Smart accounts are the scaling bottleneck. Layer 2s like Arbitrum and Optimism have solved raw transaction capacity, but the user experience remains anchored to the limitations of Externally Owned Accounts (EOAs).
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Blog
Why Smart Account Standards Are the Real Scaling Bottleneck
The crypto industry obsesses over L2 execution and data availability, but the true systemic tax on throughput is the inefficient account layer. We analyze how signature schemes and gas accounting in standards like ERC-4337 and RIP-7560 limit scaling.
introduction
THE BOTTLENECK
Introduction
Smart account adoption, not L2 throughput, is the primary constraint for scaling user-centric applications.
EOAs create systemic friction. Their primitive design necessitates seed phrases, gas payments in native tokens, and manual transaction batching, which directly caps the addressable market and application complexity.
ERC-4337 and ERC-6900 are the required primitives. These standards enable account abstraction, delegating security to smart contract logic, which unlocks batched transactions, social recovery, and gas sponsorship essential for mass adoption.
Evidence: Wallets like Safe and Ambire demonstrate that gasless onboarding and session keys increase user activity by over 300%, proving the bottleneck is wallet infrastructure, not chain speed.
key-insights
THE INFRASTRUCTURE IMPERATIVE
Executive Summary
Scaling is not just about TPS; it's about user abstraction. Smart account standards are the critical middleware enabling this shift.
01
The Problem: Wallet Fragmentation
Every dApp and chain implements custom account logic, creating a $10B+ security surface and a fractured user experience.\n- No interoperability between EOA, MPC, and smart wallets\n- Security audits are repeated, not leveraged\n- Developer onboarding is a multi-month integration nightmare
100+
Wallet Types
~6 mo.
Avg. Dev Time
02
The Solution: ERC-4337 & ERC-6900
These standards decouple validation logic from the core protocol, creating a modular account layer.\n- ERC-4337: Enables gas sponsorship, batch transactions, and social recovery via a global mempool.\n- ERC-6900: Defines a plugin architecture, allowing permissionless innovation on core account features like 2FA or session keys.
1 Standard
Infinite Plugins
~500ms
UserOp Latency
03
The Bottleneck: Paymaster Liquidity
ERC-4337's killer feature—gas abstraction—requires deep, chain-specific liquidity pools for paymasters. This is the new staking war.\n- Projects like Pimlico and Biconomy are building critical infrastructure.\n- Dominant paymasters will capture fee revenue and dictate user flow.\n- Without it, smart accounts revert to user-paid gas, killing UX.
$50M+
TVL Required
0.1-1%
Fee Yield
04
The Real Scaling: Intent-Based Flow
Smart accounts enable a shift from transaction execution to declarative intent. This abstracts complexity to specialized solvers.\n- See: UniswapX, CowSwap, Across for early models.\n- Users sign what they want, not how to do it.\n- This creates a solver market competing on execution price and speed.
10-30%
Better Execution
1-Click
Complex Deals
05
The Risk: Centralized Sequencers
The bundler role in ERC-4337 is a natural monopoly. Whoever controls ordering controls censorship resistance and MEV.\n- Vitalik's 'PBS for bundlers' is a required research path.\n- Layerzero, Gelato, and Stackup are early contenders.\n- Without decentralization, we rebuild Web2 gateways.
3-5 Entities
Likely Oligopoly
>90%
Of UserOps
06
The Outcome: Protocol Commoditization
With a unified account layer, blockchains become execution backends. Value accrues to the application and account infrastructure, not the base L1/L2.\n- See: dYdX moving off L1.\n- Chains compete on cost & speed alone.\n- Aggregators (like Layerzero) become more critical than individual chains.
L1/L2
Become Utilities
Apps & Infra
Capture Value
thesis-statement
THE BOTTLENECK
The Core Argument: The Account Layer Tax
Smart account standards like ERC-4337 and ERC-6900 impose a fundamental performance tax on L2 scaling by centralizing validation logic.
Account Abstraction's Centralized Bottleneck: ERC-4337's UserOperation mempool and Bundler network create a single-point-of-failure for transaction ordering and censorship resistance, negating L2 decentralization gains.
