To successfully attract and retain billions of users globally, crypto—and particularly wallets, as an inevitable first blockchain touchpoint—must revamp the user experience. Wallets have been greatly, but insufficiently, refined since the launch of Bitcoin Core. New account abstraction and multi-party computation solutions, which improve security and transaction execution, have excited the developer ecosystem.

Account abstraction is an Ethereum modification that allows smart contracts to serve as users’ main accounts. The legacy system employs externally-owned accounts (EOAs) in combination with browser-based plugins, such as MetaMask or Phantom. Each app interaction requires a signature (often in the form of a perplexing pop-up) and generates significant transaction costs. Consequently, complex on-chain actions can feel as burdensome as texting on a Nokia 3310.

However, account abstraction offers three, key benefits that yield a more iPhone-esque user experience:

1. Gas subsidies allow web3 developers to cover costs related to, and dispense with the signature requirements for, certain transactions. Developers appreciate that these subsidies improve conversion rates in the acquisition / retention funnel, as users see lessened app onboarding expenses (can be up to $30).
2. With transaction batching, multiple transactions can be grouped and submitted to the blockchain as a single unit. By eliminating individual transaction submissions, this feature reduces cost and complexity.
3. App-specific logic allows developers to create custom or vertically-integrated experiences that simplify dApp usage (e.g., approving token balances on a DEX aggregator).

Multi-party computation (MPC) is a cryptographic protocol that uses private inputs from multiple parties to verify information. It functions by sharding a given account’s key—effectively increasing security by removing single-device point of failure risk (relevant to EOAs). In the event a shard is lost or compromised, MPC enables free off-chain backup (whereas account abstraction recovery incurs transaction costs). MPC features allow less-crypto-native companies and institutions to safely access a wide range of on-chain opportunities; traditional custodians, by contrast, are still struggling to adapt their existing infrastructure to interact with smart contracts.

Account abstraction and MPC modernize wallets for both consumers and enterprises. While the shift away from EOAs and cold-storage-centric custodians may take time, a smoother on-chain experience will likely accelerate adoption. Hopefully, this user inflow will result in increased demand for, and the subsequent creation of, differentiated crypto products and services.

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Weekly explorations into emerging crypto trends and how to navigate 2023 from the Slow Crypto Team, Sam Lessin, Clay Robbins, and Caroline Cline.

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