Everything About Account Abstraction: Nasdaq highlights Web3 onboarding, Ethereum Layer 2 diversity, Criticism of LayerZero’s wstETH, ERC-4337 Core Devs call #21

Everything About Account Abstraction: Nasdaq highlights Web3 onboarding, Ethereum Layer 2 diversity, Criticism of LayerZero’s wstETH, ERC-4337 Core Devs call #21

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November 8, 2023

We are welcoming you to our weekly digest! Here we discuss the latest trends and advancements in account abstraction.

Please fasten your belts!

Nasdaq expresses about Web3 onboarding revolution

Nasdaq, the world’s first electronic stock market and a benchmark index for U.S. technology stocks, also took the stage to talk about ERC-4337.

Web3 is on the brink of a significant transformation in user onboarding and account management with the move towards account abstraction. Seed phrases, the cryptographic strings crucial for wallet access in Web3, present a high entry barrier due to their complexity and irreversible nature.

As per Nasdaq, with account abstraction, the tide is turning towards user-friendly and secure alternatives. Developers are now exploring password-based recovery mechanisms and leveraging existing Web2 technologies like DKIM for account recovery, enabling a generation of “seedless” wallets. These innovations, supported by the Ethereum Foundation, aim to lower entry barriers, making the decentralized web more accessible and secure for users​.

Vitalik Buterin analyzes diversity in Ethereum’s Layer 2s

The Ethereum layer-2 ecosystem is evolving with diverse technologies. Vitalik Buterin, Ethereum’s co-founder, discussed this on his blog, highlighting the varied approaches of Layer 2 protocols for improved scalability and security.

EVM rollups like Arbitrum and Optimism, alongside “sidechain projects” such as Polygon and “almost-EVMs” like zkSync, are key to this advancement. Buterin anticipates that the heterogeneity among Layer 2 projects will grow due to several reasons, including independent Layer 1s aiming to integrate more closely with Ethereum’s ecosystem.

However, transitioning to Layer 2 poses challenges. An immediate shift could hinder usability while delaying may result in losing relevance. Centralized, non-Ethereum projects are also turning to blockchain for enhanced security over traditional “permissioned consortium chains.” Buterin recognizes the varying needs of applications; for instance, social media may need less security for regular posts than for critical functions like account recovery.

He also comments on the financial aspect, noting that non-blockchain users may find rollup fees excessive compared to previous blockchain users accustomed to higher costs. Vitalik concludes by discussing the balance between security, scalability, and the level of integration with Ethereum, with the forthcoming EIP-4844 expected to significantly increase network data availability.

Protocols unite against LayerZero’s proprietary wstETH token standard

LayerZero’s new bridged token is facing pushback from nine Ethereum ecosystem protocols, including Connext and Chainsafe, which labeled it a “vendor-locked proprietary standard.”

They argue it restricts token issuers’ freedom by being fundamentally controlled by the bridges that deploy them, posing systemic risks. These protocols suggest the xERC-20 standard for bridging stETH as a preferable alternative.

The issue stems from LayerZero’s creation of Wrapped Staked Ether (wstETH) on networks like Avalanche and BNB Chain without Lido DAO’s endorsement.

LayerZero launched wstETH independently and later sought Lido DAO’s approval, a move some members saw as pressuring. Lido DAO discussions revealed concerns over potential security risks, fearing a hack could lead to uncontrolled wstETH minting.

LayerZero defended its token’s protocol, asserting its security, decentralization, and the success of its omnichain fungible-token (OFT) standard, used by numerous projects for transfers across chains. The company emphasizes that developers retain control over their validation layer within LayerZero’s framework.

ETHLondon hackathon showcased innovative Account Abstraction projects

ETHLondon’s recent hackathon highlighted the potential of Account Abstraction, with Etherspot’s bounty awards going to two standout projects:

  1. DeFi Bank is a user-friendly decentralized lending protocol that enhances the DeFi experience by leveraging Etherspot’s transaction batching. This approach simplifies asset leverage for borrowers and lenders within the crypto ecosystem.
  2. Another project, Ninfa, is an NFT Marketplace catering to both Web2 and Web3 users. It allows for gasless transactions and wallet-free NFT trading, providing a seamless onboarding experience similar to Web2 platforms. Ninfa integrates Etherspot’s social logins and gasless transactions to minimize friction for users entering the marketplace.

Both projects exemplify the innovative use of AA to streamline and secure transactions in the Ethereum ecosystem.

Understanding ERC-4337 and the Future of Account Abstraction in Ethereum on Hackernoon

Last week Kristaps Grinbergs, Developer Relations engineer at Flare, shared his vision of Account Abstraction on Hackernoon. According to the article, Ethereum’s pursuit of improved usability, security, and user experience takes a significant leap with the proposal of ERC-4337, introducing the concept of account abstraction.

This development represents a fundamental change in how user accounts function on the Ethereum network. Proposed in ERC-4337, account abstraction blurs the traditional lines between contract and Externally Owned Accounts (EOAs), enabling more sophisticated wallet functionalities directly integrated into user accounts.

The success of ERC-4337 and account abstraction largely hinges on the adoption rate within the Ethereum community. This advancement promises to streamline user interactions by allowing transactions to be sponsored, which means users won’t need Ether for gas fees, enhancing user-friendliness, particularly for those new to the Ethereum ecosystem.

Additionally, ERC-4337 aims to fortify security protocols by introducing more complex signing logic, potentially reducing the risk of fund loss due to private key compromises.

The adoption of ERC-4337 could lead to a new era where user accounts on Ethereum become more versatile and secure, significantly impacting how applications are designed, developed, and used. The Ethereum community is optimistic about the transformative potential of account abstraction, though its implementation and acceptance across the network remain to be seen.

Ethereum core developers held 21st ERC 4337 meeting

The 21st meeting of core developers discussing ERC 4337 — Account Abstraction — took place last week. Experts delved into the latest advancements in the field.

Feel free to check out the discussion on YouTube.

As testing continues, the community eagerly anticipates the positive changes this could bring to the network’s usability.

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Start exploring Account Abstraction with Etherspot!

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