What is Account Abstraction: How Does It Reshape the World of Crypto Wallets?

In the cryptocurrency space, users cannot set multiple private keys for the same wallet address, nor can they modify them. Therefore, if a private key is lost, not only will wallet assets be lost, the wallet will never be used again and will have to be invalidated.

According to Conor Grogan, director of product strategy and business operations at Coinbase, about $1.15 billion in cryptocurrency has been permanently lost through human negligence. Grogan added that the statistic is much lower than the amount of ETH locked up due to loss of wallet access because many long-motionless assets are on the chain, and it’s impossible to tell how many of them have lost their private keys.

This post is carefully crafted by our blockchain department to explain the account abstraction technology basics and show a few examples of protocols that have already implemented it.

Table of Contents:

1. Key Features of Account Abstraction
2. ERC-4337: The Engine of Account Abstraction
3. Why Is Account Abstraction an Awesome Solution For Crypto Wallets?
4. Examples of Crypto Wallets with Account Abstraction
5. IdeaSoft Experience Building Account Abstraction – Dollet Wallet
6. The Future of Web3 Access and Account Abstraction
7. Summary

Key Features of Account Abstraction

Crypto wallets have long been a focus of Ethereum founder Vitalik Buterin. Researchers at Nethermind and Opengsn, with Vitalik’s help, have proposed ERC-4337. This solution would bring account abstraction to Ethereum without changing any consensus layer protocols. Vitalik presented his ideas in his article How I think about choosing guardians for multisig and social recovery wallets. It is dedicated to promoting the adoption of trusted third parties (Guardians) in crypto wallets.

The account abstraction technology has introduced the next level of user interaction with decentralized applications. The key difference lies in the fact that it allows for assets to be exclusively held by smart contracts rather than being controlled by externally owned accounts (EOAs) as it was previously managed. 

Key features of account abstraction in crypto wallets:

• Flexible transaction fees. Ethereum account abstraction enables gas fee payment in any ERC20 token, enhancing flexibility.
• Social recovery integration. While not intrinsic to account abstraction, social recovery is a vital feature that bolsters security and eliminates the need for traditional seed phrase management.
• Simplified security. The integration of social recovery removes the complexity of managing seed phrases, simplifying the overall user experience.

At IdeaSoft, we are excited about account abstraction. Our excitement stems from its potential to reshape how we interact with decentralized ecosystems. That is why we have prepared a detailed scheme introducing the example of how account abstraction works within the Ethereum network for your better understanding and technology onboarding.

Imagine performing a wide range of on-chain operations — from buying ETH to executing complex smart contracts — directly from your mobile phone, all with self-custody. This capability extends well beyond mere ETH purchases on DEXs like Uniswap. It facilitates seamless, secure, and user-friendly on-chain activities, with processes like fiat-to-crypto conversions (e.g., fiat to USDT/USDC) running smoothly in the background.

Current methods, such as purchasing ETH through custodial solutions, lack the trustless nature of account abstraction. Traditional custodial services require you to entrust your funds and personal data to a third party, with potential risks as seen in incidents like the FTX collapse. Account abstraction self-custodial approach offers a more secure and private alternative.

Wallet abstraction, combined with social recovery, not only makes your wallet more secure than traditional custodial options but also provides a familiar, Web2-like UI/UX. Everything technical operates under the hood, ensuring a seamless user experience.

ERC-4337: The Engine of Account Abstraction

Currently, Ethereum wallet addresses are categorized into EOA wallets (Externally Owned Accounts) and Contract wallets. ERC-4337 proposes the concept of account abstraction, which can be used to manage multiple Contract Accounts and EOAs to improve the security and operation of Ethereum accounts.

The following benefits can be realized by using account abstraction EIP:

• More efficient contract deployment and maintenance. Since multiple contracts can share the same address and private key, the workload of contract deployment and maintenance can be reduced.
• Better security. Since account contracts represent only one address and private key, the risk of private key leakage can be reduced.
• Better scalability. Since reusable contract code can be implemented, complex contract logic can be more easily realized.

In short, the vision of ERC-4337 is to achieve user-friendliness, mainly in terms of ease of use and social recovery. It also aims to attract new users by improving the UI experience of crypto wallet design.

