The crypto space is a rapidly evolving one, and it spots a few significant upgrades every once in a while. One of the latest proposals is the ERC 4337 standard, which allows users to bundle and automate transactions on Ethereum.
Here is everything you need to know about ERC 4337.
What is ERC 4337?
This is a game-changing token standard on the Ethereum mainnet that brings innovative changes to the network. These changes include the much-coveted account abstraction, drawing a billion users to the ecosystem.
Account Abstraction
Account Abstraction is a concept that will enable greater democratization of the blockchain. It will allow users to interact with the blockchain more flexibly and without worrying about the private key! With account abstraction, people can finally use the Blockchain without even realizing it! The effect of this will be the rapid onboarding of non-crypto users onto Web3.
It was deployed on the mainnet in March 2023, so it is no longer EIP-4337 but ERC-4337. Open Zeppelin completed the code audit for this protocol, and the Ethereum Foundation allocated a budget of $300,000 to encourage the development of projects using this new standard.
To really grasp the importance of ERC 4337, you must first understand the types of Ethereum accounts that exist:
- Externally Owned Accounts (EOA) – These are accounts composed of a cryptographic pair of private and public keys. You are probably already familiar with this type of account. The public key is used to receive payments, while the private key unlocks the funds in the account.
- Contract Account (CA) – This is a computer code designed to specify the account’s behavior. It consists of an address without a private key.
To record information on the blockchain (such as transfers, minting, ..), a transaction needs to be sent, and this transaction must be signed by an EOA that pays transaction fees. With an EOA account, you can transfer tokens to another EOA and interact with a CA.
However, EOAs can only perform these two operations. On top of that, losing the private key results in losing funds without the possibility of recovery.
CAs, on the other hand, require programming skills to set up; therefore, a small coding mistake can lead to loss of funds or unintended consequences.
Since both types of accounts have setbacks, they slow down adoption. And this is where ERC-4337 comes into play.
ERC 4337 standard combines the features of both types of accounts with the idea of offering the advantages of an EOA (ease of creation and use) and the advantages of a smart contract (flexibility). The result is SMART CONTRACT WALLETS.
How Does a Smart Contract Wallet Work?
ERC-4337 introduces a set of special operations and interfaces that are specific to it. They include the bundler (special nodes), an Entry point, and a special mempool. The process goes like this:
- Users perform operations sent to the mempool (you can see it as a waiting room).
- Nodes called “Bundlers” then gather these operations into a single transaction, and the Bundler sends the transaction to a specific contract called the “EntryPoint.”
- The contract (entry point) has several functions which it calls:
- handleOps() – This function calls the validateOp() and execute() functions present in each smart contract wallet
- validateOp() – This one verifies the operation signature and pays for the fee.
- execute() – This function executes the operation after the validation
This new process enables use without a private key and a greater variety of actions (Basically Account Abstraction).
Benefits of ERC 4337
- Gasless transactions – Users can pay transaction fees with tokens (no ETH)
- Security: This type of abstraction separates the transaction’s signature from the account address, allowing users to interact more securely on the Ethereum blockchain.
- Scalability: The new process will handle a much higher number of operations per second since multiple operations will be integrated into a single transaction.
- Account recovery: EIP-4337 has social recovery features that make a recovery easier
Final Thought
ERC 4337 will attract many users as the required skills will be reduced. Much of the population not in crypto has been shying away because they feel the tech is too much for them. It will enable businesses and institutions to imagine various use cases. Conversely, ERC-4337 is relatively complex, and developers will take time to grasp it to create decentralized applications. The significant expertise required will limit the number of devs who can integrate it. Anything attracting new users and use cases are good for the ecosystem and, therefore, much welcome.