The Blockchain Promise

Hazim and I founded Stackup because crypto hasn't fully lived up to its promise.

The blockchain promise is this: Everyone needs to know that they can own things without them being taken away. Everyone deserves access to an equitable financial system. And everyone has the right to safely manage their money.

These promises are fundamental rights that enable prosperity around the world. And many governments and institutions in the world are pretty good, at least historically speaking, at upholding these promises. But there are many that aren’t, and ultimately there are limitations to enforcing these social contracts.

Blockchains are a powerful new tool for giving people this equality. In fact, it excels at it.

When crypto works

Here is just one example. When the Taliban took control of Afghanistan in September 2021, women like Arezo Akrimi were forced out of their jobs. Many of these women, including Arezo, were the sole breadwinners in their families and feared for their lives.

Crypto provides fix for some in crisis-hit Afghanistan | Deccan Herald
Image courtesy Wakil Kohsar/AFP

The reaction from countries like the United States to the rise of the Taliban was fierce. They cut off the new government from the world’s financial system, and the Taliban in turn slowed the withdrawal of money from its banks to maintain control of the country.

Financial services collapsed, and in just one year the poverty rate skyrocketed to 98%.

Arezo, who despite all odds was educated as a web developer, turned to cryptocurrency. She was lucky enough to have access to enough internet to watch YouTube videos and learn how to use Binance.

Stablecoins allowed her and her family to get food and maintain just enough of a sliver of freedom to stay alive. Others quickly caught on, and despite unreliable electricity, limited internet access, and a 43% literacy rate, suppressed people in Afghanistan are able to trade with each other out of the Taliban’s reach.

So why hasn't crypto caught on?

In short, because you have to be an expert just to use it. This isn’t equality. Arezo’s story is inspiring because it is an exception. There are still billions of people who would prosper from using crypto but can’t. You can’t have equality without accessibility.

Economic accessibility

Lack of accessibility is an existential risk to crypto. For the last few years great progress has been made, for example, in making transaction fees affordable.

The innovations in alternative layer 1s, optimistic rollups, and ZK rollups have been astounding and are necessary to making crypto accessible economically. And there are more to come as other improvements to Ethereum mainnet are made this year, such as EIP-4844.

Accessible accounts

The next big piece for making crypto accessible, and fulfilling the blockchain promise, is Smart Accounts.

Smart Accounts are blockchain wallets that are programmable.

By default all user accounts on Ethereum-based blockchains are just a key. With a key you can do anything with your account, and without it you can’t do anything.

There is a single security model: If you lose it, you lose everything, and every time you use it you pretty much either have to fully trust the application you’re using to not drain your wallet or you have to be able to audit the code yourself. This puts a lot of burden on the user.

We want our wallets to be smart - to understand how a blockchain works so that we don’t have to.

Smart Contract Wallets

This is not a new idea. As you can see from this figure, Smart Contract Wallets have been around for a while. Pretty much since the start of Ethereum itself in 2015.

(By the way - sorry if I’m missing your project up here or put the date wrong, I probably don’t mean it personally! Just dm me and I'll fix it)

Smart Contract Wallets are as old as Ethereum itself

But in practice smart contract wallets haven’t really caught on for individual users. In fact, only about 1 in every thousand wallets is a smart contract wallet, despite smart contract wallets being around for a very long time.

Less than 0.10% of Ethereum addresses are smart contract wallets.

Does this mean that people don’t actually want Smart Contract Wallets?

My opinion may surprise you.

I think people don’t actually want smart contract wallets. They want all of the benefits, of course, but they don't want a "smart contract" and they don't want a "wallet".

They want access, and smart contract wallets fall short in this dimension.

And it is absolutely no fault of the developers of these projects. I think they have done an amazing job and are, for lack of a better term, ahead of their time. The unfortunate truth is that they have been fundamentally constrained.

A key is still needed to initiate a transaction, transaction fees are higher for these wallets than just using a key, and smart contract wallets tend to become closed ecosystems because they need bespoke integrations with many apps, despite the best efforts of leaders of these projects to get broader support.

Some of the pioneers, like Argent, have effectively moved on from Ethereum to new blockchains that natively support smart accounts. 

I think this has taught us that interoperability—which is just a fancy word for access—is king. And it is clear that native support for smart accounts is the best solution.

Native Smart Accounts

There have been many attempts at moving Ethereum to smart accounts. Vitalik Buterin even talked about it in the months before the actual launch of Ethereum.

But attempts to enshrine smart accounts within Ethereum or extend keys have largely fallen flat. It is a huge change that we haven’t been able to pull off, in part because we needed to increase economic accessibility first by supporting rollups, and in part because we don’t know exactly what the best way of doing it is.

How ERC-4337 fits in

Two months ago the Ethereum Foundation announced that a clever workaround first proposed in 2021, called ERC-4337, completed an audit and was now safe to use. This surprise announcement has caused renewed interest and support for smart accounts.

ERC-4337 does not make smart accounts the default on Ethereum. But it does provide a framework that gets them a lot closer to the end goal, and paves the way for them to be enshrined in the future.

Here’s how it works: ERC-4337 creates another transaction pool specifically for Smart Accounts and a framework for processing their transactions on-chain.

Components of ERC-4337.
ERC-4337 creates a separate transaction pool for smart accounts

Users submit what they want to do as user operations to the pool. This pool is monitored by a new class of decentralized actors, called bundlers, which have their own keys and are paid by users for submitting these transactions to the blockchain. On-chain, an EntryPoint contract handles all of the logic.

This design can be done without consensus layer changes, is censorship resistant, and works on any blockchain that supports the Ethereum Virtual Machine. This means, unlike past proposals for supporting smart accounts, developers can start building on a universal standard today, on many blockchains.

Here are some of the things enabled by Smart Accounts and ERC-4337:

  • Arbitrary verification logic, like social logins, faceID, device keys, aggregating signatures to make rollups even cheaper, and even boring old private keys.
  • Sponsored transactions, so apps can pay for transactions on their platform or wallets can pay network fees in stablecoins
  • Security features, like account recovery and daily spending limits
  • Bundled transactions, so any complex series of tasks in crypto can be one click

All of these things were possible before ERC-4337 in one way or another. In fact, if you’ve been on Crypto Twitter in early 2023, you’ve probably been reminded of this by people upset that they built the same functionality years ago but didn’t get the attention.

But these innovations ended up being closed ecosystems. 

Interoperability is King

The power of ERC-4337 is that it pulls them all together into a single new standard that we can all start using now. At Stackup we’ve counted nearly 1000 projects already using ERC-4337, ranging from hackathon projects to Fortune 500 companies, and this number is growing.

Furthermore ERC-4337 has become a template that new blockchains are using to build native support for smart accounts. And it will be the template that Ethereum uses when we finally get smart accounts supported natively.

This means that individuals like Arezo won’t need to learn how blockchains work just to buy bread for her family of six. It means that everyone, not just those who overcame all odds, can know that they can own things without them being taken away. That their rights are truly inalienable, not just because a social contract says so, but because a smart contract says so.

That is the blockchain promise, and this is what the future of Ethereum access looks like. Smart Accounts are no longer a differentiating feature of projects or blockchains. They are now table stakes.