“It’s gone, man! It’s all gone!!!”

This was the message I woke up to on Twitter in March 2021.

I struggled to understand the context.

Then I looked at his Twitter feed and my heart sank.

A good friend, and one of my crypto mentors just had 18.2 BTC drained from his wallet.

The price of BTC that morning was just over $61,000. That was over $1 million.

I knew this was a significant amount of his net worth.

I got him on the phone and he gave me the whole story. I was in shock and disbelief.

But more on that later.

The Hurdle for Mainstream Adoption

One of the biggest hurdles for mainstream adoption for Web3: the wallet setup.

The first time I set up a crypto wallet, it felt like something from the 1980s.

You mean I have to write down twelve words on a piece of paper and then hide it somewhere like I’m a cartel member burying drug money in my backyard?

If Web3 wants to go mainstream, it needs to fix the user experience with the wallet setup.

We always hear: “not your keys, not your coins.” Which is a great saying. But it doesn’t take into account the fact that the majority of people don’t want the responsibility of being their own bank.

It’s ironic that as we enter the next phase of the internet, despite all our cutting edge technologies and computing breakthroughs, we still have to secure our wallet with a pen and paper.

Thankfully we are on the cusp of solving that issue with wallet account abstraction.

What is Account Abstraction

Account abstraction is a new way to make blockchain accounts programmable.

Currently there are two types of accounts on Ethereum:

• Contract Accounts

• Externally Owned Accounts (EOA).

An EOA is a basic user account.

For a transaction to be processed, it needs to be paid by an EOA.

Right now, an EOA is controlled by your private key. You use this private key to create a signature that proves to the blockchain that it’s your account.

The problem with that is if you lose that private key, you’re fucked.

It also creates a single point of failure in which hackers can drain your entire account.

The alternative is “custodial accounts” at a centralized exchange like Coinbase or Binance. This has the same single point of failure issue. And centralized exchanges have a history of getting hacked.

So what’s the solution?

Enter account abstraction.

Account abstraction shifts the paradigm so that assets are held by smart contracts exclusively, not by externally-owned accounts (EOAs).

This opens up the door to a range of solutions to the current problems. Examples include:

• What if I lose my private keys? With account abstraction you can program logic into the smart contract to override the previous private key, which effectively allows you to recover your account. This solves a HUGE issue.

• Can I create new wallets and sub accounts with only one seed phrase? Yes, this is possible and it opens up many use cases. You could structure a wallet in a way that allows you to set up multiple sub accounts for your family. On a larger scale, think about how businesses could also use that for company accounts.

Basically, this allows us to program our crypto wallets with the same user experience as people are accustomed to today with credit cards or bank accounts.

The current way we interact with blockchains relies on EOAs which are not scalable. Users have to protect their password with their entire net worth on the line.

Can you imagine your grandma hiding her password in her kitchen cupboard and then forgetting where it is two weeks later?

Account abstraction is about scaling self custody wallets to billions of people. Without it, self custody will continue to be only for the diehard zealots.

Why Haven’t We Figured This Out Already?

Account abstraction and smart contract wallets have been around for a few years.

But the way Ethereum is currently set up, it has made it prohibitively expensive to use.

This topic has started to gain steam because of ERC 4337, which helps us get to account abstraction without changing the Ethereum protocol.

So what does this actually mean?

ERC 4337 is basically ready so many of these wallets will launch within months, not years.

Additionally with the launch of scaling solutions such as Arbitrum and Optimism, account abstraction is already built into those protocols.

This is great news for crypto and Web3 as it opens the door for billions of new users.

If we can fix the user experience with the wallet, the floodgates will open. But it has to be as good as or better than the current Web2 experience of managing money.

The Hack Explained

The night of March 13th 2021, my friend was stressed. It was the middle of the bull run and the volatility of watching his net worth swing 20% in a day was getting to him.

His business was on the ropes as it had not recovered from the Covid shut downs.

He was working 12 hour days and getting very little sleep.

He had read some troubling stuff on Crypto Twitter about people being hacked.

He already kept his BTC on a Trezor wallet. However, he wanted to transfer it to a new hardware wallet since he had interacted with some contracts he thought were suspect.

Late one night, after working too long and spending too much time on Twitter, he downloaded a Trezor app on the Apple app store.

He took a look at the app store reviews. Over 5,000 5-star reviews.

Seems legit.

He downloaded the app and committed the cardinal sin of crypto investing:

He entered his seed phrase.

Within minutes his account was drained.

He spent the rest of the night in shock and horror messaging anyone he could find on Twitter to see if they could help.

The BTC was gone.

He’s a crypto OG.

Been in the space since 2015.

But he’s only human. And he made a devastating error.

This is why we need account abstraction.

Without it, there is zero room for error.

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