Web3 wallet "iPhone Moment", understanding the OuiAA smart contract wallet in one article.

Source: OKX

Introduction: "This article aims to help new users understand and try to use Web3 wallets in the most simple language, and to join the new wave as soon as possible."

The current global Web2 users are nearly 5 billion people, while Web3 users are only 400 million people. Web3 is still a niche industry. As an entry-level application, the popularity of Web3 wallets can help Web3 achieve large-scale applications.

On August 2nd, Ouyi OKX announced the first launch of the AA smart contract wallet, which may forever change the blockchain industry and lower the barrier for internet users to enter the Web3 world.

Introduction to Web3 Wallets

Putting aside the concept of Web3, in fact, Web3 wallets are no different from WeChat and Alipay in terms of their attributes, as they are all payment tools. With this basic reference, it is easy to understand Web3 wallets. Web3 wallets are mainly used for receiving, storing, managing, and transferring digital assets, as well as exploring DApps.

If we add back various concepts such as decentralization to Web3, the biggest change of Web3 wallets compared to traditional payment tools is that they allow users to own their private keys and have complete control over their assets, eliminating the reliance on third-party intermediaries such as banks and financial institutions. In other words, even in the event of a black swan event like the Silicon Valley Bank or the end of the world, your assets will still be in your Web3 wallet, controlled by your private key.

A Web3 wallet corresponds to a unique private key that cannot be modified. The private key is a 64-bit hexadecimal string composed of letters and numbers. For ease of user memory and record keeping, it is simplified into 12 words. Therefore, the private key is crucial, as whoever controls the private key controls the assets. Three types of wallets are derived from the control of the private key, including custodial wallets, hybrid custodial wallets, and non-custodial wallets, where the private key is respectively held by the user, the user and the custodian, or the user themselves. Currently, mainstream Web3 wallets such as Metamask and OKX are non-custodial wallets (also known as self-custodial wallets).

Despite returning asset control to users, non-custodial wallets face many pain points such as difficult-to-remember mnemonic phrases, limited GAS payment methods, and complex operation processes, which are major obstacles for new users. In order to solve these problems, wallets represented by OKX Web3 Wallet are constantly exploring new technologies and methods, accelerating product updates and iterations, and aiming to create a leading user-friendly and secure digital wallet. The launch of the Ouyi AA Smart Contract Wallet ensures asset security while providing more custom and extended functions such as batch transactions, Gas payment on behalf, and private key recovery. It not only improves security by getting rid of the constraints of mnemonic phrases/private keys, but also simplifies the process of on-chain interaction, and can automatically implement Gas subsidies, reducing the threshold for users to use Web3 wallets. This may open up a huge imagination space and help realize the large-scale application of Web3 wallets, ushering in the "iPhone moment" of Web3 wallets.

Opportunity

Why did Oukei OKX launch the AA smart contract wallet?

The "AA" in the AA smart contract wallet stands for "Account Abstract" in English, so the AA smart contract wallet is also called a smart account or account abstract.

To understand what account abstraction is, it can be divided into two parts: "account" and "abstraction". First, it is necessary to understand some background knowledge about Ethereum accounts.

Nowadays, almost everyone has an account on financial platforms. Ethereum accounts are similar to regular financial accounts such as bank cards, Alipay, and WeChat, and users can easily view their account balance. What makes Ethereum accounts unique?

How do Ethereum accounts work? For example, Xiao Ming creates EOA account A, and Xiao Li creates EOA account B. Now, if Xiao Ming wants to buy an apple worth 1 ETH from Xiao Li, can he transfer the funds directly from account A to account B? No, he must use CA account C.

Why? Because what if after Xiao Ming transferred money to Xiao Li, Xiao Li refused to pay? Or what if Xiao Li shipped goods to Xiao Ming but Xiao Ming didn't pay? You can deploy a smart contract to generate account C, and have accounts A and B transfer 2 ETH to account C. After Xiao Li ships the goods, account C will be triggered to transfer 1 ETH to account A and 2 ETH to account B.

Above is the basic explanation of Ethereum accounts. Next, let's talk about "abstraction". To help everyone understand the abstraction of accounts in a simple way, let's take an example. In summer, we don't need to know how the air conditioner works internally. We can control the temperature and wind speed of the air conditioner through the remote control. The remote control abstracts the internal operation of the air conditioner to the surface. With this basic concept, it is easier to understand the "abstraction" of accounts.

