Ethereum’s account abstraction (ETH) uses smart contract wallets to manage users’ account activity and blockchain transactions. It hides the complex processes of blockchain interaction and could finally make web3 apps easier for users.
Blockchain technology has long promised a decentralized future, but its notoriously complex inner workings have severely hampered widespread mainstream adoption. Now, Ethereum developers are taking advantage of a feature called “account abstraction” to completely simplify and streamline blockchain interactions for regular users. But how does this new abstraction model actually work under the hood?
EOAs vs. smart contract wallets
To understand what account abstraction is, we must first examine the two primary account types that currently exist on Ethereum:
External Ownership of Accounts (EOAs) consist of public-private key pairs that users must securely manage themselves. The public key is the account address you share, while the private key proves ownership and allows you to sign your transactions.
To perform any action on the blockchain, users must install browser extensions such as MetaMask, copy long cryptographic addresses, approve each transaction prompt, and manually sign each transaction with their private key. This cumbersome process can frustrate new users. And if you ever lose your private key, you’ll lose access to your account and funds forever, with no way to recover.
Smart contracts are advanced programmable accounts that allow developers to program custom logic, rules, and capabilities directly into the contract code itself. For example, a smart contract wallet would enable social recovery features, daily transaction limits, access controls, account freezes, batch sending, and many other capabilities not possible with a standard private key-based account. Smart contracts are accounts managed by code rather than private keys.
The core innovation of Ethereum’s new account abstraction protocol is the use of smart contract wallets to fully manage users’ account activity and blockchain transactions behind the scenes. This abstracts many of the complexities of blockchain interaction from the user experience.
How does account abstraction work?
The technical design is outlined in an Ethereum Improvement Proposal called EIP-4337:
When a user wants to perform an action through a web3 application, he simply submits something called a “User controls‘in a pool known as the alt mempool. This user action contains instructions such as “send 0.05 ETH to address1” or “buy NFT #2456” without requiring direct blockchain signatures.
Validators on the network, called “bundlers,” periodically retrieve user operations from the mempool, bundle groups of them together into packet transactions called “bundle transactions,” and submit these bundles to a central global smart contract called EntryPoint.
The EntryPoint contract acts as a router and forwards each user operation to the relevant smart contract wallet it belongs to. It calls validateUserOp(), which verifies the user’s signature, pays gas fees, and approves/rejects the operation. Then execute() is executed to perform the operation in the chain.
This suite allows users to easily submit user operations while their smart contract wallet handles validating, bundling, paying for gas, and executing Ethereum transactions behind the scenes. All blockchain complexity is pulled away from the users.
Benefits of Ethereum account abstraction
The implications are profound when it comes to opening up web3 to the mainstream. Regular users would be able to participate in DeFi, NFTs and blockchain applications without crypto wallets or understanding cryptography involving public keys, addresses, gas fees and signatures.
Account abstraction also enables easy-to-use features not otherwise possible, such as social recovery, spending limits, batch transactions, and approvals. This brings smart contract wallets significantly closer to the usability standards people expect from traditional finance.
While highly complex under the hood, account abstraction ultimately provides the simplified user experience needed to drive mass adoption of decentralized apps. By abstracting the complexity of the blockchain, Ethereum’s new protocol brings the user’s vision of web3 closer to reality.
What are the disadvantages of account abstraction?
However, this approach has one major disadvantage. Although the smart contracts involved in implementing Ethereum’s account abstraction have been extensively reviewed, they still introduce more complexity into a critical system compared to a simple private-public key pair based account.
Complexity results in more potential security vulnerabilities and a larger one attack surface. For this reason, it is only recommended to use this type of account if you actually want to use the exclusive feature, and the most recommended wallet for most users is still a hardware wallet.