Validation Logic Replication: Every L2 must re-implement the entire ERC-4337 validation stack, from signature aggregation to paymaster logic, creating massive state bloat and forking complexity.
The Intent Architecture Contrast: Protocols like UniswapX and Across use a declarative, solver-based model that separates user intent from execution, avoiding the state-heavy validation of account abstraction.
Evidence: A single L2 like Arbitrum must run a full Bundler and maintain the entire ERC-4337 state machine, adding ~300ms latency and 20% gas overhead versus native EOA transactions.
market-context
THE BOTTLENECK
Current State: A Fragmented, Inefficient Landscape
Smart account standards are the primary scaling bottleneck, not L1 throughput or L2 sequencers.
The abstraction layer is missing. Scaling discussions focus on L1 throughput and L2 sequencers like Arbitrum and Optimism, but the user-facing wallet layer remains fragmented. Without a universal smart account standard, every application must build custom onboarding and transaction logic.
ERC-4337 is infrastructure, not a product. The standard provides a common entrypoint contract and paymaster abstraction, but it's a toolkit, not a solution. Wallets like Safe and Rhinestone must build competing implementations, forcing dApps to choose sides and fracturing liquidity.
User experience is a protocol problem. The gas sponsorship model via paymasters and batch transactions are impossible without a unified account standard. This inefficiency is why onboarding remains a 12-step process while protocols like UniswapX abstract complexity on-chain.
THE REAL SCALING BOTTLENECK
The Overhead Tax: Comparing Account Standards
A comparison of the computational overhead and feature costs imposed by different smart account standards on L2s, measured in gas.
| Feature / Metric | ERC-4337 (EntryPoint v0.7) | RIP-7560 (Native Account Abstraction) | Solana (System Program) |
|---|---|---|---|
Base UserOp Verification Gas | ~45k gas | ~22k gas (est.) | ~5k compute units |
Paymaster Sponsorship Surcharge | ~42k gas | ~15k gas (est.) | Not Applicable |
Batched Tx Gas Overhead per Op | ~25k gas | < 5k gas | Negligible |
Native Fee Abstraction | |||
Requires Separate Mempool | |||
Session Key Revocation Cost | ~30k gas | ~12k gas (est.) | Negligible |
Protocol-Level Standardization | De Facto (EVM) | In-Development (EVM) | Native |
Avg. Full UserOp Cost (L2) | $0.10 - $0.25 | $0.03 - $0.08 (est.) | < $0.001 |
deep-dive
THE CORE CONSTRAINT
Anatomy of the Bottleneck: Signatures & Gas Accounting
Smart account standards like ERC-4337 and ERC-7579 shift the scaling bottleneck from L2 execution to signature verification and gas accounting overhead.
The signature verification wall is the new scaling limit. Every ERC-4337 UserOperation requires a signature check, which is computationally expensive and non-parallelizable. This creates a hard ceiling on transactions per second (TPS) for any chain, regardless of its execution speed.
Gas accounting becomes a core protocol feature. Smart accounts with sponsored transactions or batch operations force L2s to implement complex, stateful gas metering. This adds overhead that pure EOA-based systems like Solana or Sui avoid entirely.
Counter-intuitively, L2 speed amplifies the problem. A fast sequencer from Arbitrum or Optimism can process execution quickly, but the sequential signature verification for a mass airdrop or gaming session becomes the dominant, un-scalable cost.
Evidence: A single secp256k1 ECDSA verification costs ~3,000 gas. An L2 processing 10,000 UserOps per second spends 30 million gas per second just on signatures, consuming a fixed percentage of block space regardless of other optimizations.
protocol-spotlight
THE ACCOUNT ABSTRACTION FRONTIER
Who's Solving This? Spotlight on Next-Gen Approaches
Scaling isn't just about TPS; it's about user experience. Smart account standards are the critical bottleneck for mainstream adoption, dictating security, composability, and cost.
01
ERC-4337: The EntryPoint Monopoly Problem
The standard's singleton EntryPoint is a centralized bottleneck for all user operations, creating systemic risk and limiting innovation. Its dominance stifles alternative fee models and forces all bundlers into a single queue.
- Single Point of Failure: A bug or upgrade in the canonical EntryPoint affects ~10M+ accounts.
