Welcome to Valid Points. In today’s issue, Margaux Nijkerk discusses how one of Ethereum’s newest concepts, known as Account Abstraction, could make Ethereum wallets significantly more user friendly.For an extended version of this article, view the web post here.
The Year for Account Abstraction
Ethereum developers are hard at work trying to make its blockchain more user-friendly.
One of the downfalls of crypto is the costliness of simple screw-ups. For instance, if a user loses the keys to their crypto account, they could lose access to their crypto holdings forever. In the face of this and other potential pitfalls, it’s vastly easier to lose your money in crypto than in traditional banking.
Blockchain developers increasingly recognize that human error is an inevitability, meaning it will be difficult to push crypto into the mainstream without fail-safes and better ease of use. One of those innovations is a concept called “Account Abstraction.”
Account Abstraction (AA) aims to use smart contracts to execute crypto transactions, by creating certain validity rules. With AA, users won’t need to sign off on every transaction with one’s private keys.
Ultimately, through AA, developers want to make Ethereum as usable as a traditional fiat bank account, so users can make transactions more easily, program automatic bill payments and more.
But before understanding how AA could change the nature of how one may use crypto, it’s important to understand how Ethereum transactions operate today.
On Ethereum, users have the ability to create two types of accounts: External Owned Accounts (EOA) and Contract Accounts (CA). The two account types differ in terms of how they initiate transactions over Ethereum’s network.
EOA’s, the typical account-type for Ethereum users, are the type of account you use if you have used a wallet provider such as MetaMask and Coinbase Wallet. With an EOA, users are given a pair of keys: a public and a private key. Anyone can send funds to an EOA using its public key. But only the account’s owner – whoever has access to the account’s private key, which should be kept secret – can actually initiate transactions from the account.
CA’s, better known as “smart contracts,” are like mini computer programs that live on the Ethereum network. These accounts are controlled by code – not private keys – but they cannot initiate transactions themselves; an EOA needs to send a transaction (which you can think of like a message or instruction) to a CA in order for it to make transactions of its own.
The problem with EOAs comes down to human error. If you lose a private key to an EOA account, there is no help desk or key recovery process (like a “password reset” button) that can help you regain access to your funds.
However, Account Abstraction addresses the shortcomings of EOAs by merging them with CAs – allowing people to create user accounts with built-in fail-safe mechanisms and other special features for verifying transactions.
Under account abstraction, user accounts could be programmed to include social recovery systems where several people – each with a key of their own – have the ability to return an account to its owner should the owner lose access to the private key.
One could also create “multisig wallets” that hand account ownership over to a group – requiring multiple different parties to sign off on transactions as a sort of extra layer of security.
There are a bunch of proposals that aim to add AA to Ethereum, with the most prominent being EIP-4337. But if all these tools are currently available, why isn’t account abstraction more widespread?
The answer to that is momentum. It’s obviously not easy to build a new wallet, launch it and ship it to people.
So finding people to implement these new technologies seems to be the biggest bottleneck for account abstraction. But the tide for that seems to be changing.
Some layer 2s on Ethereum – including StarkWare – are leading the way to natively integrate AA. And other firms, such as Gnosis Chain, are looking to integrate Account Abstraction into their infrastructure.
Pulse Check
The following is an overview of network activity on the Ethereum Beacon Chain over the past week. For more information about the metrics featured in this section, check out our 101 explainer on ETH metrics.
Disclaimer: All profits made from CoinDesk’s Eth 2.0 staking venture will be donated to a charity of the company’s choosing once transfers are enabled on the network.
WHY IT MATTERS: Decentralized finance (DeFi) project Yearn Finance will allow users to create their own vaults to accrue yield and deposit proceeds to earn even more token rewards. So far, users have been limited to vaults created by Yearn’s contributors and developers. With the introduction of the “permissionless vault factory,” anyone can create their own strategies and offer them on Yearn. This may, in time, increase Yearn’s user base and attract more liquidity to the popular DeFi tool. Read more here.
WHY IT MATTERS: ConsenSys, the developer of the crypto wallet MetaMask, plans to downsize by 100 staffers or more. The New York CIty-headquartered Ethereum studio currently has about 900 employees. The planned cuts are understood to be in the process of being finalized. The Ethereum software firm’s recent layoffs adds to what’s already a bad week for crypto employment as Coinbase announced it is planning to reduce its headcount by around 950 employees as part of a restructuring that it expects to be complete by the end of the second quarter. Read more here.
WHY IT MATTERS: The company made the decision “in accordance with instructions from the Ontario Securities Commission (OSC) as part of our pre-registration undertaking for a restricted dealer license,” a spokesperson for the exchange said in an email sent by the firm to customers. All USDT trading pairs, transactions, deposits and withdrawals will be delisted by 2 p.m. ET on Jan 31. The move comes after the Canadian Securities Administrators committed to stronger oversight over crypto exchanges following the demise of FTX. Read more here.
Factoid of the Week
Consensus 2023 is a call to action for developers, investors, founders, policymakers, brands and others to come together and find solutions to crypto’s thorniest challenges and finally deliver on the technology’s transformative potential. Use code VP15 for 15% off your pass.Register now.
Open Comms
Valid Points incorporates information and data about CoinDesk’s own Eth 2.0 validator. All profits made from this staking venture will be donated to a charity of our choosing once transfers are enabled on the network. For a full overview of the project, check out our announcement post.
You can verify the activity of the CoinDesk Eth 2.0 validator in real time through our public validator key, which is:
