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What is ERC-4337 & Why Does it Matter?


Cryptocoins Exchanges / CEX.IO 151 Views

The Greek philosopher Heraclitus said, “the only constant in life is change.” Indeed, this paradox has been the driving force of life since the dawn of humankind. On the one hand, changing what’s broken is necessary. On the other hand, improving what works well is to enhance an experience. In both cases, doing things differently is the key to success.

As thought leaders, we feel a responsibility to educate and inform our community. That’s why, at CEX.IO, we continuously strive to remain at the forefront of exploring and adopting new technologies. Be it market movements, new and intriguing frontiers such as AI, or crypto updates, they all have one thing in common: change.

And we revel in the excitement of being able to bring these news bits and updates to you. In this post we satisfy the urge to address a particularly significant, and what many believe to be a groundbreaking update: ERC-4337. We’ll do our best to be as straightforward and non-technical as possible. 

After all, as Einstein once said, “if you can’t explain it simply, you don’t understand it well enough.” Well, challenge accepted Albert. Let’s begin.

What is ERC-4337? A brief overview  

Ask any tech-savvy crypto expert and they’ll likely tell you that ERC-4337 is a “new Ethereum upgrade” that went live on March 1, 2023. But, what is it…really?

Technically speaking, ERC-4337 is a mere token standard. However, it’s not so much what it is, as what it does that makes it extraordinary. It introduces a feature called Account Abstraction, which enables Ethereum wallets to operate as smart contracts. 

Here’s what Account Abstraction means for users:

  • Gasless transactions

When it comes to sending gasless transactions, this feature enables dApps to “sponsor” (cover the costs) of gas fees. This makes things more straightforward and affordable for customers. 

  • Automate payments, and set time-based spending limits

This empowers users to manage their crypto wallets at their leisure, and on their own terms. 

  • Secure your wallet without a seed phrase

No no, we’re serious — you can say goodbye to those pesky 12-word seed phrases. Instead, Account Abstraction makes it possible to enable biometrics, like facial or fingerprint scans, as well as 2FA. 

  • Recover private keys

By far the most significant improvement introduced by ERC-4337 is the ability to recover lost private keys for wallets. Should someone lose their private wallet keys, a new “social recovery system” allows designated users to restore access. 

Why does ERC-4337 matter?

Technical updates occur almost daily in the crypto world. Most of them have to do with improving functionality or making various interactions more user-friendly. 

However, what could potentially make the ERC-4337 upgrade so groundbreaking is that it enables several of the same features a bank offers — without the need to trust an actual bank. This update ultimately makes crypto more accessible to users by merging smart contracts with crypto wallets. This theoretically results in more efficient and secure transactions.

But, the improvements don’t end there. As mentioned above, the upgrade also enables previously “impossible” functionalities, such as seedless wallets, wallet recovery, etc.

And while we’re on the subject of functionality, (not to brag or anything), the CEX.IO ecosystem already facilitates access to  similar services, such as:

  • Accessing/recovering your CEX.IO wallet with a password and 2FA
  • Enjoying numerous DeFi and crypto services at your fingertips
  • Opening a Savings account and taking out loans without visiting a bank*
  • And more…

*Services are available in select countries. Visit CEX.IO Savings and CEX.IO Loan pages for details. 

Potential applications of ERC-4337

Everything  covered above is well and fine, but what does this actually mean for users? Well, to demonstrate the enormous potential of this upgrade, we’ve explored two scenarios: a bullish one and a bearish one. Here’s what the future may hold for this new feature in two likely cases.

Scenario #1: bullish markets

In this case, the upgrade operates optimally, resulting in wallets that use ERC-4337 functionality more capably than the wallets of today. For example:

  • The ability to sponsor gasless transactions
  • Much more straightforward wallet recovery methods
  • No more seed phrases, since users can resort to other authentication methods

In simple terms, the possibilities expand when your wallet is simultaneously a smart contract. Consequently, the change may lead to developers building more dApps, which could also lead to more new users onboarded.

Scenario #2: bearish markets

On the other hand (and we’re sorry to rain on your parade, but it comes with the territory), there’s also another scenario. In the case of bearish markets, one downside of this upgrade is too much complex terminology.

Words like “bundlers,” “paymasters,” “account abstraction,” etc. are likely to make it challenging to build products that regular users will understand, and therefore, like.

In that regard, at CEX.IO, we continuously strive to simplify all things crypto-related (including concepts like the ERC-4337 upgrade). Our mission is to facilitate crypto adoption and serve as your safe port during stormy crypto seas. 

After all, we’ve done so since 2013. More than six million users are a testament to our longstanding commitment to bringing the exciting world of crypto to your doorstep (or screens). In straightforward terms (take that, Einstein!), bite-sized chunks, and on your own terms. May the markets trend in your favor! 


For information purposes only. Not investment or financial advice. Seek professional advice. Digital assets involve risk. Do your own research.

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