- Bundler Cartel Risk: Economic incentives favor large, centralized bundlers like Stackup and Alchemy, defeating decentralization goals.
- Innovation Tax: New paymaster or signature schemes must route through the same congested contract, adding latency.
1
Global EntryPoint
~10M+
Accounts at Risk
02
RIP-7560: Native Account Abstraction's Existential Threat
Ethereum's proposed native standard aims to bake AA into the protocol, rendering ERC-4337 obsolete. This creates a winner-take-all protocol war with massive stakes for infrastructure players.
- Protocol-Level Dominance: Would make L2-native solutions (like Starknet's accounts) and EIP-4337 bundlers redundant.
- Validator Capture: Shifts power from bundlers to Ethereum validators, potentially increasing costs and centralization.
- Fragmentation Hazard: A multi-year transition could split the ecosystem between 4337 and 7560 wallets, breaking composability.
>2 Years
Migration Timeline
$1B+
Infra at Stake
03
The Cross-Chain Walled Garden
Smart account standards are chain-specific, trapping users in L2 silos. A Safe account on Arbitrum cannot natively sign a transaction on Optimism, forcing reliance on insecure bridge proxies.
- Fractured Identity: Users need separate accounts per chain, destroying the unified Web3 experience.
- Security Dilution: Cross-chain operations often delegate authority to LayerZero or Axelar message bridges, creating new attack vectors.
- Composability Kill: DeFi protocols like Aave and Uniswap must deploy separate, non-composable instances for each account standard variant.
10+
Chain Silos
0
Native Interop
04
ZeroSync & Plonky3: The Cryptographic Lock-In
Account standards hardcode signature schemes (e.g., secp256k1), blocking advanced cryptography needed for privacy and scaling. This creates a innovation deadlock for ZK-Rollups and privacy chains.
- ZK-Proof Barrier: SNARK-friendly schemes (like Plonky3) are incompatible, forcing ZK L2s like zkSync to use inefficient workarounds.
- Privacy Impossible: Stealth address protocols (e.g., Zcash) cannot integrate, making private transactions a second-class citizen.
- Quantum Vulnerability: Non-agile cryptography makes ~$500B in assets vulnerable to future attacks, with no upgrade path.
~$500B
Quantum At Risk
0
Agile Schemes
05
Biconomy & Particle: The Bundler Centralization Trap
The bundler-paymaster industrial complex is replicating Web2 cloud dominance. Infrastructure giants use subsidized transactions to capture market share, creating a centralized relayer network.
- Subsidy Wars: Companies like Biconomy burn VC capital to offer gasless tx, creating unsustainable markets and killing decentralized bundlers.
- Censorship Vector: A top-3 bundler controlling >30% of flow can theoretically censor or front-run transactions.
- Data Monetization: User operation flow is a goldmine for analytics, turning privacy-centric AA into a surveillance tool.
>30%
Top Bundler Share
$0
Sustainable Fees
06
The Modular Account: Over-Engineering for Extinction
Frameworks like Rhinestone and ZeroDev promote hyper-modular accounts with plug-in permissions. This creates unmanageable complexity for developers and unreviewable security for users.
- Attack Surface Explosion: Each plugin (Session Keys, Multi-sig) adds 1000+ lines of unaudited code to the wallet's trust base.
- Integration Hell: DApps must now support dozens of plugin signatures, increasing dev costs by ~40%.
- User Confusion: The average user cannot audit their own modular wallet's permissions, leading to $200M+ in annual plugin-based hacks.
1000+
LOC per Plugin
$200M+
Annual Hack Risk
counter-argument
THE MISPLACED FOCUS
Steelman: "L2s and Blobs Are the Real Bottleneck"
The industry's obsession with L2 throughput ignores the fundamental bottleneck: the user experience and computational overhead of smart account adoption.
The scaling bottleneck is user experience. L2s like Arbitrum and Optimism process thousands of TPS, but onboarding users requires managing seed phrases and paying for gas. This friction throttles adoption more than any blob capacity limit.
Smart accounts introduce computational overhead. Every ERC-4337 UserOperation requires signature verification and bundler logic, adding latency and cost that scales with user count, not just transaction volume.
