Why ERC-4337 Alone Is Not Enough for L2 Dominance

ERC-4337 is not a network effect. The standard enables smart accounts and paymasters, creating a superior user experience. However, it does not solve the core problem of state and liquidity fragmentation across rollups. A user's smart account on Arbitrum is isolated from their assets on Optimism or Base.

Dominance requires composability, not just accounts. The winning L2 ecosystem will be the one that functions as a single, coherent state machine. ERC-4337's account abstraction is a user-facing layer built atop a still-siloed execution layer. True scaling demands seamless interaction, akin to how UniswapX and Across Protocol abstract cross-chain intents.

The evidence is in the data. Despite ERC-4337 deployment, over 90% of DeFi TVL remains siloed within individual chains. Bridging and messaging protocols like LayerZero and Wormhole see more volume than native cross-rollup transactions, proving the standard alone does not unify liquidity.

ERC-4337 is infrastructure, not a product. It standardizes account abstraction's core components, making smart accounts and paymasters interoperable. This eliminates a key differentiating feature for L2s, turning a complex technical advantage into a baseline expectation.

Commoditization shifts competition elsewhere. With a uniform UX layer, the battle moves to execution price, speed, and liquidity. L2s must win on raw performance and ecosystem depth, areas where Arbitrum and Optimism already have entrenched leads.

The standard enables vertical integration. Projects like Starknet and zkSync are building native AA stacks, but post-4337, any chain can offer the same features. This forces them to justify their high-performance VMs with tangible developer adoption, not just UX promises.

Evidence: The DeFi composability precedent. Standardized token interfaces (ERC-20) made liquidity portable. The same will happen with user sessions, making chain-specific AA wallets obsolete and increasing user mobility between networks like Base and Polygon zkEVM.

ERC-4337 is a partial solution. It standardizes smart account logic for gas sponsorship and batched transactions, but it does not solve the cross-chain user experience. A user's smart account on Arbitrum is a different, isolated contract on Optimism or Base.

The real battle is for identity. Dominant L2s will be those that own a portable user identity that works across all chains. This is why projects like ZeroDev (Kernel) and Biconomy are building cross-chain smart account frameworks that layer atop 4337.

Fragmentation kills adoption. A user who mints an NFT on Polygon must still manage a separate native token balance on Arbitrum for gas. ERC-4337's smart accounts do not unify liquidity or state; they only abstract the transaction execution layer on a single chain.

Evidence: The success of LayerZero and Circle's CCTP proves demand is for seamless asset movement. The winning L2 stack will integrate a native cross-chain intent layer, not just better single-chain accounts.

Native Integration is the Bottleneck. ERC-4337's modular design creates overhead. L2s like Arbitrum and Optimism bypass this by baking account abstraction logic directly into the sequencer, reducing gas costs and latency for core operations like signature verification.

Custom Opcodes Define Performance. Standard EVM opcodes are generic. Chains like zkSync Era and Starknet introduce custom opcodes (e.g., for signature schemes) that make sponsored transactions and batch paymasters orders of magnitude cheaper than a vanilla 4337 implementation.

The Bundler Market is Fragmented. A pure 4337 approach relies on a competitive public bundler network (e.g., Stackup, Biconomy). Native L2 integrations let the sequencer act as the canonical, trust-minimized bundler, capturing MEV and ensuring transaction reliability.

Evidence: Gas Cost Differential. A simple user operation on a vanilla 4337 rollup costs ~40k gas extra. The same operation on Arbitrum's native AA costs under 10k gas. This gap determines which chains attract high-frequency dapps.

ERC-4337 is plumbing, not a product. The standard defines a common interface for UserOperations, Bundlers, and Paymasters. This creates a shared language for wallets like Safe and Argent, but does not dictate performance, cost, or reliability. An L2 cannot compete on a spec alone.

The real moat is execution infrastructure. Dominance requires superior bundler and paymaster networks. Chains must optimize their sequencers for 4337 opcode pricing and sponsor gas via sophisticated paymaster subsidy programs to onboard users.

Standardization commoditizes the front-end. It allows wallets to be chain-agnostic, increasing user mobility. A chain relying solely on 4337 compliance cedes control to aggregated bundlers like Stackup or Alchemy, which can route transactions anywhere.

Evidence: After 4337 deployment, chains like Polygon and Arbitrum still compete on subsidized transaction fees via custom paymaster deals and faster bundler inclusion times, not compliance.

ERC-4337 is infrastructure, not a feature. The standard provides a common interface for account abstraction, but its vanilla implementation on an L2 offers no competitive edge. Every chain can implement it, making it table stakes. Dominance requires building superior systems on top of this foundation.

The battle is in the bundler and paymaster layers. L2s like Arbitrum and Optimism compete on who provides the cheapest, most reliable bundler network and subsidized gas via paymasters. A chain with a 10% cheaper average user operation cost via its native bundler will attract more wallets.

Native AA drives protocol integration and lock-in. Chains that bake AA primitives into their core—like zkSync's native account abstraction—enable deeper, chain-specific dApp integrations. This creates a developer moat that portable ERC-4337 wallets cannot easily replicate.

Evidence: Starknet's 1.2M accounts. Over 80% of active accounts on Starknet are abstracted AA wallets, a direct result of its early, chain-specific implementation. This user base did not wait for ERC-4337 and is now a captive ecosystem.