Ethereum’s ERC-4337 Standard: A Game-Changing, User-Friendly Innovation

by Arthur · April 5, 2023

Ethereum is one of the most popular and widely used blockchain protocols. While its native coin ether (ETH) can be used to make payments like cryptocurrencies such as litecoin (LTC) or bitcoin cash (BCH), Ethereum was designed to be a far more flexible and feature-rich blockchain protocol. Ethereum enables the execution of smart contracts and decentralized applications (dApps). It also allows tokens to be built on top of the core protocol.

One of the most innovative ERC standards to date is the ERC-4337 standard. Like previous token standard releases, it was designed to enable additional features and options that were not possible using the previously available token options.

Ethereum’s tokens are one reason why it has gained such a significant share of the crypto market. These Ethereum Request for Comment (ERC) tokens create concrete rules and frameworks that allow ERC tokens to be sent and received on the Ethereum blockchain. One of the most popular token standards is ERC-20, which allows you to issue new fungible tokens on the Ethereum protocol. Another popular option is ERC-721 token standard, which allows the issuance of non-fungible tokens (NFT). This is one reason why many of the most popular NFT collections and fungible tokens exist on Ethereum.

There are a number of ERC token standards (ERC-777, ERC-2222 and more) on Ethereum, with new proposals called Ethereum Improvement Proposals (EIPs) continually being proposed and discussed. Some EIPs are ultimately rejected, while others end up being released on Ethereum. Once an EIP is improved and implemented, it becomes an ERC (ERC-4337 was formerly EIP-4337).

Funded through Ethereum Foundation grants, the launch of ERC-4337 was announced at WalletCon 2023. Let’s find out what ERC-4337 enables on the Ethereum protocol – and why the community decided it needed to be approved.

Table of Contents

ERC-4337 brings new features to Ethereum

ERC-4337 enables enhanced crypto transaction options. To distinguish it from standard crypto transactions, these ERC-4337 transactions are referred to as UserOperations. This type of blockchain improvement will usually be done through a blockchain update and not through a new ERC standard release (more on that later).

A new core feature is that it allows account abstraction on Ethereum in a decentralized way (more on that below). Additionally, it allows dApp developers to partially or fully subsidize transaction fees for users; on many dApps the user must pay these fees. ERC-4337 also allows users to pay fees with ERC-20 tokens (as opposed to ETH). This should create a decentralized fee market for smart contract operation. On top of that, it enables some privacy-preserving features and supports the use of aggregated signatures. ERC-4337 is also available on networks compatible with Ethereum Virtual Machine (EVM) such as Polygon, Avalanche, Arbitrationand several others.

To send transactions, ERC-4337 allows you to aggregate (combine) multiple transactions to save time and reduce the cost of transaction fees. You will also be able to pre-approve transactions in an automated way. Most current wallets require you to manually approve each transaction. Now you can create review processes that require additional manual approval only for certain transactions – such as transactions that send over a specified amount of crypto (more than $1000 USD equivalent, for example).

ERC-4337’s easy-to-use wallet features

Through a process known as account abstraction, ERC-4337 allows the use of smart accounts that are expected to be more user-friendly for beginners. This update is expected to catalyze crypto adoption as technical barriers to entry are continually lowered – or removed. Although somewhat technical, in essence, account abstraction turns a user’s crypto wallet into a smart contract-enabled account. For this reason, many do not call ERC-4337 a “token standard” and simply call it an ERC standard; it doesn’t really fit categorically with the previous ERC token standards.

A core benefit is how account abstraction simplifies both the use and creation of wallets. Before ERC-4337, users usually had to remember a seed phrase (or save this phrase offline) to create a backup copy of their crypto wallet. Through abstraction, a cryptowallet’s private keys can be stored on a smartphone’s standard security module. This would create what some would consider a hardware wallet on the phone—even if some express concerns about a smartphone’s vulnerabilities through the touchscreen or some other way.

ERC-4337 allows for the use of smart accounts that are expected to be more user-friendly for beginners.

ERC-4337 allows you to sign transactions biometrically through a fingerprint or face scan as an additional security measure. Should you lose your phone, you can regain access to your account using time-locked social recovery. This requires multiple users to sign a recovery transaction through a multi-signature (multi-sig) wallet. You can give a group of trusted friends or family the ability to restore your account. If that doesn’t suit you, you can pay a commercial third-party service to restore your account should the need arise.

Losing your wallet and its associated crypto – and not being able to recover it – is a fear people have when it comes to spending non-custodial crypto wallets. It is horror stories of people losing large sums of crypto this way. This protection is designed to give you some of the features and security you can have when using a bank – without having to trust a bank – thus preserving the central crypto ethos of trustlessness and permissionlessness.

In general, the implementation of account abstraction is intended to provide two benefits to wallets:

Making crypto wallets more user-friendly.
Prevent loss of crypto or crypto wallet access.

Why not update the underlying Ethereum protocol?

For many blockchain protocols, changes require a code update to the blockchain called a fork. There is often heated debate about whether to implement changes in a blockchain. These updates sometimes cause a blockchain to split into two separate networks. Called a hard fork, this has led to the 2017 Bitcoin fork that spawned Bitcoin Cash and even an earlier split of Ethereum (which created Ethereum Classic). The other fork option is a soft fork. Soft forks are backwards compatible – giving users and validators the option to implement an update or not.

With the time and work that has gone into transitioning Ethereum from a Proof-of-Work (PoW) to a Proof-of-Stake (PoS) network (known as The merger), the proposal for ERC-4337 noted that it may be some time before Ethereum goes through another significant update. For that reason, ERC-4337 was implemented as a way to enable updates that do not change the core Ethereum protocol. Taking this innovative approach has apparently saved a lot of time and effort. In addition, ERC-4337 will not create compatibility problems in the same way that some blockchain forks have.

By taking these changes to a higher abstraction layer (the ERC-4337 standard itself), it negates the need to implement changes to the core protocol of Ethereum (the Ethereum blockchain). While this has accelerated the implementation of account abstraction on Ethereum, the goal is to eventually implement this feature in the primary Ethereum protocol.

What ERC-4337 Means for Ethereum Adoption

With its remarkable mix of ERC-20 tokens, the popularity of ERC-721 NFTs and the outsized presence of Ethereum in decentralized finance (DeFi)ERC-4337 is likely to help Ethereum remain one of the premier blockchains as the enhanced functionality will benefit all of these different – but interconnected – niches within the wider Ethereum ecosystem.

With crypto wallet security and ease of use ahead of the ERC-4337 update, we may end up seeing newcomers to the crypto space choose to start with Ethereum (and EVM-compatible blockchains) as opposed to other blockchain ecosystems. Lured by the core benefits and ease of use enabled by ERC-4337, this could allow Ethereum to retain – or grow – it already significant market share which it occupies within the broader crypto market. For other blockchains to remain competitive and gain market share, they may need to incorporate their own versions of higher-level account abstraction. This will allow them to appeal to new crypto users who want to experience Web3 with the ease of use and simplicity more often found in the Web2 experience.

Cheat Sheet:

ERC-4337 allows you to aggregate and automate transactions on Ethereum.
ERC-4337 allows for social recovery of crypto wallets, biometric authentication of transactions, and the ability to store a wallet’s private keys on a smartphone security module.
The features enabled by the ERC-4337 standard are also available on EVM-compatible blockchains.
The ERC-4337 standard adds new features to Ethereum without the need for a major Ethereum blockchain protocol update.
The goal is to eventually offer the features made possible through ERC-4337 through a major Ethereum protocol update.