Currently, EOA carries wallets while CA carries the logic of smart contracts, each with its own advantages and disadvantages.

Unlike traditional bank accounts, for EOA accounts, various problems arise because their "ownership" and "signing authority" are integrated and controlled by a unique private key. Why? "Ownership" is the person who owns the account, and "signing authority" is the person who can control the account. For traditional bank users, even if their password "signing authority" is stolen or lost, others cannot transfer their assets "ownership" from the bank. However, for Ethereum EOA accounts, as long as they hold the private key, they can completely control the assets in the account. Therefore, the current EOA account has many pain points, such as difficult private key storage, high signing authority, and losing all assets if lost. Imagine a scenario where the money is still in the wallet, but the private key is lost and the money cannot be retrieved. In addition, it does not have programmability and requires ETH as gas fees to operate.

For CA accounts, there are also many issues. Although it is possible to customize the logic to achieve more functions, it cannot initiate transactions actively and must be called by EOA accounts. Additionally, because it is deployed on the chain, extra GAS is required to wait.

It is not difficult to see that currently both types of accounts cannot solve the problem of complex wallet usage experience and security thresholds. Therefore, the AA intelligent account is to "abstract" the complex operating logic of CA and EOA, simplifying the two types of Ethereum accounts into one. This account type will be able to support both cryptocurrency transactions and smart contracts, with the programmability of CA and the ability to get rid of the dependence on EOA for initiating transactions. This separates "ownership" and "signature rights" and combines the advantages of both, enabling various new gameplay such as multi-signature, batch transactions, gas payment delegation, and social recovery, without the need to distinguish between account types.

That is, the wallet is the contract, allowing the AA smart contract wallet to expand into diversified functions.

The development of account abstraction in the encryption industry cannot be separated from the Ethereum environment. It was proposed as early as the launch of Ethereum, but most of the solutions were not mature or difficult to implement, so they were shelved. From the earliest EIP-101 to EIP-3074, several versions have been iterated. The real implementation is based on the proposal of ERC-4337. ERC-4337 aims to achieve the flexibility and upgradability of wallets without modifying the underlying native protocol, including multi-signature and social recovery functions, as well as more efficient and simplified signature algorithms.

 Image: ERC-4337 Officially Forwarded and Liked by OKX AA Smart Contract Wallet

Proposal EIP is a proposal for improving Ethereum, which is a way to publicly solicit and discuss measures to improve Ethereum, enabling the community to work closely together and make Ethereum more efficient. Any update to Ethereum comes from EIP, and anyone can create an EIP, but it needs to be reviewed, including several stages of preliminary discussion, feedback, and revision. ERC is the formal standard, such as the well-known ERC20, ERC721, ERC1155, etc. Ethereum founder Vitalik Buterin has said that the implementation of the ERC-4337 proposal "will open the door to creativity in wallet design" and could be key to realizing the dreams of "account abstraction" and "social recovery" if successfully implemented.

It is worth mentioning that Layer2 public chains such as StarkNet and ZkSync Era already natively support abstract accounts at the bottom layer of the chain, without the need for implementation of the 4337 standard, which enables the construction of abstract accounts, such as in the Argent and Braavos wallets.

In short, the excellent performance of account abstraction in terms of signature algorithms, functional implementation, and user experience has become a "must-have" for the large-scale application of Web3 wallets, which is worth everyone's expectation. Based on the above background, Ouyi OKX has taken the lead in developing and launching the AA smart contract wallet. It should be noted that the AA smart contract wallet involves a large number of smart contracts and requires high difficulty in testing the contract side. Without a unified security standard, the efforts behind Ouyi OKX can be imagined, but we will not elaborate on this here.

Use Case

After explaining the principles and background in detail, the following will use the example of the Ouyi AA smart contract wallet to help users understand its innovation and the new experiences it has achieved.

Supports multi-chain. Currently, Ouyi has supported users to create AA smart contract wallets on seven mainstream public chains including Ethereum, OKTC, Arbitrum, Polygon, Optimism, BNB Chain, and Avalanche.

DEX One-Click Exchange. Ouyi AA Smart Contract Wallet combines the previously separate steps of authorizing (Approve) and trading (swap) in a regular account into one call data (calldata), allowing users to complete the process in one step. This enables users to make one-click exchanges on decentralized exchanges (DEX).

