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Smart Accounts Adoption Accelerated in Q4 2023

Smart Accounts Adoption Accelerated in Q4 2023

Author: Kofi


Published on January 5, 20244 min read

ERC-4337 smart account adoption saw major growth in the fourth quarter of 2024, surpassing 1 million total deployed accounts! 

Over 960,000 new ERC-4337 accounts were created in Q4, representing 53% of the total 1.8 million deployments to date. This rapid pace of new smart account creation indicates ERC-4337 adoption is accelerating across the industry.

In this article, we will:

  • Analyze ERC-4337 user behavior on Ethereum, Arbitrum, Optimism, Base and Polygon

  • Review ERC-4337 Bundler and Paymaster performance

  • Discuss the future of ERC-4337 

More than 5,400,000 User Operations were Executed in Q4

Smart accounts allow you to initiate User Operations (UserOps) instead of basic transactions. UserOps are meta-transactions that get bundled by Bundlers. 

In Q4, over 5,400,000 UserOps were executed, a 194% increase compared to Q3 2023!

Monthly User Operations
Monthly User Operations

The top three apps driving growth this quarter were:

1. Grindery 

Grindery is a telegram bot that allows users to send and receive tokens. Grindery has been running a token incentive program to drive sign-ups. In December, 35% of UserOps were generated by users farming the Grindery token.

2. FanTV

FanTV is a video streaming platform that rewards users with tokens for watching videos. In December, 18% of UserOps were driven by users claiming and transferring FanTV rewards.

3. CyberConnect 

Smart accounts on CyberConnect, a web3 social app, generated 13% of the UserOps in December.

Other interesting use cases we've seen smart accounts adopt include:

  • Transferring value with stablecoins (e.g. USDC, USDT).

  • Completing onchain quests on CapX to earn tokens.

  • Staking on EigenLayer

Multi-UserOp Bundles are Becoming More Common

In Q4, we saw a massive spike in the number of bundle transactions that contained multiple UserOps. Multi-UserOp bundles peaked at 32% in October and dipped to 9% by December.

Percentage of Bundles Containing Multiple User Operations
Percentage of Bundles Containing Multiple User Operations

The main reason why there aren't many multi-UserOp bundles is that there aren't always enough UserOps being submitted to make big bundles without significantly delaying execution.

It is important to increase the number of user operations in bundles because users benefit from lower fees when the cost to execute a bundle is distributed across more UserOps. Similarly, bundlers earn more on gas premiums.

Polygon Leads Smart Account Adoption

Highlighted in our Q3 2023 Account Abstraction report, the Optimism and Arbitrum blockchains surpassed Polygon in number of active monthly accounts during August. The main drivers were CyberConnect's airdrop on Optimism and the minting of ZTX NFTs on Arbitrum.

However, in September, Polygon regained its top ranking after Grindery launched token incentives and FanTV adopted smart accounts. These launches drove a 114% increase in active monthly accounts on Polygon.

As of now, Polygon holds the dominant market share with 92% of monthly active accounts.

Monthly Active Smart Accounts by Blockchain
Monthly Active Smart Accounts by Blockchain

Smart Account Power Users Emerged in Q3

In September, the number of smart accounts submitting more than five (5) UserOps per month increased 15x from 1,688 power users to more than 25,000. This cohort of “power users” currently sits at 9,000 monthly active accounts.

Monthly Active Smart Accounts Grouped by Number of Monthly UserOps Sent
Monthly Active Smart Accounts Grouped by Number of Monthly UserOps Sent

New smart account users are increasing

The percentage of monthly active accounts that are “newly active” (i.e. accounts that made their first UserOp that month) has risen from 71% at the end of Q3 to 88% in Q4. This indicates that more people are trying ERC-4337 wallets and applications with account abstraction for the first time. Smart accounts make it possible to offer new users a zero-friction onboarding experience.

New vs. Returning Monthly Users of Smart Accounts
New vs. Returning Monthly Users of Smart Accounts

The percentage share of new users is greater, but the quantity of returning monthly users has also been growing. The ecosystem saw monthly returning users increase almost 13% from 47k in September to 53k in December.

Paymaster volume blew past $1,000,000 in Q4

ERC-4337 Paymasters offer a standardized way for applications and wallets to implement flexible gas-handling policies. These policies include options like subsidizing gas fees for users or enabling gas payments in stablecoins or other ERC-20 tokens. 

Paymasters have gained significant adoption in the ERC-4337 ecosystem. In the 4th quarter, 97% of UserOps used a Paymaster to pay transaction fees, rather than the standard approach of paying fees in ETH. This widespread Paymaster integration highlights the demand for more flexibility in transaction fee payment options.

Cumulative Paymaster Volume (USD) for all Bundlers
Cumulative Paymaster Volume (USD) for all Bundlers

In December, total paymaster volume across all paymasters crossed $1M.

Monthly Paymaster Gas Spend Grouped by Bundler Operator
Monthly Paymaster Gas Spend Grouped by Bundler Operator

In Q4 2023, Alchemy processed 24% of the total monthly paymaster gas spend, Pimlico processed 28%, Stackup 26% and Biconomy 8%.

What comes next?

ERC-4337 accounts had a breakout year in 2023 but their adoption is still small relative to EOA wallets. We believe that smart accounts will be more popular than EOA wallets by the end of this decade. In 2024, steps will be made toward that end:

1. P2P Mempool

Work is in progress to build a public ERC-4337 mempool. This alternative mempool will create a competitive market for bundlers, and improve the overall user experience with multiple bundlers competing on speed and efficiency to get UserOps finalized faster and more cost-efficiently.

2. More Crypto Consumer Apps 

Smart accounts allow protocol developers to deliver beginner-friendly user experiences that were previously only possible on custodial platforms. This is a huge unlock for crypto consumer products that exist onchain. To start building, explore some of these guides:

3. EIP-7212

Most modern devices and applications use the “secp256r1” elliptic curve to create digital signatures, but the Ethereum Virtual Machine (EVM) uses the “secp256k1” curve.

EIP-7212 proposes adding native support for the secp256r1 curve to the EVM, which would enable UserOps to be signed using passkeys, Webauthn, Android Keystore, the secure enclave on Apple devices, and more! If implemented, users would be able to use their existing mobile devices as the “keyholders” for their smart accounts.

4. ERC-6900

ERC-6900: Modular Smart Contract Accounts and Plugins is a standard for building plugins that extend the functionality of modular smart accounts, such as social recovery, custom spending policies, or r1 signature validation as mentioned above. It optimizes for reducing fragmented development efforts that would be unique to particular implementations or ecosystems, avoiding onchain vendor locking while maximizing component and security re-use.

You can engage in the standard’s development with a pull request to the Github repo, a comment to Ethereum Magicians, joining the bi-weekly community calls, or a question in the Modular Smart Contract Accounts telegram channel.

5. RIP-7650

Rollup Improvement Proposal (RIP) 7650 proposes consensus-layer protocol changes to enshrine ERC-4337 and support native account abstraction.

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