Everything About Account Abstraction: 21Shares Dives into Ethereum’s Pectra, OneBalance Transforms Web3, Deep Dive into ERC-4337, Safe{Wallet} Launches Native Swaps & ZeroLend for L2 Lending

By Pillar | Etherspot | 23 May 2024

We are welcoming you to our weekly digest! Here, we discuss the latest trends and advancements in account abstraction, as well as bring some insights from Etherspot’s kitchen.

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21Shares Analyzes Ethereum’s Pectra Update and EIP Proposals

21Shares, the largest issuer of crypto-linked ETPs, recently analyzed the upcoming Pectra update to the Ethereum blockchain, anticipated for Q4 2024/Q1 2025.

This update is expected to introduce significant technical improvements that could enhance the efficiency of capital locked in staking along with the transaction management flexibility.

According to Adrian Fritz, Head of Research at 21Shares, Pectra is seen as a pivotal update that combines the advancements of previous upgrades, Electra and Prague, aimed at enhancing the network’s consensus and execution levels. The update is set to incorporate several EIPs that will address various aspects of the network, from validator deposits to execution-level outputs and data privacy improvements.

A critical element of Pectra is Vitalik Buterin’s proposed inclusion of EIP-7702, which could replace EIP-3074 and offer new functionalities to users’ Externally Owned Account (EOA) wallets. This move could streamline operations while ensuring full compatibility with account abstraction standards like ERC-4337.

The ongoing debates among Ethereum community experts reflect the dynamic nature of blockchain development as they weigh the benefits of EIP-7702 against the existing EIP-3074.

The outcome of these discussions could significantly influence the direction of Ethereum’s evolution, potentially setting a new standard for how blockchain networks manage transaction efficiency and wallet functionality.

Embedded Fee Markets and ERC-4337: A Deep Dive

Davide Rezzoli and Barnabé Monnot have published an insightful article on embedded fee markets and ERC-4337. This research, supported by the ERC-4337 team, delves into the complexities of transaction fee mechanisms within Ethereum’s ecosystem.

The authors highlight how ERC-4337 introduces a new layer of fee markets, where users generate “User Operations” (UserOps) that bundlers then include in transactions. This mechanism allows for efficient batching and execution of multiple UserOps, reducing the cognitive overhead for users and increasing transaction efficiency. The bundlers act as intermediaries, ensuring that users’ operations are included in blocks, paying the necessary fees, and managing the associated costs.

Vitalik Buterin commented on the cost implications of ERC-4337, noting that fixed costs are significantly higher than in regular block building due to additional gas costs. He emphasized the need for potential enshrinement of ERC-4337 features to address market inefficiencies.

The article underscores the importance of transparency in these dynamics to prevent user exploitation and enhance overall user welfare. By automating low-level operations through account abstraction, ERC-4337 simplifies user interactions, making DeFi more accessible and efficient.

ZeroLend: A Multichain Lending Platform on L2s Leveraging AA

Bybit has published an in-depth article on ZeroLend, highlighting how this multichain lending protocol leverages account abstraction to simplify DeFi interactions.

ZeroLend focuses on real-world assets (RWAs) and liquid restaking tokens (LRTs), operating on Ethereum and several Layer 2 networks like Linea, zkSync, and Manta Network. Its platform features automated collateral management and real-time interest rate adjustments, ensuring competitive rates and robust security for users.

One unique aspect of ZeroLend is its account abstraction, which simplifies the management of DeFi assets by automating underlying blockchain operations. This includes covering gas fees, automating delegated transactions, and allowing login with social handles. By simplifying these processes, ZeroLend lowers the barriers to entry for new users and enhances the overall user experience for seasoned DeFi participants.

OneBalance: Transforming Web3 with Credible Commitment Machines

Frontier Research has introduced a framework OneBalance, aimed at reshaping the Web3 ecosystem by transitioning from a chain-centric to an account-centric model, enabling smoother and more intuitive interactions across blockchain networks.

OneBalance utilizes credible commitment machines to manage user accounts, allowing for seamless and secure state transitions on any blockchain. This framework not only consolidates fragmented user experiences but also promises to significantly enhance scalability and flexibility in managing digital assets.

With OneBalance, users can combine token balances from various chains, abstract gas costs, and perform token swaps and transfers effortlessly. The system also supports complex permissions and incentivizes atomic asynchronous composability, ensuring rapid confirmations and robust security measures.

The introduction of resource locks within OneBalance addresses the shortcomings of traditional Externally Owned Accounts (EOAs), such as limited authentication methods and inflexible control over digital assets.

This innovative approach permits a more nuanced and secure way of handling state transitions, potentially accelerating the adoption of blockchain technology by making it accessible to a broader audience.

Safe{Wallet} Introduces Native Token Swaps

Safe, a smart account infrastructure, has integrated native token swaps into Safe{Wallet} through a partnership with CoW Protocol. This new feature accesses a vast liquidity pool, offering users competitive prices and a wide selection of tokens for seamless trades directly within the wallet.

Previously, users had to navigate external sites to swap tokens, but now the integrated swaps fetch quotes from multiple decentralized sources directly through the wallet, enhancing the user experience.

The integration uses an intent-based swap mechanism that supports batched execution, reducing errors and expirations common in multi-signature transactions. This provides Safe signers with greater accuracy, peace of mind, and a streamlined experience, complete with MEV protection.

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