ERC-4337 is an Ethereum standard that aims to achieve account abstraction on the protocol without any consensus-layer changes. Account abstraction means that users can use smart contracts as their primary accounts, instead of externally owned accounts (EOAs) that rely on private keys. This allows users to customize their verification logic, transaction fees, and user experience.
ERC-4337 works by introducing a new type of object called a UserOperation, which users send to a separate mempool. A UserOperation contains a signature, a nonce, a gas limit, a gas price, a paymaster address, and an entry point address.
The entry point address is a smart contract that implements the required entry point contract functionality, which defines how the UserOperation is executed and validated. The paymaster address is another smart contract that pays for the transaction fees on behalf of the user.
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A special class of actors called bundlers (either block builders or intermediaries) package up a set of UserOperations into a transaction that calls the handleOps function of a special contract called the Entry Point Contract Registry (EPCR).
The EPCR then calls the entry point contracts of each UserOperation and executes them according to their verification logic. The EPCR also pays the paymasters for their services and collects fees from them either by deducting it from the user’s balance or by delegating it to a paymaster.
Bundlers are actors that collect user operations from the mempool and package them into transactions that call the entry point contract. Bundlers can be blocking builders or intermediaries that sell bundles to block builders. Bundlers are incentivized by receiving a portion of the fees paid by user operations.
The Shanghai Upgrade has scaled chances for more experiments on ERC 4337, Shanghai is a network upgrade for Ethereum that aims to improve scalability and security of the blockchain. Shanghai will introduce two main features: rollups and statelessness.
Rollups are a layer 2 solution that moves computation and storage off-chain, while keeping security and finality on-chain while Statelessness is a design change that reduces the size and complexity of the state which stores all the account balances and smart contract data on Ethereum.
Shanghai convention is expected to launch in late 2023, after the merge of Ethereum 1.0 and 2.0. This will pave the way for future upgrades such as London and Berlin, which will further enhance the performance and functionality of Ethereum.
ERC-4337 enables new capabilities for smart contract accounts, such as social recovery, meta-transactions, gas abstraction, and account upgradability that offer more security, convenience, and efficiency than EOAs… It also improves the user experience and security of Ethereum by reducing the reliance on private keys and allowing users to interact with any smart contract directly from their wallet.