The Ethereum ecosystem is on the verge of unlocking advanced security features and transaction functionality through the introduction of smart contract wallets and account abstraction. However, the adoption of this technology is happening gradually. In an interview with Cointelegraph during ETHGlobal in London, Safe co-founder Lukas Schor explained why smart contract accounts and account abstraction are crucial for maximizing the potential of Ethereum.
Schor referred to a recent blog post by Ethereum co-founder Vitalik Buterin, which outlined three transitions that need to occur. One of these transitions is moving to smart accounts, and that is where Safe comes into play. Originally developed by Gnosis as an in-house multisignature wallet to manage the Ether raised during its initial coin offering, Safe has now become a standalone offering that serves as the smart account infrastructure for Ethereum users, layer-2 protocols like Optimism and Polygon, and exchanges like Bitfinex. Safe currently secures over $100 billion in value across more than 7.5 million smart account addresses.
Smart accounts address security and user experience challenges within the Ethereum ecosystem. They offer a range of functionalities that conventional ETH wallets cannot provide. Schor explains that smart accounts are programmable accounts that open up new design possibilities to solve long-standing UX and security challenges, such as cross-chain interoperability and key management. This reduces the barriers to adoption.
One key feature of smart accounts is the ability to batch transactions, which allows for more seamless interactions with decentralized applications (DApps) by bundling multiple on-chain actions into a single transaction. Smart accounts also offer enhanced security guarantees. In addition to multisig functionality, the key rotation feature allows users to detach the signing key from an ETH wallet, enabling the exchange of the signer setup without moving assets to a new account. Smart accounts also support the automation of traditional finance concepts like subscriptions and provide on-chain security features such as allow and deny lists to block interactions with malicious contracts.
Furthermore, smart accounts can make it easier for non-Web3 users without an ETH wallet to onboard onto the Ethereum ecosystem. They can be onboarded using Web2 social accounts or email addresses with the option to migrate to a “more trustless setup” later on. Additionally, DApps, exchanges, layer-2 protocols, and other chains can sponsor gas fees, which significantly improves the user experience of Web3 interactions.
Schor believes that the adoption of smart accounts will follow a “first slowly, then all at once” pattern. The gradual adoption curve is partly due to the fact that most users still use externally owned accounts (EOA) via wallets like MetaMask. However, layer-2 protocols have an opportunity to start from scratch, and the proposed migration outlined in EIP-7377 could expedite adoption as wallets and DApps no longer have to optimize for legacy users.
Safe has intentionally focused on specific user groups that would benefit the most from the added security and flexibility of smart accounts, such as Ethereum ecosystem teams and DAOs. While adoption has initially been driven by technical and higher-value use cases, Schor notes that it is gradually shifting towards less technical and lower-value use cases. He points to Worldcoin’s deployment of six million smart accounts as evidence of this trend and suggests that 2024 could be a breakout year for smart account adoption.
Various catalysts, including Coinbase leveraging smart accounts, the development of cross-chain smart accounts, and the implementation of EIP-7377, could further drive the migration to smart accounts.