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‘Smart accounts’ can bring crypto to the masses — why hasn’t it caught on?

‘Smart accounts’ can bring crypto to the masses — why hasn’t it caught on?
Jason Windawi is a protocol specialist at crypto software tooling company Alchemy. Credit: Andrés Tapia
  • Smart accounts give crypto users a familiar, web2-like experience.
  • With smart accounts, users can regain access to their crypto even if they lose their seed phrase — an issue many consider a major barrier to widespread adoption.
  • Although they have yet to gain much traction, that could soon change.

Crypto accounts are famously difficult to manage and secure.

“You have to manage all sorts of really cumbersome stuff around gas fee estimation, signatures and [account] recovery,” Jason Windawi, protocol specialist at crypto software tooling company Alchemy, told DL News. “And there are all sorts of things that make [using crypto] a very difficult user experience.”

A 11-month old concept called “account abstraction” aims to solve that by letting users create “smart accounts.”

While it’s been hailed as a potential solution, it has yet to catch on.

What is account abstraction?

“The idea [with account abstraction] is to abstract all of that complexity away for people,” Windawi continued. “You can think about it as almost having, like, a web2 sign-on experience, but with all the self ownership and autonomy of web3.”

Web2 refers to the Internet as most people know it today — social media platforms, search engines, online shopping, etc.

Web3, a term for the constellation of applications and services that run on crypto rails, has long sought to emulate the familiar experience of the former in a bid to boost user adoption.

Benefits include the ability to log in using a standard username and password combination, rather than the string of 12 randomised words — a “seed phrase” — that are typically used to access crypto wallets.

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Blockchains are peer-to-peer systems; without an intermediary to help users regain access to an account, losing a single word from one’s seed phrase means forever losing access to that account.

With smart accounts, users can recover their crypto in the event they forget their login credentials.

Smart accounts also allow companies or protocols to pay crypto transaction fees on users’ behalf.

Even on low-cost blockchains, transaction fees can add up, and they have been considered another barrier to wider adoption.

Among other things, a smart contract deployed last March enabled smart accounts across any Ethereum-compatible blockchain.

“We needed a standard that will work on every [Ethereum Virtual Machine] chain without requiring changes,” Yoav Weiss, a fellow at the Ethereum Foundation and one of the developers behind the new smart contract, said Tuesday during a live-streamed discussion on X.

‘A set of limitations’

More than 9.3 million transactions have been made by smart accounts using that standard since their debut last March, according to data compiled by pseudonymous crypto analyst Kofi.

That’s roughly the number of transactions that Ethereum handles in a single day, according to data compiled by pseudonymous crypto analyst Hildobby.

In other words, smart accounts have a long way to go before they become the standard way to interact with Ethereum and its broader ecosystem.

“This approach, it has a set of limitations,” Weiss said on the live-stream. Those include slightly higher cost than transactions executed by standard Ethereum accounts.

“It meant that these [smart] accounts remain a second class citizen of the [Ethereum] network.”

Thus far, most smart accounts have not been created on Ethereum itself, but on Polygon, another layer 1 chain often erroneously referred to as an Ethereum layer 2.

Smart account creation has been dominated by a trio of projects: Grindery, a crypto wallet embedded in the Telegram messaging app; Cyber Connect, a crypto-based social media platform; and FanTV, a so-called watch-to-earn platform that pays users for watching live-streamed videos.

Kofi has attributed smart account creation on those apps to “farming,” the practice in which people with little interest in the product itself nevertheless use it repeatedly in order to claim free tokens.

Windawi noted that it’s still early days for smart account adoption.

“There are a lot of new apps that are incorporating it now. But in terms of things that would have shown up in 2023 data, there weren’t there weren’t quite so many,” he said.

“There are a lot of organisations working very hard to make it easier to implement. But at the moment, it’s a challenge.”

One proposal would embed account abstraction and the ability to create smart accounts within so-called layer 2 blockchains, which append transactions to Ethereum for security reasons and are used to circumvent the latter’s notoriously high transaction fees.

Weiss described it as a protocol-level version of the smart contract that launched last year.

“You end up with being able to develop only once, and have it work more efficiently on some layer 2s,” he said. “And this way we can increase the adoption over time.”

Building it directly into Ethereum — rather than enabling it via a contract built atop Ethereum — remains the ideal, according to Weiss.

But changes to Ethereum’s codebase are complex, take quite a bit of time, and have to compete with other, more pressing upgrades.

“We don’t have the luxury of just changing Ethereum as we like,” Weiss said. “This takes time, takes consensus. So the right place to start experimenting with it is a layer 2.”

Aleks Gilbert is DL News’ New York DeFi correspondent. Have a tip? Contact him at

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