There are few people on this planet you would rather not be more than Stefan Thomas, even though you’ve probably never heard of him.

What if I told you that this man owns more than 7,002 Bitcoin?

Knowing this, you’re surely thinking “that man is rich! Why wouldn’t I want to be him?”

Well, the problem is, he owns that Bitcoin, and, at the same time… well, he doesn’t, as he can’t remember the seed phrase to unlock the wallet that stores them.

Imagine being locked away from 186 million dollars worth of Bitcoin.

Painful.

But he’s far from being the only person impacted by Crypto’s non-trivial ways of working. Crypto is hard, very hard, and we all suffer this every day, with a simple mistake being capable of making us lose everything.

Luckily, situations like this will soon be a thing of the past thanks to this convenient Crypto technology that is a necessary next step in Crypto’s path to worldwide adoption, a technology that goes by the name of Account Abstraction.

A simple solution to a big problem

It is estimated that around 5 billion people use the Internet every single day, according to Zippia.

That’s more people than the amount of living human beings in 1986, and a rough 63% of today’s world population.

Without a doubt, the Internet has become an essential part of our lives, and corporations and countries alike would crumble if it disappeared.

But the truth is, probably less than 0.000001% of that number understands the technology behind it.

The rest? Well, they simply use it.

And that’s beautiful.

Beauty in simplicity

TCP/IP, client-server, Ethernet cable, SSL encryption… all these are fundamental elements in our lives and the majority of people around us don’t even know what they are.

Still, without them, the Internet wouldn’t exist.

But society doesn’t care.

They don’t understand what a domain name and extension are, they simply type “medium.com” into their web browser, another product they too don’t understand, and hope that it takes them to that website, another digital element they also don’t technically understand and, as long as their Wi-Fi works, another technology they again don’t understand, this procedure will work and a nearby cloud server will send them to this website.

And that’s the thing about the Internet, you don’t need to understand how it works to use it. And that’s beautiful.

Yet, what about Crypto? Sigh.

Seeds, hackers, and wallets

Crypto is hard to use, plain and simple.

You need to understand how the technology works to use it. And that’s a problem.

You need to set up your Crypto wallet, learn or write on paper a 12 or 24-word long seed phrase that becomes the quintessential key to your cryptocurrencies (I mean, it’s literally your wallet’s private key) and you need to be very careful with what transactions you sign (perform) and which ones you don’t.

The result?

Unsophisticated users (99% of future Crypto users) go the easy way and start using hot wallets, digital wallets that, as the term “hot” implies, are connected to the internet, which enables them to access and manage their assets quickly and easily.

However, this also makes hot wallets more vulnerable to hacking, phishing attacks, and other security threats.

And the result of people taking the easy way?

Unsurprisingly, $3.8 billion dollars worth of Crypto was stolen just in 2022.

And truth be told, this number also includes smart contract vulnerabilities on bridges, DeFi protocols, and others, but a great deal of money can be traced to poor risk-management procedures by many users.

But you know what, I’m sick of some Crypto enthusiasts blaming these people for not storing their Crypto in offline wallets and other far less risky procedures.

The real blame is on the technology, that’s clearly not prepared for our society, as the average Jane Doe doesn’t give two shits about Crypto and won’t ever come close to it unless it’s made accessible and easy to use.

But with Account Abstraction, we might have figured that out at last, preparing Crypto to onboard the next billion users.

Using Crypto without you even realizing it

A simple description of what happens in a blockchain is enough to understand how creative Account Abstraction is.

The journey to validation

Whenever you perform a transaction on Crypto, your transaction enters the memory pool, conveniently defined as ‘mempool’, to await approval amongst other transactions.

Once your transaction is chosen to be included in a block by a block builder, that block gets proposed by block proposers (Crypto people get right to the point when naming stuff) and introduced as the last block of the chain, your transaction becomes validated.

However, your transaction isn’t considered final yet, as you usually have to wait for a few blocks until the chances of your transaction being reversed are slim to none (the number of blocks for this depends on the blockchain).

But in what ways can we interact with a blockchain today?

The journey to customization

To perform transactions you need to use Externally-Owned Accounts (EOA), like MetaMask.

These are the primary way to interact with a blockchain but are very limited in the customization features they offer (they basically hold your coins and allow you to sign transactions, period).

This lack of parametrization makes them quite complex to use, forcing you to go down the alley of seed phrases and complex blockchain terminology.

But what if there was a way to make these wallets much simpler to use?

And that’s exactly what smart contract wallets are.

These wallets, as they are based on code, are programmable. This allows them to embrace several features that EOAs can only dream about. And these customization capabilities are the reason smart contract accounts are known as Smart Accounts.

And just like that, Account Abstraction is brought to life.

But there’s a problem.

In order to allow for such accounts to exist, the blockchain protocols need to be upgraded to handle them, which on blockchains like Ethereum would take years.

For that reason, a team of Ethereum researchers, including the founder Vitalik Buterin, have come up with a brilliant way to bring Smart Accounts to our lives today, with ERC-4337.

An abstraction of an abstraction

To enable Smart Accounts without making changes at the protocol level, the researchers have created a new type of object, UserOperations (they didn’t name them transactions to avoid confusion).

When a user performs a UserOperation with her/his Smart Account, this UserOperation is sent to another mempool (remember, the place where pending transactions go to get approved).

Then, a new form of validators known as bundlers, bundle (again Crypto researchers getting to the point with names) these UserOperations into batches.

Bundlers then send these transactions to a set of special smart contracts, known as EntryPoint, which execute the bundled operations.

Okay, great, but why all this fuss? What are we achieving by using this new way of transacting in a blockchain?

It turns out, we’re achieving a lot.

Signing transactions with your face

Smart contract wallets, as mentioned earlier, can be designed with custom logic.

By using smart contract wallets as the primary accounts in account abstraction, users can take advantage of advanced features such as:

1. Customized transaction validation and signing logic.

For instance, Smart Accounts open the door to storing your private key in your personal smartphone’s security module. This would allow unlocking your Crypto wallet using iOS biometrics, like your finger or your face.

2. Paying transaction fees with ERC-20 tokens or other assets.

3. Allowing multiple users to control a single account with multisig functionality.

4. Implementing advanced security features like daily spending limits, recovery options, and time locks.

5. Enabling privacy-preserving applications.

6. Or supporting atomic multi-operations and aggregated signatures.

In short, you can think of Smart Accounts as blank slates that allow you to define a wallet in your preferred format while not having to worry about complex stuff like seed phrases.

Similarly, Smart Accounts is a very similar concept to your bank or Verse accounts; a simple-to-use piece of software that allows you to customize your experience using it without having to worry about the intricate details and complexity behind it.

Unsurprisingly, the first examples of real products offering account abstraction are already appearing, with examples like the Avocado wallet by Instadapp (not based on ERC-4337), the StarkWare Braavos wallet, and others.

The revolution of simplicity

In short, Smart Accounts represent an extremely relevant innovation taking us towards a future where Crypto will be as simple as using the Internet.

In fact, I’m pretty convinced that, in that future, you won’t even realize you’re using a blockchain most of the time.

And that’s the thing about Account Abstraction, you don’t need to understand how it works to use it. And that’s beautiful.

A final word

Einstein is often quoted as saying, “Everything should be made as simple as possible, but not simpler”. The idea is to avoid unnecessary complexity and seek elegance and clarity in understanding the world around us.

And what I strive to do with my newsletter is exactly that, make the complex things in our world easier to understand.

Every Sunday, I deep dive into the main events and innovations occurring in the worlds of Crypto and AI by making these technologies as simple as reading a book to your child.