Using a wallet to navigate web3 is often seen as overly complicated.
However, a recent Ethereum upgrade opens the door to a better UX.
Since its inception, cryptocurrency has asked more of its users than most technology. Whereas traditional public-facing finance is generally intuitive and easy to use, navigating blockchains and private keys takes a little training. That initial layer of difficulty and responsibility is what many believe is stopping millions from opening up their own wallet.
However, Ethereum’s March 7 ERC-4337 upgrade is so far one of the biggest steps the industry has taken to solve its poor UX and general user unfriendliness. Its implementation allows for account abstraction, which has prompted an arms race of builders trying to upgrade the wallet experience. But what exactly is it?
Traditional Ethereum accounts, or “externally owned accounts” (EOAs) rely on users to interact with the intricacies of the blockchain. EOAs also lack the flexibility and dimension of other financial apps and neobanks by not including functions such as imposing spending limits or setting controls on how and when funds are spent. The kind of features you’d expect elsewhere.
This is where account abstraction comes in. By delegating to smart contracts these “smart contract wallets” can get an extra layer of functionality: the ability to pay for a subscription, pass on funds to a relative, recover lost private keys, and gasless transactions. In the future, users can also expect to log in to their web3 accounts with an email, social login, or phone number.
“Account abstraction enhances user experience by embedding transaction validation processes, like signature verification and gas payments, into smart contracts, eliminating the need for users to manage these aspects actively,” Lukas Schor, the co-founder of Safe, an Ethereum smart contract wallet, told CCN.
EOAs fall short on the security front, too, with their single point of vulnerability via private keys. Once you lose it, you’re locked out forever—a worry that, mercilessly, doesn’t come with your email or bank account. The ideal crypto wallet is a smart contract wallet “anyone, anywhere, can use irrespective of their technical know-how or knowledge,” said Schor. One where the wires are hidden, and these concerns are removed from the picture.
The long-awaited overhaul has sparked significant enthusiasm. Over 730,000 ERC-4337 smart accounts found deployment on Ethereum and L2s in Q3, according to Will Hennessy, Product Manager at Alchemy, when speaking to CCN, leading to increased interest from institutional and web2 players.
Whilst conceding that it was difficult to pinpoint a precise timeline for when web3 will achieve the seamlessness of conventional digital services, he remained bullish. “We could see a web3 wallet experience, combining the ease of web2 with the security and autonomy of blockchain, becoming a reality within a few months,” he said.
Schor’s optimism stems from the rapid advancements we’re witnessing in real-time, he explained. It‘s mostly about putting the pieces together and rolling it out at scale.
“World App is a prime example, demonstrating how the integration of account abstraction and Layer 2 scaling solutions are not just theoretical but practically applicable,” added Schor.
That added functionality is important. Without a user experience that competes with your mobile banking app, digital assets, and finance will struggle to break through beyond crypto devotees. Schor compared expecting the next billion crypto users to onboard without account abstraction would be akin to transitioning to electric cars without building charging infrastructure.
“The challenges with private key management, gas fees, and network switching are comparable to the range anxiety and lack of charging stations that early electric car adopters face,” he said. “Account abstraction is not just an enhancement; it’s a necessity.”
However, implementing account abstraction is “notoriously difficult,” says Ambire Wallet CEO Ivo Georgiev, due to the “gas overhead” that makes transaction fees expensive. Another challenge is ensuring a consistent wallet address across all blockchain networks to minimize user errors.
“The only thing that’s holding adoption back right now is a product that provides account recovery and security, while preserving the positive characteristics of traditional wallets, such as… low transaction fees, easy integration and connection with dapps and availability on all device types,” said Georgiev.
Georgiev is less optimistic about light-speed progress, believing it could take a couple of years. But he clarified that there are no fundamental blockers to a more seamless, Web2-like wallet.
A better user experience will be a “significant step forward,” he believes. As well as the added security, a simplified wallet could mean that crypto holders are more likely to use self-custody solutions. That, in turn, could reduce the chances of another FTX-like catastrophe where depositors lose billions of dollars in crypto assets. Three cheers for that, at least.