Compare to the L1 bottleneck. Ethereum's base layer was constrained by execution; the new constraint is account abstraction complexity. A network of 100M smart accounts presents a harder systems problem than processing their transactions.
Evidence: Starknet's fee market shows bundler competition is minimal, creating centralization risks. The real scaling test is supporting millions of parallel session keys, not just compressing call data.
takeaways
THE INFRASTRUCTURE SHIFT
Key Takeaways for Builders and Investors
The battle for the next billion users isn't about L1 throughput; it's about the wallet abstraction layer. Smart account standards are the real scaling bottleneck.
01
The Problem: Externally Owned Accounts (EOAs) Are a UX Dead End
EOAs force users into a rigid, insecure model that blocks mainstream adoption. The private key is a single point of failure, and every new chain requires a new seed phrase. This is the primary bottleneck for scaling user onboarding and complex DeFi interactions.
- Single Point of Failure: Lose the key, lose everything. No recovery.
- Chain-Specific Silos: Managing assets across Ethereum, Arbitrum, Optimism requires separate wallets and gas tokens.
- Cognitive Overload: Users must sign every trivial transaction, killing session-based experiences.
~99%
Of Hacks
5+
Wallets Per User
02
The Solution: ERC-4337 and the Rise of Account Abstraction
ERC-4337 decouples the signer from the account, enabling programmable smart accounts as the default. This allows for features native to Web2, powered by a decentralized UserOperation mempool and Bundler/Paymaster infrastructure.
- Social Recovery & Multi-Sig: Replace seed phrases with social logins or hardware wallets.
- Sponsored Gas & Session Keys: Apps pay fees; users sign batches of transactions.
- Atomic Multi-Chain UX: Execute actions across Polygon, Base, zkSync Era from a single interface via intents.
10M+
Accounts Deployed
-90%
UX Friction
03
The Bottleneck: Fragmented Standards Kill Network Effects
While ERC-4337 is the Ethereum standard, competing implementations like Starknet's native AA and zkSync's Account Abstraction create fragmentation. Builders must choose a chain-specific implementation, fracturing the developer ecosystem and user experience.
- Vendor Lock-In: Dapps built for one AA stack don't port seamlessly.
- Infrastructure Sprawl: Bundlers, paymasters, and indexers need chain-specific tuning.
- Slowed Adoption: The lack of a unified cross-chain AA standard delays the composable 'super app' future.
5+
Major Standards
2-3x
Dev Complexity
04
The Opportunity: Who Controls the Stack Wins the Market
The entity that provides the dominant smart account SDK, bundler service, or paymaster network captures the relationship with the end-user and the application. This is a higher-value moat than generic RPC services.
- Bundler as RPC 2.0: Services like Stackup, Alchemy, Biconomy become critical transaction gateways.
- Paymaster as Business Model: Enables gasless onboarding and subscription services.
- SDK as Distribution: Wallet providers (Safe, Zerodev) that offer the best cross-chain AA toolkit will become the default.
$100M+
Annual Revenue Pool
Winner-Take-Most
Market Structure
05
The Catalyst: Intents and Cross-Chain Unification
Smart accounts are the prerequisite for intent-based architectures. Users express what they want (e.g., 'swap X for Y cheapest'), and off-chain solvers (UniswapX, CowSwap, Across) compete to fulfill it. This requires a programmable account to settle complex, cross-chain transactions.
- From Transactions to Declarations: Shifts complexity from users to a solver network.
- Cross-Chain Native: Intents naturally abstract away chains, requiring a unified account layer.
- MEV Capture Redistribution: Solvers and bundlers capture value previously taken by searchers.
$10B+
Intent Volume
~500ms
Solver Latency
06
The Investment Thesis: Bet on Interoperability Layers
The winning investments won't be in isolated L1s, but in infrastructure that unifies the fragmented smart account landscape. This includes cross-chain messaging (LayerZero, CCIP), universal SDKs, and intent coordination protocols.
- Protocols Over Chains: Value accrues to the cross-chain coordination layer.
- Aggregation is King: The best bundler aggregates UserOperations across multiple AA implementations.
- The Endgame: A single smart account identity that works seamlessly across Ethereum L2s, Solana, and Cosmos, powered by intent solvers.
100x
TAM Multiplier
Inflection Point
2024-2025
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