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A More Bullish Case For Ethereum
Ethereum has been a big topic of discussion since its inception. What makes Ethereum so popular? For starters, the founder – Vitalik Buterin – founded Ethereum at the young age of 19, along with the assistance of other teammates that have gone on to become legendary founders: Gavin Wood (Polkadot), Charles Hoskinson (Cardano), and Fabian Vogelsteller (Lukso). Ethereum is also the first blockchain to use smart contracts, which makes it one of the most innovative technologies of this generation (aside from Bitcoin). When you take both of these factors into consideration, ETH’s popularity should come as no surprise. However, Ethereum is not perfect. In fact, it suffers from a list of problems that Vitalik is actively working to solve, such as:
High Gas Fees
Slower Transaction Speed
To address some of these issues, the ETH development community launched EIP 1559 earlier this year. This proposal was supposed to help quell some of the high gas issues that the crypto space has been facing while simultaneously making ETH deflationary. The latter was achieved. However, gas is still as high as it’s ever been. The release of ETH 2.0 should address these issues once and for all. Vitalik’s dedication to constantly improving Ethereum is admirable. While the space eagerly and impatiently awaits the launch of ETH 2.0 – which will transition the blockchain from Proof Of Work to Proof Of Stake –, Vitalik and company have announced yet another proposal that will improve the functionality of Ethereum. This time the proposal is set to improve the way that Ethereum wallets operate. The proposal that I’m referring to is ERC-4337.
To understand the purpose and benefits of ERC-4337, we must first understand the problem.
There are two types of accounts on the Ethereum network:
External Accounts: These are the wallets outside of the Ethereum Virtual Machine (EVM) where transactions take place.
Contract Accounts: These are the contracts that exist within the EVM aka smart contracts.
All transactions must first start from external accounts that are controlled using private keys. While this may not seem like a big deal, it becomes very problematic when private keys are misplaced, stolen, or lost.
It can be argued that wallet difficulty is one of the biggest catalysts in the lack of mainstream adoption.
The loss of private keys has resulted in the loss of wealth for many.
A loss of private keys isn’t the only issue. Ethereum requires that every user operation be wrapped by a transaction from an externally owned account. This adds an overhead of 21000 gas.
The user must either have ETH in a separate EOA account – which requires them to manage two accounts – or use a centralized relay system.
However, these problems can be solved. The solution lies within the ERC-4337 proposal.
The solution that Vitalik proposes is ERC-4337 which is a solution for account abstraction. This means that instead of there being two accounts, there will only be one account that is able to complete both the coin and contract transaction.
This account would be housed within the EVM. So, there will no longer be a need for external accounts.
The greatest part about the ERC-4337 proposal is that all of this can be achieved without making significant changes to the actual protocol.
I can imagine that the next question is how all of this is achieved. Continue reading young grasshoppers…..
A Breakdown Of ERC-4337
Instead of changing the consensus layer of the protocol, the functionality of the mempool (an area of the blockchain where all valid transactions wait to be confirmed) is replicated in a higher level system. This will allow the protocol to conduct business as usual with little to no impact.
The users will send all of the information that is needed to complete a transaction to the system (signatures and other data). Then miners or bundlers can package this data into a single bundle transaction that will be included in the Ethereum block.
Here is a diagram that details the process:
The bundler would then pay a fee for the bundles in ETH. However, they would also receive compensation from the fees paid on the users’ end. This means that they will have the ability to prioritize bundles based on the fees received, just like miners prioritize transactions in the mempool.
The wallet will be a smart contract that will have the ability to verify the signature and nonce (number only used once) on the user’s end – fees will be paid and increment nonce if it succeeds, and trigger an exception if the verification fails – and interpret calldata (non-modifiable data where external arguments are stored) as instructions for the wallet to act on.
Most of the functions that need to take place to ensure safety occurs in a global contract aka the entry point. This helps keep the wallet’s logic simple.
Here is chart detailing the process:
Benefits And Weaknesses Of ERC-4337
The new ERC-4337 proposal offers plenty of benefits with one of the main benefits being users having the ability to recover lost wallets through a social recovery feature.
Users will be able to assign three or more guardians (family, friends, custodians, other devices, etc) as a second layer of protection. If the wallet key is lost, a user can reach out to their guardian and have them sign a transaction that will create another key. Therefore, allowing the wallet to be recovered.
Here’s a list of the other new benefits that the proposal will bring:
As great as all of this is, the proposal still has its weaknesses.
It looks like we still aren’t going to escape that damn gas cost…..
I have always had a bullish sentiment towards Ethereum. This proposal only helps that sentiment. I believe that this ultimately gets us closer to ETH 2.0.
It’s good to see that Vitalik is still finding ways to deliver value to the users while we wait for the ultimate POS rollout. I’m sure some people will see this as him buying more time for a launch that won’t be ready anytime soon. They have the right to their opinions. No judgement here.
However, I’m fine with Vitalik and the team rolling these proposals out in increments. The stakes are entirely too high for there to be any major issues or bugs. As long as ETH 2.0 lives up to be everything it’s promised to be, I’ll deal with playing around with ERC-4337 for the time being.