Why Does Vitalik Value Account Abstraction? How Will It Unlock the Door to Web3 Applications?
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Why Does Vitalik Value Account Abstraction? How Will It Unlock the Door to Web3 Applications?
Account abstraction has the potential to remove barriers between Web2 and Web3 applications, making Web3 accounts as convenient as traditional bank accounts.
Navigating Web3 tides with focused insightsBy Asher Zhang, TechFlow
On February 28, 2023, ERC-4337—the standard protocol for account abstraction—was deployed on the Ethereum mainnet and has since expanded to over 20 EVM-compatible blockchains. As of January 20, abstracted accounts reached approximately 2.05 million, with UserOps totaling around 8.35 million, demonstrating rapid growth. But what exactly is account abstraction, a concept championed by Vitalik Buterin? Why is it so important? And which key projects should we be watching?
Why Is Account Abstraction So Important?
Throughout 2023, Vitalik Buterin frequently voiced his support for smart contract wallets enabled by account abstraction. For instance, during a Twitter AMA in June 2023, when asked about MPC-based (EOA) wallets versus smart contract wallets, he stated that MPC-based EOA wallets have fundamental flaws because they cannot revoke keys, asserting that smart contract wallets are the only viable solution. Indeed, Vitalik Buterin has been a major driving force behind the adoption and development of the ERC-4337 upgrade, which he believes could become one of the primary catalysts for global Web3 adoption. There is growing interest in integrating certain aspects of account abstraction—such as ERC-4337—directly into the Ethereum protocol to enhance efficiency and censorship resistance, while also ensuring smooth transitions for legacy EOA users and supporting innovative features like biometric signers.
So, what exactly is Ethereum account abstraction? The Ethereum account system can be broadly divided into two types: EOA (Externally Owned Account) and CA (Contract Account). EOAs are native to Ethereum and used to initiate transactions. CAs, being essentially smart contracts, offer greater flexibility and programmability, enabling better user experiences. However, CAs cannot directly initiate Ethereum transactions and still rely on EOAs, inheriting their drawbacks such as private key risks. With ERC-4337’s account abstraction standard, users can fully control their own CA and use any desired verification method, while the actual task of initiating Ethereum transactions is handled by a Bundler.
What is the current state of account abstraction development? Since account abstraction based on ERC-4337 involves more contract calls and incurs additional gas costs, most UserOps occur on Layer 2 networks, primarily Polygon, Arbitrum, and Optimism. Looking at the evolution of abstracted accounts, user growth has occurred in three main waves: the first driven by Learn-to-Earn project The Capx App, which leveraged AA's batch operation advantages for token transfers and attracted many users; the second spurred by CyberConnect’s Cyber Trek campaign, incentivizing users to create Cyber Accounts using AA; and the third fueled by ZepetoX (ZTX), a metaverse project on Arbitrum. Overall, abstracted accounts show an upward trend, but as many mainstream projects have yet to adopt the technology, the ecosystem remains in its early stages.
Overview of Leading Account Abstraction Projects
Currently, there are four leading projects in the account abstraction space: Pimlico, Alchemy, Biconomy, and Stackup.
Pimlico: Pimlico is an infrastructure platform for building next-generation smart accounts. It provides developers working on ERC-4337 smart accounts with tools such as bundlers, Paymaster validators, and ERC-20 payers, helping them build more user-friendly decentralized applications (dApps). On September 25, 2023, Pimlico announced a $1.6 million pre-seed round led by 1confirmation, with participation from Safe, Consensys, and over a dozen angel investors. On November 7, 2023, Pimlico announced a $4.2 million seed round led by a16z crypto.
Alchemy: Founded in 2017, Alchemy is a blockchain infrastructure company whose primary business is providing blockchain development platform services to improve developer and end-user experience. Through the creation of developer tools and computing infrastructure, Alchemy aims to enable a MultiChain future.
Biconomy: Offers plug-and-play API services that allow anyone to access DApps without requiring specialized knowledge or experience. Currently, Biconomy's multi-chain relayer infrastructure processes nearly 50,000 transactions daily across more than 70 Web3, DeFi, and NFT dApps. Its core offerings include Hyphen (instant cross-chain bridging), Gasless (gas-free transactions), and Forward (flexible gas fee payments). Biconomy has received investments from DACM, Mechanism Capital, Coinbase Ventures, Huobi Ventures, Bain Capital, NFX, Ledgerprime, Huobi Innovation Labs, and Primitive Ventures.
Stackup: Operates bundler services across multiple chains, leading in profitability on Arbitrum and Ethereum, though slightly behind in other areas.
The Future Development of Account Abstraction
Having reviewed the current state of account abstraction, what does the future hold commercially? Let’s briefly examine how account abstraction works:
1. Users initiate a UserOperation (UserOp) via their Contract Account (CA), sending it to a dedicated UserOp mempool. (Note: UserOp is a new type of transaction introduced by ERC-4337.)
2. A Bundler collects these UserOps from the mempool, bundles them into a single transaction, and submits it to the EntryPoint contract using their EOA. Since the Bundler initiates the transaction, they also pay the gas fees.
3. The EntryPoint contract standardizes execution and protects Bundlers from malicious DoS attacks. All Bundlers must call this contract to execute UserOps.
4. Users must deposit funds in the EntryPoint contract to reimburse the Bundler for gas, or a Paymaster—an arbitrary third party willing to cover gas fees—can pay on their behalf.
5. If the user hasn’t created a contract wallet yet, a Wallet Factory contract will automatically deploy one for them.
In account abstraction, the Bundler is essentially an EOA. Thanks to Bundlers, users can trigger smart contract wallet transactions without needing to create or manage EOA private keys. Bundlers validate UserOperations, bundle multiple UserOperations into a single "bundled transaction," and broadcast the validated content to public or private mempools. After executing UserOperations, Bundlers profit from the difference between the maximum priority fee and the actual gas cost. Additionally, similar to traditional transaction relayers, Bundlers can extract MEV by reordering UserOperations within the bundled transaction. In the long term, Paymasters’ commercial opportunities may include serving as gas payment gateways, enabling automatic token swaps, and integrating with DeFi and gaming projects for traffic referral—paralleling innovations seen in the traditional payments industry. While Paymaster innovation paths are relatively narrow, this role offers the most stable value capture, significantly lowering the barrier for Web2 users entering Web3, potentially attracting numerous Web2 institutions to deploy Paymaster services.
Conclusion
Championed by Vitalik Buterin, account abstraction has experienced rapid growth since launch, with many projects already deploying abstracted account wallets. Nevertheless, the ecosystem remains in its early stages overall, as many mainstream applications have yet to adopt the technology and user migration rates need further improvement. In the long run, account abstraction holds the potential to eliminate barriers between Web2 and Web3 applications, making Web3 accounts as convenient as traditional bank accounts. This represents a crucial step toward mass Web3 adoption, making the account abstraction赛道 highly promising and worthy of investor attention.
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