As one of the three major transformations of Ethereum, what is the current development status of smart contract wallets? What opportunities exist?

Author: 0xKofi, Cryptocurrency Data Analyst

Translation: LianGuaixiaozou

In a recent blog post, Vitalik described the adoption of smart contract wallets as one of the most important changes Ethereum is facing today.

ERC-4337 is the standard for smart contract wallets, also known as smart accounts. The main features of this system are as follows:

  • Users perform pseudo-transactions called UserOperations (UserOps).
  • A Bundler bundles UserOps into a single on-chain transaction.
  • Applications can use the LianGuaiymasters contract to pay gas fees on behalf of users.

Ethereum, Arbitrum, Optimism, and Polygon have deployed over 350,000 ERC-4337 accounts, with 83% of them created just last month, showing exponential growth.

I analyzed the on-chain activities of ERC-4337 users and made the following findings:

1. Polygon

In July, Polygon experienced a significant surge in ERC-4337 usage due to the launch of the CyberConnect social network, where all accounts are ERC-4337 wallets. CyberConnect conducted approximately 360,000 UserOps in just July.

2. Optimism

Similarly, with the release of CyberConnect on L2, Optimism saw a significant increase in ERC-4337 usage this week. The number of UserOps executed in the first four days of August was over four times the total number in July.

Beam is the second most popular app using ERC-4337 on Optimism, a smart account wallet tailored for stablecoin payments.

3. Ethereum

Most smart account activities on Ethereum are focused on liquidity staking. In July, 41% of UserOps were generated by users minting and transferring stETH, cbETH, and rETH.

4. Opportunities

(1) Metamask Snaps

During the ETHCC conference, the Metamask team announced the launch of the Snap Keyring API, allowing developers to add new types of accounts to Metamask outside of EVM EOA. Keyring will add support for smart accounts later this year, as they believe smart accounts will play a significant role in the future development of Metamask.

If you are running an ERC-4337 startup or perhaps looking for a new opportunity, it is recommended to learn how to build Metamask Snaps.

(2) MEV

Currently, ERC-4337 Bundler has exclusive access to MEV extraction for any UserOps sent to them. Bundlers with a large volume of activity can decide to either sell access to the order flow to MEV extractors or run their own MEV strategies.

In the long term, the plan is to create a public ERC-4337 mempool where all UserOps will be submitted before being included in a block. I believe this will bring a lot of opportunities for products like real-time mempool data services.

(3) Consumer apps

The most successful consumer crypto apps will have an abstracted wallet experience where account recovery, zero gas fees, and automatic operations will be standard features.

Today, if you want to create a consumer crypto app, you have to develop and audit custom implementations for this experience. The most popular crypto apps (Binance, Stake.com, Pornhub Premium, etc.) usually adopt a fully custodial form of funds management.

As the ecosystem develops, teams will be able to leverage ERC-4337 to provide most of these key features while offering self-custody or partial custodial options. Those features that are not inherent to 4337 can be built as plugins, benefiting from modular account implementations. I’m excited to see crypto consumer apps recognizing this potential and saving a significant amount of development time as a result.

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