The difficulties in implementing ERC-4337 are the development cost, compatibility, and user privacy challenges after complicating the wallet, as well as the higher gas cost of complex interaction contracts. Additionally, the implementation of Ethereum EIP-4844 is expected to further enhance scalability, making it easier to handle the increased demand and complexity of future applications.

Why Is Account Abstraction an Awesome Solution For Crypto Wallets?

Account abstraction offers 3 awesome advantages for crypto wallets:

• Enhanced security. With account abstraction, the security of the wallet is significantly improved. Traditional wallets require users to manage private keys directly, which can be prone to human error or targeted attacks. Account abstraction allows for more sophisticated security models where the complexity of key management can be abstracted away from the end-user, potentially reducing the risk of theft or loss.
• Improved user experience. Simplifying the user experience is crucial for the widespread adoption of cryptocurrencies. Ethereum account abstraction can make wallets more user-friendly by removing the need for users to handle complex cryptographic keys directly. This can encourage more people to use cryptocurrencies by reducing the barrier to entry.
• Smart contract integration. Account abstraction is particularly beneficial for platforms like Ethereum, where smart contracts play a central role. By abstracting accounts, wallets can interact seamlessly with smart contracts, enabling a wide range of decentralized applications (DApps) and financial services without sacrificing security or usability.

For example, new users no longer need to transcribe mnemonics when registering. Users who lose their wallet private keys can also recover them through social connections. Other practical benefits include multi-account/multi-chain management and bundled transactions, such as allowing the wallet to automatically renew services.

Account abstraction represents a significant advancement in the functionality of crypto wallets. By eliminating user experience complexities, such as the necessity to manage ETH fees or oversee the creation and maintenance of seed phrases/private keys, this feature greatly enhances usability for end users.

Rostyslav Bortman, Head of Blockchain Department at IdeaSoft

Examples of Crypto Wallets with Account Abstraction

Here are examples of blockchain wallets with account abstraction that are worth your attention if you think about crypto wallet app development.

Argent

The Argent wallet is a cryptocurrency wallet designed with a focus on security and ease of use. Its key features include:

• Social recovery. Argent’s social recovery feature allows users to recover their wallets by connecting with a trusted contact. This makes it easier for users to recover their wallets without memorizing complex mnemonics or private keys.
• No need to pay for gas with ETH. Argent uses MetaTransaction technology to enable users to send transactions without owning ETH. Specifically, Argent pays the gas fee for the user through a Gas Station Network (GSN) middle-tier service and deducts the corresponding fee from the user’s account.
• Attack detection. Argent wallet uses self-developed “Guardians” smart contracts to automatically detect and prevent phishing attacks, malware attacks, replay attacks, and so on. For example, when a user receives an email or text message that appears to be from Argent Wallet, the Guardians contract will detect if the message is from an official Argent channel. If it detects that the message is not from an official source, the Guardians contract automatically prevents the user from executing any transactions related to that message.

Fabric Ventures, Metaplanet, Paradigm, StarkWare, Jump Crypto, Animoca Brands, and others participated in funding this project. At this stage, Argent Wallet has a small user base, mainly due to the instability of the ZK network, lack of support for multiple cryptocurrency storage and transactions, etc.

Avocado (Instadapp)

Instadapp is an Ethereum-based DeFi protocol designed to make DeFi simpler and easier to manage. The protocol introduces Avocado, an account abstraction-based wallet. Its key features include the following:

• Multi-chain support. Avocado supports multiple blockchains, allowing users to manage multiple cryptocurrencies in the same wallet, with all gas fees paid using USDC.
• Security. Avocado wallet adopts multi-signature technology and smart contracts to protect users’ digital assets. It also supports the connection of hardware wallets.
• DeFi services. Users can access various decentralized applications directly from Avocado Wallet, such as lending, trading, and stablecoins. Additionally, users have free access to all current Instadapp policies.
• Community governance. Avocado Wallet adopts the DAO (Decentralized Autonomous Organization) governance model, where users can participate in wallet decisions and development through voting.