DeFi one-click mining. Similar to the one-click exchange of Oukei OKX DEX, the AA smart contract account can combine some investment operations to allow users to execute multiple investment and portfolio adjustments with one click, greatly improving efficiency.

In addition to the above first batch of highlight features, the Ouyi AA smart contract wallet has also launched a Gas subsidy activity. Users can enjoy a senseless reduction of Gas once a day when transferring or trading, with a maximum reduction of 5U. In the future, the Ouyi AA smart contract wallet will also support social recovery, provide wallet mini-program components, realize advanced on-chain financial management strategies such as Gas payment by friends and family, on-chain follow-up of multi-signature functions, and combinable operations.

Imagine, once the social recovery function goes live, we will bid farewell to the era where losing the mnemonic phrase means losing the account. Users no longer need to write down 12 words or private keys on paper. Even if the mnemonic phrase is lost, the assets are still safe, and the account can be accessed again through multi-factor authentication, providing a silky smooth Web2 experience. If the automatic execution function goes live and meets the user's set conditions, transactions will run automatically, similar to Alipay's password-free payment. This means that in future blockchain games, Web3 social networks, and high-frequency trading on the chain, authorization signatures will be automatically granted after meeting the requirements, greatly improving the user experience.

However, the account abstract wallet is not "perfect" and there are still many aspects that need improvement. For example, since all the logic of the account abstract wallet runs on the chain, it increases gas costs. Additionally, due to its dependence on smart contracts, it may not be compatible with other chains when deployed on the chain. Furthermore, there is an increased risk of contract vulnerabilities.

Creation

How to create an Ouyi AA smart contract wallet?

Users can add corresponding AA smart contract accounts to their existing accounts in different wallet types (mnemonic wallet, private key wallet, keyless wallet, hardware wallet) provided by OKX Web3 wallet. Each AA smart contract account is generated by a regular account and is used to control on-chain behavior and account recovery.

For new users who are using a wallet for the first time, OKX Web3 wallet provides two ways to create a wallet: without a private key and with a mnemonic phrase. For existing wallet users, they can import their wallet using four methods: restoring a wallet without a private key, restoring from the cloud (iCloud, Google Drive, Huawei Cloud), using a mnemonic phrase, or using a private key.

After completing the wallet creation or import, click ▼ on the wallet homepage, then click "Add Account" and select "Smart Contract Account" to successfully create an AA smart contract account.

 In the OKX Web3 wallet, each non-private key wallet or private key wallet can only create one AA smart contract account, while each account under the mnemonic wallet can create a corresponding AA smart contract account. For example, account 01 under wallet A corresponds to Smart 01 under wallet A.

Future

The past is knowledge, but the future is the trend. It is crucial for enterprises to perceive and grasp the future trends.

Although the current EIP-4337 proposal is not mature, developing an account abstraction wallet based on it is not an easy task. However, Ethereum's ultimate goal is to remove EOA accounts from the Ethereum network, and AA smart accounts are undoubtedly the future choice, bringing developers a high degree of freedom, helping users reduce participation barriers, and bringing more gameplay to Web3 wallets, opening up huge imagination space.

Currently, only a few technology companies like Oukei OKX with early accumulation of encryption wallet technology can perceive and grasp trends in advance, and start to lead and promote the development of AA smart contract wallets, constantly exploring and improving the value and experience of daily user usage.

In recent years, as the world's second largest cryptocurrency exchange, OKX is not eager to climb to the top, but instead returns to "first principles", rethinking the company's original intention and the path it will take in the future, and timely and accurately grasping user needs. While doing well in centralized business, it has begun to explore decentralized business and focus on Web3 wallets.

Just like the greatness of iPhone is not in pioneering the era of smartphones, but in making smartphones a mass product. As a product that users use frequently every day, Oukei OKX began to think about Web3 wallet products like "novice" users, constantly reducing their usage threshold. As Jobs said, "Simplicity is harder than complexity. You have to work hard to simplify things." Oukei OKX AA smart contract wallet is "simplifying complexity" and pursuing the ultimate user-friendly experience. Although it is not possible to immediately convert existing EOA users into AA smart contract wallet users, it brings possibilities for the large-scale application of Web3 wallets.

According to a survey in 2022, as many as 1.7 billion people worldwide do not have bank accounts and are excluded from the modern financial system. However, Web3 tools built by platforms such as Europe Easy OKX can provide these people with equal and accessible financial services, and bring deeper liquidity and more users to Web3.

Indeed, "the bigger the pattern, the more the world."

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