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While EIP-3074 offers a potential leap in the Ethereum wallet user experience by enabling batch transactions and smart contract-like features, some experts have concerns about its security and long-term impact.

Posted April 13, 2024 at 7:28 am EST.

Ethereum Improvement Proposal (EIP) 3074 will go live during Ethereums next hard fork, dubbed Pectra, and many in the Ethereum community are very excited that its finally coming to fruition.

Initially proposed by Ethereum researchers Sam Wilson, Ansgar Dietrichs, Matt Garnett, and Micah Zoltu in October 2020, EIP-3074 will be included in the next fork, as decided on Thursday on Ethereum All Core Developers call, and is designed to improve Ethereum wallet usability. It proposes a new set of code changes that would allow users to batch multiple transactions together and confirm them in a single action, unlike now where users usually have to sign at least two transactions to, for example, swap an asset on a decentralized exchange.

This is a big deal. Wallet [user experience] will 10x, wrote Georgios Konstantopoulos, research partner at crypto VC Paradigm, on X.

EIP-3074 suggests a novel way to extend the functionalities of externally owned accounts (EOAs) by delegating control to a smart contract. This method allows users to enjoy some of the advantages of smart contract wallets while keeping the straightforward approach of EOAs. Unlike account abstraction (ERC-4337), which focuses on transaction sponsoring and relaying, EIP-3074 lays the foundation for these new features to be possibly added in future proposals.

By enabling EOAs to interact like smart contract wallets, EIP-3074 could redefine how wallets operate, easing the transition to advanced wallet systems without requiring users to undertake complex migrations. This is huge, because it allows EOAs to be magically converted to Smart Accounts, wrote Ivo Georgiev, CEO of Ambire, on social media.

Learn more: What Are Externally Owned Accounts (EOAs) in Ethereum?

The proposal also aligns with the broader goal of ensuring a smoother user experience across multiple EVM-compatible chains, maintaining consistency as users navigate different platforms.

The communitys support for EIP-3074 reflects its potential to simplify transaction processes and enhance the Ethereum networks usability, making it a significant upgrade anticipated by both developers and users alike. Hayden Adams, founder of prominent DEX Uniswap, posted on X: EIP-3074 inclusion will be a monumental upgrade to Ethereum UX.

Meanwhile, Dan Finlay, MetaMasks cofounder, said: 3074 couldnt come at a better time: Theres momentum to define an onchain permissions system for smart contract accounts, and 3074 can allow EOAs to still enjoy some of its benefits.

While there is significant excitement around EIP-3074, not everyone in the Ethereum community is equally enthusiastic.

Martin Kppelmann from Gnosis voiced his concerns, saying that the EIP brings us in a weird state with EOAs getting some of the benefits but not all, such as no option for key rotation. He explained that instead of moving towards a unified and improved future, EIP-3074 could solidify the division between two different types of wallet technologiessmart contracts and traditional EOAs.

Moreover, Kppelmann criticized its revocation capabilities, arguing that they provide only a fake sense of security. He wrote: After 3074, an EOA will always have the danger that signing one wrong message can mean you lose anything this account controls.

Kppelmanns criticism was echoed by 0xngmi from DefiLlama, who pointed out that with EIP-3074, itll be possible to fully drain an address (all tokens, all nfts, all defi positions) with only one bad signature.

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Why (Almost) Everyone in Ethereum Is So Excited About a Wallet-Related Proposal - Unchained - Unchained

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Ethereums upcoming Pectra upgrade, expected to be implemented by late 2024 or early 2025, is set to introduce significant improvements to cryptocurrency wallets, including the addition of smart contract capabilities to standardexternally owned accounts (EOAs).

The inclusion of Ethereum Improvement Proposal (EIP) 3074 in the Pectra upgrade will bring a range of new features and enhancements to the user experience.

The Pectra upgrade follows the recent Dencun update, which focused on lowering transaction fees on layer-2 solutions. The name Pectra is derived from the combination of two simultaneous upgrades occurring on different layers of the blockchain. The execution layer, responsible for enforcing protocol rules, will undergo the Prague upgrade, while the consensus layer, which ensures the validation of blocks, will go through the Electra upgrade. This naming convention follows the Ethereum developers tradition of combining the names of the upgrades, as seen in previous instances like Dencun and Shapella.

