Analysis, Ethereum

Why EIP-3074 Matters

Ethereum's latest buzzy improvement proposal could transform how you transact.
William M. Peaster William M. Peaster Apr 17, 20243 min read
Why EIP-3074 Matters

Crypto has been abuzz over a new Ethereum Improvement Proposal (EIP) – EIP-3074 is in the limelight this week as Ethereum core devs just approved the standard’s inclusion in the upcoming Pectra hard fork, which is set to go live later this year or in early 2025.

EIP-3074 is the next big step in evolving Ethereum’s account model for the future. It’s a short-term remedy ahead of the ascendance of ERC-4337, but its user experience (UX) level-ups are significant. 

Let's take a look at what's cooking in EIP-3074 👇

The Basics of Account Abstraction

Externally Owned Accounts (EOAs) are the most basic form of Ethereum accounts, controlled directly by private keys without associated code. EOAs can send ETH and interact with smart contracts, but they lack more complex functionalities.

Unlike EOAs, Smart Contract Accounts (SCAs) are directly controlled by their contract code, and through them, users can hold and control funds, automate decisions based on other contract calls, and more, according to their programmed logic. This makes SCAs extremely versatile and the future of wallets.

Against this backdrop, Account Abstraction (AA) refers to a series of development efforts aimed at making Ethereum accounts more flexible. The goal? Reduce the differences between EOAs and SCAs, allowing account behaviors to be more programmable and capable of catering to a wider array of user needs.

Ethereum’s AA Roadmap

Ethereum’s AA roadmap includes multiple parallel efforts that address different challenges. 

Today, the consensus on the main path forward is a deeper embrace of ERC-4337, an AA standard that supports a wide range of features typically not available to EOAs, such as paying gas fees in tokens beyond ETH, complex account recovery mechanisms, and more advanced transaction batching and scheduling functionalities. 

However, ERC-4337 can and will be complemented by other approaches, like EIP-5003, a proposed method for permanently transitioning from an EOA to an SCA, and EIP-3074, which will pave the way to allowing EOAs to delegate transaction execution authority to SCAs.

What is EIP-3074?

EIP-3074 introduces new Ethereum opcodes. This system will allow EOA users to authorize smart contracts to perform actions on their behalf within a single transaction while retaining the security and control of not permanently transferring their private keys.

The user-friendly utilities made possible by these new opcodes include:

  • 🔗 Transaction batching — The batching of multiple transactions, like many token transfers, into a single operation. 
  • 👛 Sponsored transactions — The ability to have transactions paid for by third parties, opening a new avenue for apps to cover gas costs for their users.
  • 🧮 Conditional transactions — Complex transaction structures where multiple steps can be linked, and conditional execution can be implemented, like a transaction that executes only if certain conditions are met, without needing separate transactions for each step.
  • 🔁 Meta-transactions — The ability to sign a transaction that can be submitted by another party, e.g., signing transactions offline or from a different interface without needing ETH for gas.
  • ⚔️ Delegated security — By allowing a trusted invoker to manage transactions, users can benefit from advanced security models, such as those involving multi-signature setups.

Taken together, these capabilities can lead to a range of UX improvements, like DAOs sponsoring their members’ transactions or wallets rolling out automatic payments, subscription services, and programmed withdrawals. 

On the flip side, EIP-3074 will also introduce non-trivial security risks, like new users making mistakes from misunderstanding how the new invoker system works or a compromised invoker executing unauthorized transactions. However, these problems can be tackled by wallets implementing clear messaging around EIP-3074 signatures. 

The Big Picture

While ERC-4337 focuses on creating a robust, offchain transaction relayer network and is the current north star of the Ethereum AA roadmap, EIP-3074 allows for more immediate onchain flexibility and execution abstraction with existing EOAs.

Both are steps towards full AA but serve different needs in different ways within the Ethereum ecosystem. How smoothly EIP-3074 integrates into the existing Ethereum ecosystem and its reception by wallets and apps will be crucial, and ongoing improvements to address security concerns and ensure safe, user-friendly operations will be key going forward.

William M. Peaster

Written by William M. Peaster

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William M. Peaster, Senior Writer, has been with Bankless since January 2021. Immersed in Ethereum since 2017, he writes the Metaversal newsletter on the onchain frontier, covering everything from AI projects to crypto games, as the team’s lead NFT analyst. With a background in creative writing, he writes fiction and publishes art on Ethereum in his free time. He lives in Washington.

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