Huobi Growth Academy | Account Abstraction (AA) In-Depth Report: The Generational Leap of Ethereum's Account System and the Reshaping of the Landscape Over the Next Five Years
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Huobi Growth Academy | Account Abstraction (AA) In-Depth Report: The Generational Leap of Ethereum's Account System and the Reshaping of the Landscape Over the Next Five Years
AA will exist long-term as a premium account tier rather than the sole standard; x402 complements cross-chain and payment interoperability. Together, they drive Web3 from the geek era into the mass adoption era.
Navigating Web3 tides with focused insightsAbstract
Ethereum underwent a major upgrade named Fusaka on December 3, 2025—its third milestone update since The Merge and Dencun—aiming to significantly enhance network scalability, reduce transaction costs, and optimize node operation efficiency. This upgrade placed particular emphasis on enhancing and refining account abstraction (AA) functionalities. As a transformative evolution in Ethereum's account architecture, AA addresses the fundamental security and usability bottlenecks of the EOA era’s “private key = account” model, enabling blockchain accounts with modern capabilities such as programmability, recoverability, and granular permission control. The implementation of ERC-4337 has accelerated the formation of the smart account ecosystem; however, challenges including high costs, unclear business models, fragmented ecosystems, and limited cross-chain functionality have led to adoption progress characterized by “technological leadership but lagging deployment.” With cost reductions from Rollups, BLS signature aggregation, and EIP-7702 offering seamless upgrade paths, AA is gradually entering a phase suitable for scalable application. Over the next five years, AA will become the “high-end intelligent layer” of on-chain accounts—not replacing EOAs—but coexisting with interoperability protocols like x402, collectively advancing Web3 from its geek-centric roots into the mainstream era and laying foundational infrastructure for a unified internet identity system.
1. History and Full Capabilities of AA Accounts
Ethereum underwent a major upgrade named Fusaka on December 3, 2025—its third milestone update since The Merge and Dencun—aiming to significantly enhance network scalability, reduce transaction costs, and optimize node operation efficiency. This upgrade particularly emphasized improvements to account abstraction (AA). Within Ethereum’s architecture, the evolution of account structures fundamentally shapes user experience, asset security, and industrial advancement. The dual-account model of EOAs (Externally-Owned Accounts) and CAs (Contract Accounts), inherited from Ethereum’s 2015 launch, has increasingly revealed structural limitations as user scale surpasses tens of millions and Web3 begins serving as an infrastructure for asset custody and user operations during 2023–2025. These bottlenecks constrain both industry expansion and real-world application adoption. Account Abstraction (AA) emerges precisely to resolve inherent structural flaws in Ethereum’s account system, endowing the on-chain world with modern financial-grade security, usability, and autonomy—ultimately establishing it as a trusted global asset infrastructure. The root cause of these limitations lies in EOA’s protocol-level hardcoding of the “private key = asset” security model: simple in engineering design, yet the greatest barrier to mass adoption in practice.
The operational structure of EOAs resembles a "mechanical assembly line," far removed from the “one-click execution” familiar to modern internet users. Additionally, EOAs lack any fine-grained permission controls—they cannot set daily spending limits, define multi-signature rules, create parent-child accounts, freeze partial permissions, or enable automated strategies. An EOA functions like a master key holding all assets and privileges; once compromised, everything is exposed.
Thus, the Ethereum community began rethinking what an “account should be,” and AA offers a precise solution: an account should be “code,” not “private keys.” Under the AA paradigm, accounts can be programmed, verified, recovered, and upgraded. In other words, restrictions hardcoded into the EOA framework are abstracted away, transforming wallets from mere signature containers into logical, strategic, and permission-aware “smart accounts.” The development of AA was not instantaneous but evolved through prolonged design debates involving key proposals such as EIP-86, EIP-2938, ERC-4337, and the latest EIP-7702. EIP-86 and EIP-2938 required consensus-layer modifications, making them difficult to implement. ERC-4337’s brilliance lies in building AA via a “parallel system” using UserOperations and Bundlers, bypassing底层 protocol changes and allowing AA to operate seamlessly within the existing Ethereum ecosystem. ERC-4337 essentially creates a new channel parallel to the transaction mempool, where users submit UserOperations instead of transactions. These are then bundled, simulated, aggregated, and executed through the EntryPoint contract, enabling features such as contract-initiated transactions, batch execution, atomic operations, and multi-signature validation. While this approach increases engineering complexity, it remains the most viable path to full AA deployment without requiring a hard fork. During 2024–2025, Vitalik proposed EIP-7702 to further streamline the transition between EOAs and AA, though full ecosystem support is still pending. AA’s significance extends beyond fixing EOA’s structural flaws—it enables generational leaps in user experience, security, and cost efficiency. On the security front, AA introduces programmable permission systems: users can enable social recovery mechanisms, eliminating concerns over lost mnemonics; set up multi-signature rules for families, institutions, or DAOs; create sub-accounts, whitelists, and spending caps; even freeze certain permissions or use temporary keys to increase flexibility. The EOA’s “single point of failure” model is effectively eliminated, resulting in exponential security improvements. From a cost perspective, Paymaster integration allows users to pay gas fees using any ERC-20 token—or even have projects cover gas fees—enabling truly “invisible fee” experiences. Furthermore, AA supports batch execution and transaction aggregation, drastically reducing signature counts and failure costs, thereby lowering overall expenses for complex interactions. In terms of user experience, AA brings Web3 interactions closer to Web2 for the first time. Users can execute composite actions with one click, without needing to understand nonce, gas settings, or signature order. New users can create wallets without mnemonics, using biometric authentication, local recovery, or email verification for account initialization. Complex on-chain logic—such as strategy trading, automated liquidation, or scheduled execution—can be embedded directly into account logic, making “smart products” feasible on-chain.