One of the key benefits of EIP-3074 is the ability for regular wallets, such as those created using MetaMask, to function similarly to smart contracts. This upgrade will enable features like transaction bundling, allowing users to sign multiple transactions at once, and sponsored transactions, where a wallet can delegate funds to be used by another entity. These functionalities are reminiscent of the account abstraction introduced in ERC-4337.

EIP-3074 introduces two new operating instructions: AUTH and AUTHCALL. As explained by anonymous Web3 adviser Cygaar, AUTH verifies signatures and actions, while AUTHCALL calls the target contract(s) with the originator address as the caller instead of the message sender. These instructions work together to enable the smart contract-like behavior of EOAs.

In addition to the features mentioned above, EIP-3074 also includes a social recovery feature that eliminates the need for the traditional 12-to-24-word seed phrase, further simplifying the user experience and potentially reducing the risk of lost or stolen funds.

Another significant change expected to be included in Pectra is an increase in the staking limit for validators, from the current 32 ETH to 2,048 ETH a substantial 64-fold increase. This proposal, known as EIP 7251, would allow large staking providers, such as Coinbase or Lido, to consolidate their validators operating the Ethereum blockchain. By doing so, these providers can avoid the need to constantly create new validators each time they have an additional 32 ETH to stake, thereby reducing the operational load and resources required for staking and validating.

The need for this change has become apparent as the number of validators on the Ethereum network has surpassed 1 million, raising concerns about excessive latency. EIP 2751 is seen as a potential solution to slow the rate at which new validators enter the system, preventing performance issues and ensuring the blockchains smooth operation.

Other EIPs under consideration for Pectra include enabling validator withdrawals from smart contracts, incorporating a code change known as BLS precompile, and removing the deposit window. These relatively minor changes will allow developers to work on smaller improvements while focusing on more significant upgrades in the future.

Looking beyond Pectra, the subsequent upgrade will introduce the highly anticipated verkle trees a novel data system designed to help Ethereum nodes efficiently store large amounts of data. Tim Beiko mentioned that the Pectra upgrade is expected to be released sometime in late 2024 or early 2025, allowing developers to work on two forks in parallel and deliver small wins while preparing for the more complex verkle trees transition.

As Ethereum continues to evolve and improve, the Pectra upgrade represents another step forward in enhancing the networks performance, user experience, and overall functionality. By addressing key issues such as wallet UX and staking limits, developers aim to ensure that Ethereum remains at the forefront of blockchain technology, providing a solid foundation for the growing ecosystem of decentralized applications and services.

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Ethereum's Pectra upgrade slated for Q4 2024, bringing smart contract features and improved UX for wallets - Crypto Briefing

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Ethereums Pectra upgrade, slated for late 2024 or early 2025, is bringing with it a host of more functionality for crypto wallets and upgrades to their user experience (UX).

Ethereum Improvement Proposal(EIP) 3074was approved for inclusion in the next update, which allows normal crypto wallets to work like smart contracts.

One of EIP-3074s functions gives standard externally owned accounts (EOAs), normal wallets such as a MetaMask wallet, smart contract capabilities.

This allows functions such as transaction bundling, so users only have to sign once, and sponsored transactions where a wallet can delegate funds for use by another, similar to account abstraction that was introduced in ERC-4337.

Anonymous DefiLlama developer 0xngmi claimed in an April 11 X post that the EIPs downside is now itll be possible to fully drain an address (all tokens, all NFTs, all DeFi positions...) with only one bad signature.

Gaslite co-founder Harrison Leggio wrote on X that while there are security concerns with the update, people will always find a way to lose their money.

People literally GIVE THEIR PRIVATE KEYS TO TRADING BOTS, he added.

Software engineer Laurence Day wrotethat the EIPs most obviously useful application was its sponsored transactions, as it allowed users to store assets in a wallet that doesnt hold Ether, and they could sponsor the gas from a contract controlling the wallet.

Other slated functions of EIP-3074 include a social recovery feature that negates the need for the typical 12-to-24-word seed phrase.

