create non-custodial wallets as programmable smart contracts.

This will unlock many features, such as easy wallet recovery, transactions without signatures (which means lower transaction fees), and team wallets (also known as multi-signature wallets).

According to Vitalik, this upgrade could be one of the main catalysts for global Web3 adoption. "One of the key properties we want blockchains to have is to give you money before you sign up," he said.

He mentioned that the idea is to enable users to receive any tokens, such as stablecoins, in their smart contract wallets and to be able to pay gas fees without converting their holdings of ETH.

To allow these types of wallets and transactions to be broadcast, the latest account abstraction upgrade will enable "paymasters," allowing users to pay gas fees with any token they are trading.

EIP-4337 also includes signature aggregators, allowing multiple signers to come together, with only one being used for the transaction.

Vitalik stated, "This is quite an important thing," especially in Rollups, as signatures on these types of L2 solutions take up too much space.

Ethereum L2s, such as Arbitrum or Optimism, batch transactions together and validate them outside the Ethereum mainnet.

Account abstraction will allow signature aggregation. Simply put, this will allow for more data compression, translating to cheaper computation, and according to Vitalik, "will reduce costs by 86 times."

Moreover, this is not the only Ethereum upgrade currently underway. Proto-danksharding or EIP-4884 is also in progress. It has quickly become a major focus of network development as it lays the groundwork for a new type of data that will significantly reduce costs and make data usage more efficient.

Finally, Vitalik noted that there is an increasing desire to directly incorporate parts of account abstraction (like ERC-4337) into the protocol for improved efficiency and censorship resistance. He also emphasized the importance of ensuring a smooth transition for old EOA users and integrating biometric signers.