Coinbase Ventures, Pantera Capital, Standard Crypto, Robot Ventures, Balaji Srinivasan, and others participated in funding this project.

Braavos

Braavos is an open-source account abstraction layer that provides a simple way to manage multiple accounts and a unified interface for applications. Its features include:

• Multi-account support. Braavos supports the management of multiple accounts, including bank accounts, Alipay, PayPal, and so on.
• Unified API. Braavos provides a unified API that enables applications to use the same code for different account types.
• Security. Braavos uses the OAuth2 protocol to handle authorization and authentication, ensuring data security.
• Easily extensible. Braavos is designed to be easily extended to support new account types and services.
• Automated. Braavos automates the processing of account balances and transaction history, allowing the application to focus on core business logic.

Pantera Capital funded Braavos with participation from StarkWare, Crypto.com Capital, Matrixport Ventures, etc. Braavos’ hardware security module is implemented through account abstraction and can verify arbitrary signatures.

IdeaSoft Experience Building Account Abstraction – Dollet Wallet 

Dollet is a non-custodial crypto wallet that provides users with the finest crypto holding experience while allowing for additional income generation. The core functionality is designed to support ERC-20 tokens, allowing users to send and receive crypto easily. Alongside these basic features, it offers options for bridging, swapping, and buying crypto directly within the app.

Furthermore, what sets Dollet apart is that the app enables users to pool deposits across various networks and employs yield farming techniques to help grow the assets held in the wallet. The app also includes standard features such as settings, biometric authentication, and notifications, enhancing user experience and convenience.

The introduction of account abstraction brings significant enhancements to Dollet’s core functionality and is aimed at improving user experience and driving adoption.

Two key account abstraction features to be implemented:

• Social recovery feature. Social login presents a challenge for existing Dollet users as their accounts are Externally Owned Accounts, incompatible with social network integration designed for Contract Accounts (CA). To address this, users are prompted to import their private keys to enable social login, ensuring privacy as Dollet does not store such sensitive information. Notably, registration via social networks creates a user’s CA, offering a seamless transition for users.
• Transaction fee payment in ERC-20 tokens. Existing EOA users face limitations as only CA users can utilize this feature. Dollet offers two solutions: either creating “sub-accounts” within a user’s account, maintaining separate balances for EOA and CA, or transitioning the user to a CA, enabling ERC-20 fee payments. Users are informed of this transition and given the choice to migrate, with funds transferred accordingly, ensuring a smooth transition process.

The Future of Web3 Access and Account Abstraction

ERC-4337-based wallets focus on abstracting the underlying functionality. Social recovery, no native Gas fees, and bundled packaged transactions are some of the features that can dramatically improve the UI experience. In addition, a modular development platform integrating ERC-4377, such as Patch, Sequence, and Gelote, may become mainstream.

Account abstraction wallets may need a more “Make Sense” case to be adopted on a large scale. The “No Gas Fee” tagline of several projects at this stage is somewhat misleading. The logic behind this is to allow users to pay for gas with non-ETH currencies such as USDC. On the other hand, the wallet’s multi-chain dilemma has not been significantly improved. Wallets that claim to be able to realize multi-chain are only geared towards EVM-compatible chains, while eco-wallets are still trapped in a silo effect.

Smart wallets in crypto are becoming a trend, and other competitors have emerged in the niche. MPC wallets decentralize the storage of private keys in multiple devices and use multi-party computing to achieve functions such as no private key and social recovery. For example, MPC Wallet Capsule has expanded the use of on-chain transactions by introducing programmable MPCs. Meanwhile, Telegram, which has a large user base, launched a crypto wallet that currently supports trading BTC, TON, and USDT directly from the app’s chat interface. These competitors are also competing for users and are constantly introducing new features and services.

Summary

Account abstraction technology is reshaping cryptocurrency management by offering a customizable alternative to the traditional EOA model. This innovation, outlined in our review, addresses the shortcomings of existing crypto wallets by allowing users to tailor their accounts through smart contracts. By enhancing security, functionality, and user experience, account abstraction not only improves the current crypto wallet market but also opens avenues for next-gen crypto innovations. Want your project to be the next unicorn?…