For most of us, NFTs have been our entrée into Web3. However, the process of buying, storing, and securing those NFTs is still relatively complicated for the average person. Moreover, the wallet creation experience — the necessary precursor to any Web3 activity, NFT or otherwise — is a major inhibitor to mass adoption.
That’s where ERC-4337 comes in.
This new Ethereum upgrade has the potential to make blockchain technology more accessible to non-crypto natives and provide benefits like lost key recovery, no seed phrases, gasless transactions, and more.
Let’s explore what ERC-4337 is, why it’s important, and what it might mean for the future of NFTs.
What is ERC-4337?
ERC-4337, short for “Ethereum Request for Comment 4337,” is an Ethereum upgrade that enables account abstraction. In simple terms, account abstraction allows Ethereum wallets to act as smart contracts.
That means each crypto wallet can have customized authorization logic to meet the needs of individual users or applications. This upgrade was proposed by Ethereum co-founder Vitalik Buterin and others in September 2021 and announced at ETHDenver on March 1, 2023.
Until now, wallet creation and use have been cumbersome, confusing, and intimidating for many people entering Web3. The process of securing seed phrases, sending those first finger-trembling transactions, and the lack of user-friendly security features are all significant barriers to entry for new users. ERC-4337 makes wallet creation and use much easier and, therefore, more accessible.
For NFTs, this is particularly important. NFTs have helped get regular people, traditional brands, and older IPs into the space. However, if wallet creation remains user-unfriendly, it will continue to discourage people from buying their first NFTs.
What does ERC-4337 do?
ERC-4337 solves four key problems in current wallet structures:
1. Recovers lost private keys
Losing the private keys to your wallet is one of the biggest risks and fears in the crypto space.
The only thing worse than buying an NFT that goes to zero is holding a valuable NFT that you lose. It’s a scary reality in Web3. ERC-4337 enables a “social recovery system” where designated users can restore access to your wallet if you lose your private keys.
2. Secure wallets without seed phrases
ERC-4337 also allows for secure wallets without seed phrases, which can be difficult for some users to remember and keep safe.
With this upgrade, users can use 2FA (two-factor authentication) and biometrics to protect their wallets, making them much more secure and user-friendly. However, some people are in Web3 specifically to protect themselves from the type of institutional intrusion that security measures like biometrics represent. Moreover, seed phrases provide an additional layer of security that those users and others may not want to give up.
Nonetheless, this feature can still make it easier and more accessible for the many NFT-curious users who would gladly set up 2FA or biometric account access.
3. Automated trading
One of the most challenging parts of collecting and trading NFTs is how hands-on you have to be. Tracking metrics, timing mints, analyzing floor prices — they all require a near-constant effort.
However, ERC-4337 allows for automated trading, including a monthly spend limit, AI trading, and adjusting yield farming positions. These features can make trading NFTs much easier and more accessible for users of all levels.
4. Gasless transactions
Finally, ERC-4337 enables gasless transactions. With this feature, NFT collections and their DAOs can sponsor gas fees for users to make their transactions cheaper. Similarly, this feature allows the bundling of transactions, making them quicker and more efficient.
This feature also enables paying transaction fees with an application’s tokens, which can also significantly reduce transaction costs. Entire blockchains, such as Avalanche and its subnets, have been set up to enable this as a primary feature.
What might this change in the future?
Overall, ERC-4337 offers many features that traditional banks typically offer their customers, all without the need to trust a financial institution.
As a result, ERC-4337 could lead to a significant boost in the adoption of NFTs. By making it easier to buy, store, secure, and recover NFTs, this upgrade could be a game-changer for the market.
However, the features aren’t enough to lead to mass adoption in and of themselves.
The key to achieving the potential of ERC-4337 lies in how we communicate about it. Even the term “account abstraction” and other technical jargon won’t be helpful for those who aren’t already familiar with the space. Indeed, we may even need to do away with the word “wallet” and instead opt for language that more closely mimics web2: account creation, login, password recovery, and the like.
Nobody outside our Web3 world knows what those seven alphanumeric characters in ERC-4337 mean. And they won’t have to, as long as everything else is easy for them.