The Ethereum network is a decentralized, open-source blockchain network that is widely used for the development of decentralized applications (DApps). These DApps are powered by smart contracts that have plenty of use cases in industries like real estate, automotive, supply chain, education, art, music, and more. But how about Ethereum account abstraction?
The Ethereum network has seen tremendous growth over the years and the number of DApps on the network continues to increase. Today, developers are constantly looking for ways to improve the network’s performance and scalability. Account abstraction is one of the most notable updates on the Ethereum network recently. This guide will clarify the concept and its importance to the crypto space in detail.
What is Ethereum Account Abstraction?
An average trader does not necessarily need to know the technical details of account abstraction. But we will try to explain everything in layman’s terms. Previously, smart contracts on the Ethereum network were executable via a model known as the account model. In this model, a smart contract gets associated with a user account, which contains some balance. To interact with the smart contract, the user needs to send a transaction containing a payment to the contract’s address.
Ethereum account abstraction aims to separate the execution logic of a smart contract from the user’s account balance. There are two main ways in which account abstraction can be achieved, these are EIP-4337 and EIP-2938. Out of these, EIP-4337 has already been implemented and its entry point was deployed to the mainnet on the 1st of March, 2023. That is because it does not change the Ethereum protocol.
However, EIP-2938 is not active at the moment because it requires changing the protocol, which is quite difficult to achieve. There is a high chance that EIP-2938 will ever get implemented, especially if EIP-4337’s outcomes are good enough. Anyway, account abstraction allows developers to significantly improve the user experience and security of wallets. For instance, it will remove the need to sign multiple transactions for a swap and reduce gas fees.
What are the use cases of Ethereum account abstraction?
Ethereum account abstraction allows developers to create new types of smart contracts that were previously not possible on the network. Since the industry for smart contracts is still rapidly growing, there can be an endless number of potential uses of account abstraction.
Some of the potential use cases of Ethereum account abstraction include:
- Decentralized finance (DeFi): DeFi is one of the most popular use cases of the Ethereum network. Account abstraction could help with the development of efficient financial systems by reducing gas requirements.
- Gaming: Ethereum is also popular for gaming DApps, and account abstraction could make it easier to create more advanced blockchain games that involve smart contracts.
- Supply chain management: Account abstraction can allow the development of complex systems for supply chain management on the Ethereum network.
- Identity management: It will allow developers to create decentralized identity management systems that are more secure than traditional systems.
How does Ethereum account abstraction affect the Ethereum Network?
Ethereum account abstraction has had a significant impact on the Ethereum network. From improved scalability to increased adoption, let us take a look at some of the positives.
- Improved scalability: By reducing the amount of gas required to execute smart contracts, account abstraction could improve the scalability of the Ethereum network.
- Enhanced security: Separating the execution logic from the user’s account balance could improve the security of smart contracts by reducing the attack surface for attackers. It can also help with account freezing and account recovery.
- More flexible smart contracts: Account abstraction could enable developers to create more complex smart contracts that do not require an account balance, which could expand the use cases for the Ethereum network.
- Increased adoption: With improved scalability, security, and flexibility, the Ethereum network could see increased adoption from developers and users.
How can you prepare for the impact of Ethereum account abstraction?
EIP-4337 is a rather well-researched proposal that did not require any protocol changes. This made its implementation easy. Hence, its entry point was deployed at the start of March 2023.
However, EIP-2938 is still in the research phase, and it may take a couple of years until its implementation. But note that if EIP-4337 turns out to be sufficient, then there may be no need to implement EIP-2938 anymore.
Still, account abstraction is already here, and as an Ethereum trader, you should take steps to prepare yourself. That is because a single announcement or confirmation of an update can result in sudden price movements.
Some of the steps that you can take to prepare yourself for Ethereum account abstraction include:
- Keep yourself informed: On the most basic level, it is crucial for you to keep an eye on future updates and new changes to the Ethereum network. All you have to do is follow reputable sources like the Ethereum Foundation blog and Cryptopolitan.
- Monitor market sentiment: Every time a new update rolls out, the market’s sentiment shifts and impacts the prices. But remember that the sentiment always starts developing days or even months before a supposed update. You can monitor the market sentiment by analyzing social media conversations, sentiment analysis tools, and price charts over different time periods.
- Diversify portfolios: Remember that cryptocurrencies can be unpredictable sometimes. It is not always guaranteed that an update will age well. For all you know, the markets can fully crash in the worst-case scenario. Make sure to diversify your portfolios to minimize the risk of a complete loss.
- Consider long-term investments: If you are bullish on the fact that Ethereum account abstraction will increase its adoption, then this might be the best time to invest in Ethereum for the long term.
Conclusion
It is a general consensus among expert traders that Ethereum will succeed in the long term. One of the reasons for this belief is that it has a huge ecosystem, global recognition, and plenty of real-world use cases.
Developers are always looking for new ways to increase Ethereum adoption. Hence, making the Ethereum network more user-friendly and secure is the top priority. Account abstraction helps with that. It can also potentially reduce gas fees, and make the network more scalable.
Experts also believe that account abstraction can become a catalyst for adoption and an increase in prices. However, what the future holds for Ethereum’s price is based on pure speculation. If you’re interested in how Ethereum may perform in the long term, consider reading our Ethereum price prediction.
Source: https://www.cryptopolitan.com/how-ethereum-account-abstraction-improve/