The ultimate vision of AA is to transform blockchains from “experimental systems for technical experts” into “universal account infrastructures for global users.” If the past decade of Web3 was constrained by the primitive “key-as-account” model, the next decade’s breakthrough will come from the new paradigm of “account-as-program.” AA is not merely a wallet upgrade—it represents a complete rewrite of on-chain interaction logic. It not only enhances user experience but also lowers development barriers, enabling DApps to design workflows and define permissions like Web2 products while building trustless security frameworks at the account layer. As the ERC-4337 ecosystem exploded during 2024–2025, components such as Bundlers, Paymasters, AA wallets, and modular security plugins gradually formed a mature supply chain. Account abstraction is transitioning from “concept” to “infrastructure.” Just as the shift from Web1.0 to Web2.0 on mobile platforms gave rise to super apps and trillion-dollar industries, the rollout of AA could serve as the foundational driver behind Web3’s next exponential growth phase. The limitations of the EOA era are being systematically dismantled, with AA leading the industry toward a safer, more flexible, and more user-friendly on-chain future.
2. Prospects and Challenges of AA Accounts
Account Abstraction (AA) reemerged as a core narrative in the Ethereum ecosystem during 2023–2025, but after initial excitement, its structural difficulties have become increasingly evident. Long-term prospects for AA remain high—it promises generational improvements in security, usability, and automation, aiming to replace the EOA-era “private key = account” model. However, practical implementation has drawn repeated skepticism, often described as “more thunder than rain.” Viewed through the lenses of industrial structure, cost models, ecosystem collaboration, and competing protocols, AA’s promise is intertwined with significant challenges—representing both the future of blockchain account systems and the complexities inherent in protocol-level upgrades.
From a cost perspective, AA’s primary obstacle is gas fees. Compared to EOA’s standard 21,000 gas, AA’s UserOperation averages around 42,000 gas on mainnet—nearly double. This isn’t due to inefficiency but rather structural overhead: the 4337 validation process includes validateUserOp calls, EntryPoint state access, wallet contract bytecode reads, log recording, initCode deployment, and data encoding—all adding computational burden. While moving complex logic into contract wallets is conceptually correct (since real accounts should be programmable, verifiable, and controllable), Ethereum L1’s expensive resources mean even elegant designs ultimately translate into higher costs, which becomes the strongest barrier to adoption. Many potential users and developers are deterred as a result. On the business model front, another core component of AA—Paymaster—faces unclear ROI. Paymaster allows projects to subsidize user gas fees in exchange for user acquisition or engagement value. But there is no reliable mechanism to quantify the causal chain: “gas subsidy → new users → retention and conversion.” Most wallets or DApps rely on early-stage subsidies to attract users, but once subsidies end, user migration costs are low, preventing strong network effects. More critically, the Web3 ecosystem lacks the closed-loop advertising, retention, and traffic chains common in Web2, meaning Paymaster investments often go unrewarded and fail to form sustainable commercial cycles. Thus, slow AA adoption is less a technical issue than a lack of commercial traction. Markets don’t pay for ideas—they pay for profits. Fragmentation across ecosystems further exacerbates ERC-4337’s difficulties. A complete AA stack includes EntryPoint, Bundler, Paymaster, Wallet Contract, and Aggregator—each potentially implemented differently by various wallet providers and chains. Due to AA’s complexity, UserOperations aren’t processed directly by the chain but must pass through Bundler simulation and aggregation. Even minor implementation differences can lead to incompatibility. Wallet incompatibility, high DApp integration costs, and complex testing environments force developers to carefully assess cost-benefit ratios. While EOA may be primitive, it’s extremely simple; AA, despite its advantages, faces early-stage “ecosystem fragmentation.” For most small-to-medium DApps, supporting ERC-4337 brings little benefit while increasing technical overhead—leading to a default stance of “avoid if possible.”
