A deep-dive into smart contract wallets

Web3 wallets serve as users’ gateways to the blockchain, granting access to decentralized applications (dApps), storage for digital assets (including NFTs), and cryptocurrency management. However, existing Web3 wallets often lack user-friendliness, posing a barrier for newcomers venturing into this space.

Enter smart contract wallets—the next evolutionary step in Web3 wallet design. These wallets offer a significantly smoother user experience and unlock compelling use cases on the Ethereum network. 

Ethereum Accounts: The Basics

Before we dive deeper, let’s meet our main characters: Ethereum accounts. These digital addresses are where you send, receive, and store Ether (ETH) and tokens on the Ethereum blockchain. There are two types:

Externally-Owned Accounts (EOAs):

• Created by generating a public-private key pair.

• Popular Web3 wallets (like MetaMask) fall into this category.

• EOAs can initiate transactions with other EOAs or smart contracts.

Contract Accounts:

• These are smart contracts themselves, acting as cryptocurrency wallets.

• They don’t have private keys, so they can’t initiate transactions directly.

• But when an EOA triggers their code, they spring into action.

What is Smart Contract Wallet?

A smart contract wallet represents an evolution in the world of cryptocurrency management. Unlike traditional wallets (think MetaMask or Coinbase), which rely on externally-owned accounts (EOAs), smart contract wallets leverage the power of—you guessed it—smart contracts.

Here’s the lowdown: A smart contract wallet is a non-custodial Web3 wallet that operates using smart contracts. These contracts are pieces of code deployed on the Ethereum blockchain, and they bring some serious powers to the table.

A good example of such a smart wallet are Agent’s Sub-Accounts, which are programmed to hold anything from pre-TGE points to locked tokens to NFTs. Supersecure and flexible in their creation and management.

Here’s what you need to know about that:

Streamlined User Experience

• Smart contract wallets enhance usability by automating certain tasks. Imagine creating wallets seamlessly for users upon sign-up, eliminating the need to manually approve every transaction within dApps. It’s like having an intuitive assistant for your crypto needs.

  
  

Collaboration and Team Wallets

• With smart contract wallets, collaboration becomes more efficient. Teams can manage shared wallets, execute joint transactions, and coordinate seamlessly—all while maintaining security.

  
  

Account Abstraction and ERC-4337

• The introduction of account abstraction (via ERC-4337) further empowers smart contract wallets. Account abstraction (AA) is a powerful concept that aims to make crypto wallets—specifically Externally Owned Accounts (EOAs)—operate more like smart contracts.

• It allows developers to create more flexible and user-friendly interfaces, bridging the gap between traditional accounts and smart contracts.

• Read our deep-dive on this topic here

Features of Smart Wallets

• Enhanced Security: By embedding logic directly into the smart contract code, smart wallets can enforce security measures that EOAs can only dream of. Think of them as digital vaults with laser-armed unicorns guarding your assets.

  
  

• Recoverable Wallets: Ever lost access to your wallet due to a misplaced key? Fear not! Smart contract wallets allow you to set up recovery mechanisms. You can designate trusted friends or family members who can help you regain access if you ever lock yourself out.

  
  

• Signless Transactions: No more frantic signing of transactions. Smart contract wallets can automate certain actions without requiring your explicit approval for every move. It’s like having a reliable butler who knows exactly what you want.

  
  

• Batched Transactions: Why send one transaction at a time when you can bundle them up? Smart contract wallets allow batched transactions, optimizing gas costs and making your life easier.

Smart Contract Wallets in Action

Imagine a smart contract wallet named “CryptoWizard.” Here’s how it works:

1. Setting Up CryptoWizard:

• You create CryptoWizard, defining its behavior through smart contract code.

• Maybe you set spending limits, automate recurring transactions, and add recovery options.
  
  

2. Interacting with CryptoWizard:

• When you want to send ETH or tokens, your MetaMask (an EOA) initiates the transaction.

• CryptoWizard’s code executes, performing the desired actions—like sending tokens to your favorite DeFi protocol or buying digital art.
  
  

3. No Private Key Drama:

• CryptoWizard doesn’t have a private key, so it can’t act independently.

• But when you call upon it, it wields its magic wand (code) to make things happen.

So that’s it! If you want to learn even more about Agent and other topics related to us, check out our other blogposts!

Get started. Get social.

🚀 Getting started on Agent and using its Sub-Accounts is easy. Join the Agency here!

🤝 To learn more about Agent, visit our website, join our Discord and follow us on X/Twitter.