# Rethink Digital Transactions with Account Abstraction

Source: https://usa.visa.com/solutions/crypto/rethink-digital-transactions-with-account-abstraction.html

Account Abstraction and ERC-4337

To better understand Account Abstraction’s value proposition, let's briefly review the two types of accounts that currently exist on Ethereum: Externally Owned Accounts (EOAs) and Contract Accounts (CAs), commonly referred to as user accounts and smart contracts, respectively. EOAs, which are controlled by private keys, allow users to send transactions. However, they lack the programmability of a smart contract, making them more rigid. In contrast, CAs possess executable code but are unable to initiate transactions independently. Transactions must always come from a user's account and contain the user's signature, whether it’s a simple token transfer or a complex operation executed through many smart contracts.

The concept of Account Abstraction (AA) seeks to capitalize on CA programmability for the benefit of end users. When writing a smart contract, it has been common practice to define an owner, who has control over the contract's behavior. A self-custodial wallet built as a smart contract can offer more functionalities to a user than an EOA-based wallet. This is enabled through the introduction of a new Ethereum standard known as ERC-4337, proposed by members of the Ethereum community, including Ethereum founder Vitalik Buterin.² ERC-4337 makes it possible for an owner to directly own smart contract accounts without the need for an EOA signature. Although an owner might not use an EOA signature in the traditional sense, their ownership of a smart contract still requires a secure authentication process to ensure they properly control and manage the smart contract account. In turn, this smart contract account can handle tasks like multi-factor authentication, recurring payments and custom rules and policies defined by the end user.

ERC-4337, the latest advancement in AA, was initially proposed as an Ethereum Improvement Proposal (EIP)-4337 in 2021. It underwent the Ethereum Request for Comment (ERC) process, which establishes standards for applications on the Ethereum network. The difference between an EIP and an ERC lies in their scope and adoption requirements. ERCs define how smart contracts should function and interact with each other at the application level. They do not require adoption by all participants like core EIPs (Ethereum Improvement Proposals), which are deployed at the protocol level and necessitate broader consensus within the community. As of March 2023, core components of ERC-4337 have been deployed on the Ethereum mainnet. Unlike previous Account Abstraction EIPs, ERC-4337 enables Account Abstraction on the Ethereum network without the need for consensus-layer modifications of the blockchain protocol.² This development allows blockchain network participants to explore and experiment with new user experiences immediately, without waiting for a major network upgrade. Notably, one of ERC-4337's advantages is its compatibility with any blockchain utilizing the Ethereum Virtual Machine, offering a standard for AA that extends beyond Ethereum itself.

Payment Innovations for Everyone, Everywhere

As a global leader in payment solutions, Visa consistently strives to explore innovations that cater to real-world needs. We continue to investigate the potential of smart contracts and the future that programmable money and programmable payments may enable. In this article, we delved into how AA on Ethereum, carried through by ERC-4337, can support interesting new use cases on top of the blockchain. We provided an end-to-end walkthrough of an ERC-4337 transaction and explained its differences from standard Ethereum transactions to highlight the underlying mechanics.

Our experiments with ERC-4337 focused on two different use cases by deploying Paymaster contracts to learn and evaluate their potential utility in addressing real-world problems and critically enhancing customer experiences with on-chain interactions. For companies working on this forefront, our product, research and engineering teams will be happy to discuss ideas in programmable payments.

Reach out to Visa Crypto at Contact our team to learn more about our research interests and activities in the crypto ecosystem.

This document is intended for illustrative purposes only. It contains depictions of a product in development and should be understood as a representation of the potential features of the fully deployed product. The final version of this product may not contain all of the features described in this presentation.

In our writing, we adhere to a clear distinction between conceptual terms such as entry point, paymaster and user operation and their corresponding on-chain entities EntryPoint, UserOperation and Paymaster. This approach follows the conventions set forth in the original ERC-4337 proposal.