The absence of cross-chain capabilities also undermines AA’s systemic value. ERC-4337 is fundamentally an EVM-layer account upgrade, relying on EntryPoint, UserOp patterns, and EVM validation logic—making it inherently difficult to extend to non-EVM chains. Achieving unified multi-chain experiences would require additional middleware layers, multiple EntryPoints, repeated validations, and cross-chain messaging—dramatically increasing cost and complexity. Given that the Web3 world is already fragmented across chains, AA’s inability to unify account systems across chains prevents it from fulfilling its vision as a “universal Web3 account standard.” A user’s smart account on one chain cannot frictionlessly map to another, severely limiting AA’s scalability. Nevertheless, despite these structural hurdles, AA remains a highly promising direction—because next-generation blockchain infrastructure trends are aligning naturally with AA rather than diverging from it. In particular, the large-scale rise of L2s (Rollups) structurally mitigates AA’s cost issues. Leading ZK and Optimistic Rollups achieve data compression that reduces ERC-4337 gas costs by 70%–90%, while batched UserOperations further lower per-operation on-chain expenses. Hence, “Rollup + AA” is likely to become the dominant combination over the next three to five years, relieving Ethereum mainnet from bearing the cost burden of frequent AA operations. Concurrently, ERC-4337 continues evolving, most notably through the introduction of BLS aggregate signatures. By combining multiple user operations into a single signature and executing them in batches, the volume of on-chain data published is greatly reduced—improving TPS and cutting gas consumption. More importantly, it enhances on-chain throughput, transforming AA from just a “wallet upgrade” into a “more efficient on-chain operation protocol.” Combined with Rollup compression, AA’s core performance and cost bottlenecks are being unlocked, revealing growing commercial viability. Moreover, Vitalik’s EIP-7702 introduces a “temporary conversion” path from EOA to smart accounts, enabling users to instantly leverage AA capabilities within transactions—without migrating assets or changing wallets. EIP-7702 significantly reduces ecosystem congestion, allowing wallet providers to upgrade incrementally without rebuilding underlying architectures—letting users enter the AA world almost imperceptibly. This marks a pivotal shift: AA no longer needs to “replace EOA,” but can coexist and interoperate with it, achieving ecosystem migration through gradual evolution.
However, AA’s greatest challenge comes from a sudden contender that emerged in 2024–2025: the x402 protocol. Unlike AA, x402 functions more like an “internet-scale unified payment protocol,” using HTTP 402 as an entry point to unify Web2 and Web3 payment interfaces. While AA aims to solve “intra-chain account abstraction,” x402 targets “internet-wide payment abstraction.” AA focuses on Web3 users; x402 targets the entire internet population. Crucially, x402 possesses a natural commercial loop: Providers and Facilitators earn direct fees from payment flows, giving it clear market incentives. Within the x402 framework, ERC-8004 becomes a “tool protocol” rather than a foundational infrastructure requiring full network migration—making adoption far easier than AA. While AA must convince the ecosystem to adopt its defined standards, x402 adapts to existing internet behaviors—giving it a clear advantage in commercial adoption. Therefore, AA’s long-term outlook is clear, but the road ahead is rocky. There is deep tension between technological elegance and industrial reality: the future envisioned by AA is indeed better, but realizing it requires overcoming multiple hurdles—cost, commercial incentives, ecosystem fragmentation, and competing protocols. With the arrival of the Rollup era, maturation of signature aggregation technologies, and EIP-7702 opening compatibility pathways, AA’s cost and interoperability issues will gradually ease. Yet, business models and cross-chain capabilities still require breakthroughs. The critical factor over the coming years won’t be whether AA is more advanced, but whether the industry finds a way for it to “naturally diffuse.” The future belongs not to pure technologists, but to those ecosystems capable of connecting “protocol capability → product experience → commercial value.” AA may not be the easiest solution to promote, but it remains the most promising candidate to reshape the on-chain account system.
3. Investment Value and Future Outlook of AA Accounts
Account Abstraction (AA) is transitioning from a “revolutionary technical idea” to a “structural infrastructure upgrade” within the blockchain industry. Its investment value is shifting from early-stage narrative-driven gains to a comprehensive assessment based on engineering execution, ecosystem synergy, and commercial sustainability. Over the next five years, AA will not become Web3’s universal gateway nor fully replace EOAs as the standard account model. Instead, it will firmly establish itself at the high end of wallet and account architectures—becoming the core representative of “smart accounts”—and deeply integrate into on-chain interaction experiences and transaction execution capabilities in the Rollup era. For investors, AA’s value lies not in short-term user explosions, but in a “classic internet-style long-term infrastructure investment opportunity.”