Anonymous Web3 adviser Cygaarexplained on X that the EIP turns wallets into smart contracts by adding two new operating instructions AUTH and AUTHCALL.

Related: History of Crypto: Crypto winter and Ethereum landmarks

AUTH verifies signatures and actions. AUTHCALL then calls the target contract(s) with the originator address as the caller rather than the message sender, Cygaar wrote.

The planned Pectra update comes after Ethereum developers pushed through the Dencun update last month, which lowered layer-2 transaction fees.

Ethereum co-founder Vitalik Buterin also shared in early April the next steps for the Purge, which would remove old and excess network history in order to simplify it.

Magazine: Heres how Ethereums ZK-rollups can become interoperable

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Ethereum's Pectra upgrade to make normal wallets 'smart' and improve UX - Cointelegraph

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A former Amazon software engineer Shakeeb Ahmed was sentenced to three years in prison for exploiting smart contracts.

The breaches in 2022 resulted in the theft of over $12 million in different cryptocurrencies. The trial was the first-eversentencingfor a cyberattack on smart contracts.

Ahmedadmittedin December 2023 to manipulating smart contracts. By inserting fraudulent pricing data into the platforms contracts, the engineer generated approximately $12 million in unearned profits, which he subsequently withdrew as cryptocurrency.

While the prosecutors chose not to disclose one of the affected platforms, evidence in the indictment suggests it wasCrema Finance. The other platform involved was Nirvana Finance, which ceased operations following the hack in July 2022.

Before the incident, Ahmed had led Amazons bug bounty program, where he identified and fixed security loopholes in its software. The prosecution, highlighting the novelty of this case involving smart contracthacking, had recommended a four-year prison term.

They acknowledged Ahmeds cooperation and his restitution of the majority of the stolen funds but emphasized the need for his imprisonment to serve as a deterrent and underscore the gravity of his offenses.

On the other hand, Ahmeds defense argued for probation instead of prison time, citing his compromised mental health during the time of the hacks and the fact that the stolen funds were largely untouched except for covering a relatives medical expenses. Ahmed, originally from Saudi Arabia, had his legal team plea for leniency based on the following factors.

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Ex-Amazon engineer sentenced to 3 years in prison for $12m crypto hack - crypto.news

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In the dynamic landscape of financial technology, smart contracts emerge as a transformative force. These self-executing contracts, with terms directly coded into the agreement, have the potential to revolutionize how we initiate and enforce contracts.

Smart contracts, at their core, are programs operating on a blockchain network. They automatically execute, control, or document legally relevant events and actions according to contract terms.

In a decentralized environment, smart contracts operate autonomously, free from control by any single entity, and without the need for intermediaries.

Trust and Transparency: Since they are based on blockchain technology, smart contracts provide a transparent system where all parties can view the terms and the execution of the contract.

Security: Theimmutable nature of blockchain ensures that once a contract is created, it cannot be altered, thereby reducing the risk of fraud.

Efficiency: Smart contracts eliminate the need for intermediaries, which can significantly reduce transaction times and costs.

Accuracy: Automated contracts reduce the risk of human error, which is common in traditional contract law.

In finance, smart contracts find various applications. They automate insurance claims processing, manage bonds, execute derivatives, and streamline real estate transactions.

Bonds: Smart contracts can issue and manage bonds, automating interest payments and principal repayment.

Derivatives: Smart contracts execute complex financial instruments like options and swaps, ensuring terms are met without dispute.

Real Estate: They can streamline property sales by automating the transfer of deeds and funds.

Despite their potential, smart contracts face several challenges:

Legal Recognition: The legal status of smart contracts is still under debate in many jurisdictions.

Technical Standards: Standardization is needed in how smart contracts are written and executed.:

Interoperability: Smart contracts must be able to interact with different blockchain networks and traditional systems. Despite their potential, smart contracts face challenges. Legal recognition, technical standards, and interoperability are key issues to address. However, ongoing developments in blockchain technology and legal clarity promise a bright future for smart contracts.

In conclusion, smart contracts represent a significant innovation in finance, promising more secure, efficient, and equitable financial agreements. As the fintech industry evolves, smart contracts are set to become integral to the financial transactions of the future.

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How Are Smart Contracts Transforming Financial Transactions? - IT News Africa

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