What is Account Abstraction?

Introduction

Blockchain technology has matured significantly over the past decade, however, its complex onboarding process remains a barrier to mainstream use. Luckily, new paradigms such as Account Abstraction can encourage crypto mass adoption by streamlining the onboarding and usage processes of blockchain technology for casual users.

Now Account Abstraction allows private accounts to be replaced by smart contract wallets—so instead of relying solely on fixed keypairs, accounts can have customizable logic for authentication, gas payment, retries, limits, and much more.

In March 2023, the ERC-4337 account abstraction implementation was released on Ethereum, and introduced the creation of non-custodial wallets as smart contracts, unlocking features like easy wallet recovery, signless transactions, and team wallets. The key innovation of this standard is its ability to create smart accounts independently, enabling transactions without the need for a separate Externally Owned Account (EOA) or contract account. Smart accounts in this standard use UserOperations, which represent operations to be conducted on behalf of the user. These UserOperations are bundled, verified, and executed through a single entry point, allowing for various customizations in managing accounts and funds.

Key players in the web3 space are designing variations of account abstraction suited for particular needs and different blockchain ecosystems, resulting in a multitude of SDKs and libraries to choose from. And of course, we also have major players in the Stacks ecosystem working on implementing various forms of abstraction solutions.

Key Account Abstraction Use Cases

1. Wallet Recovery

   One of the biggest struggles in the crypto industry is security, with users either having to rely on custodians or having to secure their own keys. Traditional seed phrases and private-key custody place a heavy burden on users. In the realm of smart accounts, security diverges from traditional models. With smart accounts, you appoint “guardians”—other devices, trusted contacts, or services—to help recover access. Guardians can co-sign a transaction that issues new credentials, ensuring you retain full control of your assets while safeguarding against lost keys.

2. Transaction Batching

   In decentralized exchanges, a token swap typically involves two separate transactions, each requiring user approval through private key signatures, while complex Web3 transactions may demand three or more approvals. Smart accounts introduce a groundbreaking solution by allowing users to batch multiple transactions, reducing the costs for the users, and streamlining DeFi transactions in a manner we’ve come to expect in web2 applications. Account Abstraction lets you group several operations into one bundled call, cutting costs per action and simplifying complex flows. A great example for this particular use case is Ambire Wallet, which leverages AA to enable transaction batching for its users. Although the cost for executing one operation is higher compared to using an Externally Owned Private Account, when having multiple transactions the price per transaction is reduced drastically.

3. Sponsored Fees (Paymasters)

   Paymasters are specialized contracts that cover users’ gas fees—accepting payment in any token or even fiat—or absorbing the cost entirely. This brings a new level of customization for dApps, which can now accept any token from the user’s wallet as a transaction fee, FIAT payments with a card, or even subsidize the entire amount thereby creating a seamless experience for their users, improving the user experience and removing unnecessary friction points. A good example is SendIt from Arcana Network, a small protocol that allows sending crypto to anyone via email, even if they don’t have a wallet, and leverages ERC4337 to sponsor the transaction fees and create a new Smart Contract Account for them. Another great usage of this is Visa’s proposal of enabling users to pay their on-chain gas fees using a FIAT card.

4. Automated Transactions and Workflows

   Unlike private EOAs, where every transaction on a dApp requires manual initiation or signing, smart accounts introduce automation possibilities. With smart accounts, users can set a variety of parameters, including access to specific tokens, spend limits, duration, gas limits, and predefined triggers for specific actions. Let’s imagine a user wants to allow a DEX to perform a swap on its behalf every 15 minutes for the next hour: sign once and the transactions will happen automatically afterwards. Such an execution can be seen on CowSwap, a decentralized exchange that offers TWAP transactions, spreading a desired user operation into parts that execute over a period of time. The potential for automation in smart accounts is virtually limitless, offering users a level of customization and efficiency beyond the constraints of traditional EOAs.

   

Under the Hood: Core Components

1. UserOperations

   • Transaction-like objects containing intent, metadata, and fields for EntryPoint, Bundler, Paymaster, and Aggregator.

   • Routed to a dedicated mempool for AA rather than the regular transaction pool.

2. Bundlers

   • Specialized nodes that pick up pending UserOperations, bundle them into a single on-chain transaction, and submit it—earning a fee for the service.

3. EntryPoint Contract

   • A contract that validates UserOperations (checks balances, gas limits) and executes them, debiting the smart wallet to reimburse the Bundler.

4. Paymasters

   • Contracts that underwrite gas costs according to custom policies, letting users transact with non-native tokens or without any on-chain balance.

Conclusion

Account Abstraction is arguably the biggest leap in Web3 since smart contracts. Although the idea of Account Abstraction has been around for a while, there’s still relatively limited documentation and tools to help with its mass adoption among developers. Nevertheless, it’s still one of the biggest milestones in blockchain technology development and provides the foundation for new and exciting use cases. You can build your own AA stack from scratch or tap into SDKs and libraries maintained by various protocols.

Despite needing to mostly rely on third parties to make use of the account abstraction features for now, the modularity of the paradigm and the decentralization of web3 ecosystems encourage more and more developers to integrate some of these tools into their applications and even build their own in-house smart contracts and off-chain utilities to leverage this new exciting technology. There’s still a huge need for streamlining user onboarding and contributing towards crypto’s mass adoption, and account abstraction is the best tool for this necessity at the moment, allowing projects to leverage blockchain technology without the end users ever needing to be stressed.