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Blog posts, Tech, Thought leadership | 09/12/2023

How ‘Account Abstraction’ Could Impact The Crypto Landscape?

Charles Guillemet, CTO at Ledger, explores how the concept of “Account Abstraction” will radically improve user experience in crypto and why hardware wallets will serve as foundational roots of trust in this new paradigm.

The global internet revolution has ushered in an undeniable wave of digitization that is now spreading to the very concept of ownership with the rise of blockchain technologies. As we navigate this transition from one Internet era to the next, from Web2 to Web3, the friction for users only seems to intensify. Blockchain interactions remain complex and primitive; they lack security and ease of use, especially regarding account management and logins, deterring too many from entering the crypto field. 

Account Abstraction, a blockchain-enabled technology allowing people to use smart contracts as their accounts and set their own flexible rules for wallet management, is a significant promise to alleviate this friction and inculcate enhanced user rules and security measures in the crypto space. 

In this article, I delve into the concept of Account Abstraction and explore how it could underpin the future of blockchain technologies. 

Externally Owned Account (EOA): blockchains’ initial principle

To fully understand “account abstraction” technologies, one must seize the initial paradigm of blockchains implementation, rooted in what we commonly call “Externally Owned Account” (EOA). 

An EOA works with users generating cryptographic pairs of keys: a public key for creating addresses and a private key allowing their owners to control an account. Within the EOA framework, the signer and the account are the same entity. Once the pair of keys is generated, users prove ownership of the address by computing a digital signature to execute transactions. The decentralized consensus validates these transactions by verifying that the signature is correct and has actually been computed using the private key that corresponds to the given address.

EOA is at the core of the original design of Bitcoin and Ethereum. Despite being quite elementary, this mechanism is incredibly efficient for a pseudonymous network of users to transfer value in a permissionless environment. However, its design is limiting when it comes to implementing enhanced features such as governance, recovery mechanisms, or more generally code execution. 

Some major blockchain protocols already feature such use cases.

The case of Bitcoin:

Bitcoin has a limited (on purpose) programming language that allows its protocol to enforce on-chain rules when interacting with accounts. For instance, Bitcoin’s scripting language enables users to create multisig wallets that enforce spending rules over the user’s UTXO (unspent transaction output). 

Additionally, timelocks can be implemented, too. For example, on Bitcoin, it’s possible to create a multisig wallet that implements the following rules, as shown in the illustration shown below: 

  • 3 signers are registered on a given wallet.
  • 2 signatures out of 3 are necessary to move funds.
  • No fund can move before a given block.

While the set of rules and the scripting language of Bitcoin may be somewhat limited, they still enable the design of the Lightning network.

The case of Ethereum:

On Ethereum, the design principle is different since the original vision was to create a decentralized, trustless computing machine. Contrary to Bitcoin, the language semantic is Turing complete, enabling to compute anything easily, including the execution of arbitrary programs (smart contracts) that run on-chain and provide trusted computing. These smart contracts also enable enhanced designs and incredible innovations, including Automated Market Makers (AMM). However, Ethereum’s language leads to undecidability problems, but that’s another story.

One of  the main limits of  Ethereum’s design is the fact that all smart contract executions must originate from an EOA. For instance, it’s impossible to create a standalone smart contract that executes itself at each block. Doing so would require an EOA that triggers transactions and pays for gas execution at each block.

On-chain smart contract implementation: some interesting ideas

Leveraging sophisticated smart contract design for on-chain governance has already been  implemented in diverse ways. 

Safe: on-chain multisig with minimal governance level:

Crypto platforms such as Safe did a great job at providing an on-chain multisig that enables users to set a minimal level of governance rules over an account. 

With Safe, multiple parties jointly control an Ethereum wallet and set custom rules and conditions for transactions, such as requiring a minimum number of signatures or approvals before the execution of a transaction. The different signers can customize security settings according to their preferences. For example, they can set daily spending limits, enable hardware wallet integration for additional security, or require multiple levels of authentication for specific transactions. These smart accounts are controlled by several EOAs  issuing valid on-chain signatures then triggering the token transaction held in the smart contract. 

Threshold Signature Schemes (TSS): off-chain governance at minimal fees:

Recent cryptography research worked on creating threshold signature schemes (also known as threshold signature schemes (TSS) or multi-party computation (MPC)) to implement the multi-authorization part of the governance, off-chain. 

