How to unlock the full service of Ethereum with smart accounts and account summary

The Ethereum ecosystem is on the cusp of realizing advanced security features and transaction functionality with the upcoming smart contract wallet and ledger, but adoption of the technology continues to slow.

Cointelegraph spoke with Safe co-founder Lucas Schor during ETHGlobal in London about why smart contract tokens and token abstraction promise to open up Ethereum's full functionality.

“Vitalik Buterin recently put out this blog post with three transitions we have to go through, and one of them is moving to modern accounts. That's where we see our role,” Shore said.

A secure, smart wallet infrastructure provider in the Ethereum ecosystem, it was initially designed as an in-house multi-signature wallet to manage the large amount of ETH (ETH) collected during its initial coin offering by Ethereum sidechain Gnosis.

“They wanted to have a Multisig Wallet, but they weren't battle-tested at the time,” Schor said.

Gnosis founder Stefan George chose to create his own multi-signature wallet and open sourced it. Members of the Ethereum community began to accept it, and the wallet became “the de facto standard of multi-signature wallets.”

Gnosis Safe was born, but the project would eventually become a standalone offering, Safe, now available as a smart token infrastructure for Ethereum users, layer-2s like Optimism and Polygon, and exchanges like Bitfinex. Safe secures over 7.5 million modern account addresses worth over $100 billion.

Modern tags address security, UX challenges.

Smart tokens fundamentally improve the security and user experience in the Ethereum ecosystem, enabling a wider set of functions that a typical ETH wallet cannot perform.

“As smart accounts are programmable accounts, they offer completely new design spaces to solve long-standing UX and Ethereum security challenges, such as cross-chain and key management, fundamentally reducing adoption barriers,” explains Shore.

Smart account features include the ability to offset transactions, enabling Schor to combine multiple on-chain actions into a single transaction to create more seamless DApp interactions.

Security guarantees are another fundamental feature that makes smart accounts increasingly important. In addition to the multi-sig functionality, key rotation allows users to separate the signing key from the ETH wallet, allowing them to change the signer's configuration without transferring assets to a new account.

Smart accounts allow automation of common Web2 or traditional financial concepts such as subscriptions. You can enable on-chain security features such as allow and deny lists and the ability to prevent interaction with malicious contracts.

The functionality eliminates the hassle for Web3 natives who don't have an ETH wallet. This means users can later log in using Web2 social accounts or email addresses with the option to switch to a “more trustless setup”.

Dapps, exchanges, layer-2 protocols and other chains can sponsor gas payments, which Schor Web3 interaction can greatly increase user experience:

“With these developments, I expect that Web3 will become a more effective option for large brands and companies to build solutions on Ethereum and make controllers more convenient for the industry.”

First slowly, then all at once

Adoption of smart bills is something Shore sees as “slowly at first, then all at once.” Safe Co-Founder's work on developing smart accounts has been ongoing for six years, indicating a very gradual adoption curve.

“One of the barriers to adoption is that most users still use EA accounts. [externally owned accounts]with wallets like MetaMask, so many apps and wallets facilitate this,” explains Schor.

He added that Layer-2 protocols have the potential to “start from scratch” and that the recent planned migration to EIP-7377 could accelerate adoption as wallets and Dapps are not optimized for “legacy users”.

Schor says Safe will benefit more from the added security and flexibility of smart accounts that are deliberately targeted at specific user groups, such as Ethereum ecosystem groups and DAOs.

Over time, adoption has seen a gradual shift to increasingly technical and low-value use cases. Schor highlighted Worldcoin's deployment of six million smart accounts as proof of this adoption and said 2024 could be the new year.

“I expect this year to be a tipping point as the initiative in general builds, largely accelerated by ERC-4337, and even changes to make L2 smart accounts the default.”

New incentives, such as the use of Coinbase smart accounts, cross-chain smart accounts, and EIP-7377 may drive the migration to smart accounts.

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