Metaversal is a Bankless newsletter for weekly level-ups on NFTs, virtual worlds, and more!
Dear Bankless Nation,
Let’s talk ERC-4337.
It’s a new Ethereum standard that introduces “Account Abstraction,” or smart account, capabilities in production.
ERC-4337’s already spread to a handful of other chains, and it’s got big implications for NFTs wherever it goes. Let’s dig into these implications for today’s post!
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To understand AA, first it’s important to grasp the basics of accounts on Ethereum and Ethereum Virtual Machine (EVM) networks.
There are two main kinds of accounts to consider here: Externally Owned Accounts (EOA) and Contract Accounts (CA).
An EOA is a simple wallet, e.g. a MetaMask wallet, that can only sign transactions. A CA is an actual smart contract, so it contains customizable code, but it can only complete transactions if approved by an EOA wallet.
What AA does, then, is essentially blend EOA x CA capabilities, making it so regular wallets can execute smart contract code. This field is a big area of interest in the Ethereum development community right now because of the many use cases it can foster. For example, the Ethereum Foundation just recently fielded submissions for a new Account Abstraction grants wave.
With its mainnet arrival announced on March 1, 2023, ERC-4337 is a new Ethereum standard that introduces AA to increase the flexibility of accounts on, and simplify user interactions with, Ethereum. Additionally, the standard is now in action on other EVM chains like Arbitrum, Avalanche, Optimism, and Polygon.
In general there are different ways to approach AA, but ERC-4337 employs an “alternative mempool” technique that can enable new kinds of transactions to be bundled and sent onchain thanks to a special “EntryPoint” smart contract. At the heart of this system are three basic elements:
🤙 UserOperation (UserOp): A transaction made from an ERC-4337 wallet, it represents the action a user wants to perform on Ethereum or an EVM.
🔢 Bundlers: A node that aggregates UserOps and creates transactions to be executed, acting as intermediaries between users and the chain in question.
🪙 Paymasters: Entities, e.g. apps, that can cover the costs of users’ UserOps gas fees.
ERC-4337’s advances can considerably simplify the user experience around interacting with crypto but also with NFTs. Some AA applications that should become increasingly commonplace here going forward include:
🔓 Simpler, Safer Accounts — Currently, NFT users need to manage a pair of cryptographic keys, e.g. safely storing a 12-word seed phrase, to keep access to their digital assets. With ERC-4337, users can instead maintain their wallets with Apple or Google accounts, etc., and recover their wallets using trusted social connections like family and friends. Conversely, apps can also use this standard to create and maintain wallets on behalf of their users too.
💨 Gasless Transactions — For instance, on Ethereum you have to pay an ETH fee as “gas” to complete transactions. With ERC-4337, users can perform transactions without needing ETH or other crypto in their wallets thanks to Paymasters. Or they could pay gas with USDC, DAI, WBTC, etc. instead of ETH. This provides a new onboarding avenue for NFT projects who want to bring in new users who may not already have much or any crypto or experience in the NFT space.
🪢 Bundled Transactions — ERC-4337 allows for multiple onchain operations to be performed in a single transaction. For example, let’s say you’re moving NFTs from one wallet to a new vault wallet. With AA you can list the ones you don’t want to keep anymore and transfer the ones you do all within a single transaction, thereby considerably reducing the complexity and time of the transaction experience.
👍 Permissioned Activity — Thanks to ERC-4337 users can now customize permissions for their accounts in various ways, like requiring multisig transactions, allowing only certain addresses to perform certain transactions on their behalf, or restricting certain activities altogether. This feature can and will offer NFT users and NFT-centric DAOs greater control over their onchain accounts, whatever the EVM chain in question.
🎮 Session Keys — Lastly, another really cool application that ERC-4337 opens up are “session keys,” i.e. temporary keys that allow a wallet to interact with a specific app in specific ways for a specific period of time. One can envision session keys becoming very popular in the NFT gaming scene, where you could use it with a game to ensure you don’t have to sign a ton of transactions or be worried about having and needing to revoke open token approvals months later.
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ERC-4337 only just recently went live on mainnet, so the infrastructure scene around it has only just begun to bloom. Some teams like Stackup are already doing a great job making it easier for builders to start developing with ERC-4337 this early on, and giants like MetaMask are exploring here, so expect a lot more traction around this standard in the months ahead as even more projects start diving in.
Zooming out, combine the powers of the ERC-4337 standard with the powers of the also recently activated ERC-6551 (NFTs as wallets) standard, and we get an exciting new era in the NFT space filled with wide open possibilities.
For example, soon you might be signing in to your main character NFT itself via your Apple account, after which you could issue session keys from your character and then jump into the hottest new NFT game safely where all your transactions will already be paid for thanks to the project using a Paymaster. That hypothetical is just a fraction of what’s to come, but it illustrates that much will change UX-wise around NFTs thanks to the dawn of these promising new standards!
William M. Peaster is the creator of Metaversal — a Bankless newsletter focused on the emergence of NFTs in the cryptoeconomy. He’s also a senior writer for the main Bankless newsletter and a contributor to NFT curation platform JPG!
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Not financial or tax advice. This newsletter is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. This newsletter is not tax advice. Talk to your accountant. Do your own research.
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