This idea has interesting advantages. In particular, it’s directly compatible with the EOA model and minimizes fees. 

Elliptic Curve Digital Signature Algorithm (ECDSA): secure, with strong drawbacks:

Ethereum and Bitcoin blockchains use an Elliptic Curve Digital Signature Algorithm (ECDSA) signature scheme for transactions. 

However, contrary to Schnorr’s signature, ECDSA is not provably secure under DLP difficulty and Random Oracle Model. Furthermore, ECDSA has not been created to natively support Threshold Signature Schemes, leading to clunky designs. More specifically, Signature aggregation of other Signature schemes is provably secure, while ECDSA’s is not. Equations of Threshold Signature Schemes over ECDSA are hacky, leading to regular implementation issues. Last but not least, there’s currently no TSS scheme running in secure enclaves, leading to dangerous security tradeoffs.

Account Abstraction: the real game-changer crypto needs?

The great novelty ushered in by the concept of ‘Account Abstraction’ is the use of on-chain smart contracts to implement the wallet and the governance rules around it. These ideas have already been implemented in multiple smart contract accounts, including Argent, or with minimal governance with on-chain multisig such as Safe.

Much progress has been made in this area over the past months and years, and a few standardization trials have been attempted. The recent standard that had a lot of traction is known as ERC-4337. This standard provides a comprehensive framework for implementing different types of operations with a given and flexible governance. 

More specifically, ERC-4337 solves the technical specificities of implementing Account Abstraction in a EOA blockchain context, including:

  • Operation intent.
  • Operation validation.
  • Execution and fees payment (remember, on Ethereum, all operations are triggered by an EOA which pays fees. So, ERC4337 provides an incentive framework for decentralized bundlers to trigger the execution of the operations that users intend to execute.)
  • The nonce, an anti replay mechanism that was just incremental for EOAs and can be more sophisticated here.

When it comes to governance, it’s possible to create different signers and quorums to complete specific operations. Schematically, the user will interact with his smart contract, the smart contract then verifies whether governance rules are met, and finally executes the operations.

Verifying the governance can be as complex. One of the benefits of having this logic running on-chain with a Turing complete language is that it’s possible to create arbitrary governance rules and  to implement signature verification for any algorithm. As mentioned above, ECDSA scheme has plenty of limitations, first of all it’s not suited for signature aggregation (MPC / TSS), and secondly it’s not supported by current implementations in mobile’s secure enclaves.

An improved User Experience & flexible Security:

Thanks to Account Abstraction, it is possible to perform several atomic calls to different contracts in the same transaction with a smart account, leading to great improvements when navigating typical DApps (for example, it is no longer necessary to send 2 distinct transactions for an ERC-20 token approval then a deposit), as well as for the security of the user (for example ENS resolution can be directly performed by the smart contract account.)

The path to innovative Social Recovery methods:

By enabling complex operations at the account level, Account Abstraction can realize various advanced use cases, such as social recovery. In this scenario, users can designate a group of trusted guardians who can grant them access to their account should they lose access. EIP 5883 and the more recent EIP 7093 outline interesting methods for implementing such social mechanisms. 

Once more, users can specify both a threshold and a set of rules that will initiate the account recovery process in the event of access loss, which could radically improve user experience in crypto.

BLS/Schnorr signature aggregation:

As mentioned before, another weakness of ECDSA is the clunky Threshold signature design. Contrary to ECDSA, BLS and Schnorr have been designed for supporting Threshold signature scheme, and these standards are essentially additive. In brief, it’s possible to compute a valid signature by adding several partial signatures with strong security guarantees. 

Implementing BLS or Schnorr signers could allow some token governance while minimizing fees at verification by the smart contract (One verification instead of one verification per signature.) This aggregation mechanism is described and implemented optionally as part of the EIP 4337 standard.

What’s next for the adoption of Account Abstraction?
The case of Passkeys:

Account Abstraction is in direct competition with software wallets in the EOA context. The security model of software wallets is very weak, as any malware can drain users’ funds due to their inherent Internet connectivity and more generally their wider attack surface. Software wallets can’t really do better since SoC (System On Chip) based designs (smartphones) are very heterogeneous and do not all contain a secure enclave. 

