DeFi Apps Prepare For Ethereum’s Biggest Update Since The Merge: Account Abstraction
Ethereum’s largest ecosystem update since The Merge occurred.
Crypto players showcased new products at ETHDenver 2023. Among the highlights: implementing EIP-4337, an Ethereum Improvement Proposal that improves the ecosystem without changing its consensus-layer code.
The proposal is known as Account Abstraction.
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Safe, or Gnosis Safe, is a self-custody crypto protocol that secures billions of dollars in digital assets. The company’s co-founder, Lukas Schor, announced Safe updates to support EIP-4337.
“First generation wallets have this thing called Private Keys, which is like a secret key, that if you have it, you have access to all assets within the account. It’s quite magical that no one else is between you and your assets,” Schor told Benzinga.
“There’s no middleman; there’s no one that can tell you you cannot do something.”
Schor compared it to an apartment where the renter has just one key. Lose that key, and you can’t recover it or make a new one. And if someone else gets the key, they can go to your apartment to take everything.
What Account Abstraction does is make these wallets smart.
“It’s like putting a chip into a wallet where you can say it’s not just this one key, it’s maybe different keys that you store in different places or give to different people,” Schor says. “It can be that you have different keys that have different rights. So the key that’s on your phone that you can use to do some smaller transactions on a day-to-day basis. But if you want to move for a bigger amount of money, you actually have to collect the keys that you have at home in your safe.”
Benefits
Account Abstraction could also prevent scams. Users can set limits for transaction amounts, limiting the value of funds that could leave a wallet at any time.
Origin Protocol co-founder Josh Fraser explained that, in terms of user security, Account Abstraction is critical for the average user to interact with blockchain safely.
“Nobody walks around with all their savings in their pockets, so why should it be any different in crypto?” he said.
While DeFi may be among the first applications for this update, Alex Xu, a research partner at Mint Ventures, expects to the gaming sector to benefit, too.
“Account abstraction is essential for the long-term success of web3 games. It simplifies the process of owning a crypto account, making it easier for new users to access these games while still experiencing the benefits of true ownership over their accounts and assets,” Xu says.
Account abstraction is a critical piece of the puzzle for web3 game developers to attract and retain users, Xu explains, calling it “a crucial step towards building a sustainable ecosystem of web3 games.”
However, more work needs to be done to address “the primary challenge of demonstrating their unique value proposition,” he added.
Separately, DeFi apps Uniswap and 1inch launched mobile wallets — a possible play to take advantage of EIP-4337.
Developers, it appears, have only scraped the surface of this latest update. There’s innovation happening at breakneck speeds — regardless of ether’s price.