Structurally, AA’s position will significantly strengthen with the widespread adoption of EIP-7702. 7702 enables EOAs to temporarily function as smart accounts within individual transactions—meaning existing wallet systems need not undergo forced migrations or asset restructuring. Users can enjoy AA benefits such as permission controls, social recovery, multi-signature logic, and automation strategies without switching wallets, rewriting mnemonics, or transferring assets. This “frictionless upgrade” smoothens AA’s adoption curve, giving wallet providers stronger incentives to incorporate it into their base architecture. Thus, over the next three to five years, we are more likely to see coexistence and integration between EOA and AA rather than outright replacement.
AA’s true arena for deployment will be within Rollup ecosystems. As L2s like zkSync, Scroll, StarkNet, and Base become mainstream execution environments, AA’s cost burdens will be naturally absorbed by Rollup data compression—reducing gas costs by 70%–90% compared to L1. Meanwhile, BLS signature aggregation and batched UserOperations will further shrink on-chain data size, transforming AA-based account operations from “expensive yet advanced” to “advanced and affordable.” This means investment value does not lie in L1 AA, but in AA wallets, Paymasters, and Bundler infrastructures deeply integrated with Rollups. This direction reflects tangible engineering value—not theoretical speculation—but real adoption driven by measurable cost reductions. From a supply chain perspective, AA’s investment opportunities primarily cluster around four infrastructure domains: smart contract wallets, Paymaster service providers, Bundler infrastructure, and L2s natively supporting AA. Smart wallets represent the front-end gateway to future user experience. Projects such as Safe, Argent, OKX Web3 Wallet, imToken (AA version), and Zerodev are among the most certain “ecosystem plays.” Through modular wallet designs, social recovery, multi-signature setups, and automation strategies, they enable a leap from “key wallets” to “smart account wallets,” achieving strong compounding user retention. Paymaster represents one of the most commercially promising segments in the AA ecosystem—it bridges gas subsidies and user growth. Although current Paymaster business models remain immature, richer Rollup environments and diverse on-chain use cases could turn it into a “growth engine”: projects subsidizing gas for high-value users, implementing targeted incentive programs or whitelist strategies, creating marketing effects akin to Web2 “ad exposure.” Projects like Stackup and Pimlico are therefore worth watching. Bundler, as AA’s execution layer, is another hidden-value infrastructure—akin to the “transaction logistics layer” of the blockchain world. Players such as Biconomy and Alchemy’s AA Infra stand to benefit as the ERC-4337 ecosystem expands. Though Bundlers do not interact directly with users, they offer scalable and predictable revenue models, potentially becoming a “low-volatility, large-scale” infrastructure investment theme in the future.
At the same time, AA must navigate competitive and complementary dynamics with the emerging x402 protocol over the next five years. x402 does not replace AA—it operates via HTTP 402 as a universal internet payment interface, covering both Web2 and Web3, with native cross-chain capabilities and a clear commercial loop (via Provider + Facilitator fee models). Within the x402 framework, ERC-8004 becomes a plugin rather than a base protocol, granting it stronger adoption momentum. From an investment standpoint, AA’s value lies in intra-chain account intelligence, while x402’s strength is unifying internet-wide payment experiences. Their futures are not winner-takes-all, but coexistent and mutually reinforcing.
In summary, over the next five years, AA will constitute the “middle-layer infrastructure” of Ethereum and Rollup ecosystems: the bottom layer remains EOA (weakened but present), the middle layer consists of smart accounts (AA), and the top layer features x402’s unified interoperability network. AA users won’t grow explosively, but its value will steadily increase alongside rising on-chain transaction volumes, demand for automated strategies, professional asset custody, and anti-loss requirements. In a world progressively migrating on-chain, AA represents a high-certainty structural investment. In a Rollup-cost-reduction scenario, it is a “realizable future.” And in an internet where x402 coexists, AA remains the backbone shaping the on-chain account system.
4. Conclusion
AA’s core value lies in transforming Ethereum’s account system from the primitive “private key = account” model to the modern paradigm of “account = program.” It completes a crucial missing link in the transition from Web2 to Web3, making secure, recoverable, and programmable wallet systems possible. While AA still faces structural bottlenecks such as high costs, weak commercial loops, and limited cross-chain functionality, it has become the established direction for upgrading on-chain experiences. In the future, AA will persist as a premium account tier rather than the sole standard, while x402 complements it with cross-chain and payment interoperability. Together, they will propel Web3 from its niche origins into the mainstream era, laying essential groundwork for a “unified internet account” system.
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