When they do contain a secure enclave, developers can’t load their own code to implement Ethereum/Bitcoin signatures. In this context it’s simply NOT possible to leverage the only security features contained in high end phones. 

By incorporating the Account abstraction logic, developers can access a secure enclave digital signatures implementation. This includes WebAuthn, which is readily available at the OS level through passkeys standard.

It’s also possible to establish an on-chain rule in which the signatures originate from users’ passkeys. These passkeys use a different Elliptic curve than the one used on the Ethereum blockchain, but as the signature verification can be implemented on the smart contract itself, this mechanism becomes achievable.

Regarding UX, users can benefit from a broad integration within Apple, Google, and Microsoft ecosystems. It also gives a better level of security than a full software wallet. Additionally, the smart contract can enforce various kinds of governance and security mechanisms on-chain. For instance, each transaction execution can be secured by a Web3 firewall that is implemented off-chain and authorizes the smart contract to execute a specific transaction. Such a mechanism allows flexible security guards according to the user risk profile.

On the security front, such a setup (Account Abstraction with Passkeys authenticator) provides better guarantees than current mobile wallets. Modern smartphones can use Trustzone to implement passkeys. Nonetheless, the current landscape of passkeys implementation is not satisfactory for the following reasons: 

  • Passkeys is likely implemented in full software mode for Android and iOS. They don’t leverage the embedded Secure element (yet?).
  • Smartphones don’t implement Trusted User Interface and passkeys framework doesn’t provide the necessary information to users when they sign which means you could consent for transactions that you don’t understand.
Account Abstraction and the importance of Hardware Wallets as roots of trust

The concept of Account Abstraction empowers the fine-grained governance of diverse assets within a smart contract. When utilizing a wallet for micro-payments, these governance rules enable the execution of low-value transactions easily. Conversely, for higher-value transactions, a heightened level of security remains paramount, making hardware wallets the indisputable choice by far. 

For instance, Account Abstraction will enable:

  • Pocket money, which can be spent using passkeys on any smartphone.
  • Higher value transactions, all requiring secure hardware wallet signature and Web3 firewall.
  • Life Saving and Identity management, requiring hardware wallet signature + passkey + timelock + Web3 firewall.

As they continue to develop, these governance rules will need to be enacted with hardware wallets serving as the foundational root of trust, as these devices enable uncompromising security and ownership. Indeed, while Account Abstraction changes the security model, the overall wallet still needs strong security guarantees. The design of the governance rules holds paramount importance from a security perspective, especially in safeguarding the keys responsible for their modification.  Additionally, the different signers able to interact with the Account Abstraction layer will still need certain forms of secrets (private keys) to authenticate themselves. Protecting these secrets and providing the user with all the necessary information to consent to any blockchain interaction remains crucial, even in an Account Abstraction framework.

Closing Thoughts:

As previously explored, the EOA paradigm remains somewhat rudimentary. In contrast, Account Abstraction’s capacity to enforce complex on-chain rules is likely to become a radical game-changer for crypto users. Interestingly, the recent progress around EIP 4337 brings us closer to this significant shift.

Of course, several challenges lie ahead.

One of these challenges is that the blockchain itself executes the Account Abstraction’s flexible governance model, which means that the execution comes at high costs compared to regular EOA transactions. On Ethereum’s Layer-1, the chain isn’t very scalable, and the execution is consequently quite costly. However, on scalable Layer-2s, Account Abstraction could become the default choice where users define complex governance rules enforced by the Layer-2 consensus and anchored in the Ethereum Layer-1. 

Another challenge is the fundamental need to create a standard way to interact with Account Abstraction frameworks, so far focused on EVM chains. These generic wallets offer a wide range of possibilities, including high flexibility. However, without standardization, they could also remain proprietary, which, in turn, could challenge mass adoption. 

In fact, we will likely witness a future where the Account Abstraction paradigm could become a fundamental feature of EVM chains, while EOA interaction could play a pivotal role in other blockchain networks, including Bitcoin, even though such a fragmented protocol landscape isn’t desirable for users. We can also anticipate that these changes, driven by Account Abstraction, will eventually be integrated at the blockchain level. One thing is certain: Account Abstraction belongs to the future of blockchain. 

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