Why Smart Account Architecture Determines Protocol Dominance

Externally Owned Accounts (EOAs) are the single greatest UX and security bottleneck in crypto. They force protocols to build on a broken foundation.

• User Experience: No batching, no session keys, no gas sponsorship.
• Security: Seed phrase loss is catastrophic. ~$1B+ lost annually to private key mismanagement.
• Innovation Ceiling: Limits composability to simple, atomic transactions.

Smart accounts (ERC-4337, Starknet, Solana) transform the wallet from a keypair into a programmable agent. This shifts competition to the infrastructure layer.

• UserOps & Bundlers: Enable gas abstraction, batch execution, and ~50% gas savings via optimized bundling.
• Account Abstraction: Allows social recovery, session keys, and policy-based security.
• Paymaster Dominance: The entity sponsoring gas becomes the default payment rail, capturing >10% of all transaction flow.

The protocol with the best smart account stack becomes the user's primary financial interface, capturing loyalty and data.

• Sticky Integration: Once a user's account is deployed on a protocol's preferred stack (e.g., Safe{Core}, ZeroDev), migration cost is high.
• Intent-Based Future: The architecture that best solves for user intents (via UniswapX, CowSwap, Across) wins. Smart accounts are the execution layer for intents.
• Vertical Integration: Winners will bundle AA, bundlers, paymasters, and oracles into a seamless SDK, becoming the AWS of onchain apps.

Forget TVL and daily active addresses. The new KPI is TPUPS—how many actions a user completes in a single, gas-abstracted session.

• EOA Baseline: TPUPS ≈ 1. Each action requires a new signature and gas payment.
• Smart Account Target: TPUPS > 10. Batch swaps, approvals, stakes, and bridges in one click.
• Protocol Impact: High TPUPS protocols (like dYdX or a future Hyperliquid) will see order-of-magnitude better retention and fee capture than their EOA-bound competitors.

Starknet's Cairo VM and native account abstraction are a full-stack bet. The protocol's architecture treats smart accounts as a first-class primitive, enabling systemic optimizations impossible on EVM L2s.

• Native Fee Abstraction: Sponsors pay fees in any token, removing the UX deadlock of needing the native gas token.
• Atomic Session Keys: Users can pre-approve specific transaction flows (e.g., perpetual swaps on Ekubo) with zero confirmations per action.
• Vertical Integration: From sequencer to prover, the stack is built for AA, resulting in ~50% lower gas costs for common account operations versus EVM equivalents.

zkSync's LLVM compiler and system-level native account abstraction offer a pragmatic bridge. It provides full EVM equivalence for devs while baking AA into the protocol's core economic and security model.

• Paymasters as Protocol Feature: Fee sponsorship is a native system call, not a smart contract hack, ensuring deterministic and cheap operation.
• Account & Paymaster Bundling: Single transaction can deploy a contract, fund an account, and execute logic—onboarding in one click.
• The Boojum Boost: Upcoming upgrade slashes proof costs, making sponsored transactions economically viable for mass-market dApps.

Fuel rejects the monolithic account model entirely. Its UTXO-based architecture, inspired by Bitcoin, processes transactions in parallel. Smart accounts here are not singular contracts but composable state objects.

• Parallel Execution: Non-conflicting account operations (e.g., swapping on multiple DEXs) process simultaneously, offering theoretical max throughput.
• Predicate-Based Security: Authorization logic is separated from account funds, enabling trustless social recovery and advanced multisig schemes without bloating a main contract.
• Sway Language: Domain-specific language forces developers to think in terms of state transitions optimized for this model, avoiding EVM baggage.

While not L1s, these aggregators are becoming the de facto "account layer" for fragmented liquidity. Their architecture abstracts chain and signature complexity away from the user's smart account.

• Unified Intent Layer: User expresses a goal ("swap X for Y on best rate"), the aggregator's solver network finds the optimal path across 20+ chains and 100+ DEXs/bridges.
• Gas Tank Abstraction: Users pay in source-chain token; aggregator handles all downstream gas across chains via relayers or paymasters.
• Modular Hook Integration: Plug directly into smart account SDKs (like Biconomy, ZeroDev) to become the default cross-chain execution layer.

Most EVM-compatible rollups (Arbitrum, Optimism, Base) treat account abstraction as a smart contract library problem (EIP-4337). This creates fundamental architectural debt.

• Bundler Centralization Risk: Reliance on a competitive mempool of bundlers creates MEV and reliability issues absent in native models.
• Gas Overhead: Every 4337 operation requires multiple contract calls, making simple actions 2-3x more expensive than native L1 calls.
• Fragmented Standards: Each wallet (Safe, Biconomy, ZeroDev) implements its own flavor, fracturing developer tooling and user experience.

The real bottleneck for mass adoption is trust in paymasters and bundlers. EigenLayer's restaking model allows the creation of Actively Validated Services (AVS) that secure these critical AA components.

• Decentralized Bundler Networks: An AVS can provide cryptoeconomic security for a network of permissionless bundlers, eliminating single points of failure.
• Guaranteed Paymaster Solvency: A restaked service can underwrite paymaster operations, ensuring users their sponsored transactions won't fail due to insolvency.
• Unified Security Layer: Instead of each AA stack building its own validator set, they can rent security from Ethereum's $15B+ restaked pool.

Monolithic smart accounts where a single signer key controls all assets and permissions create catastrophic failure modes. A compromised EOA or faulty multisig becomes a universal exploit vector.

• Risk: A single leaked seed phrase can drain a $1M+ account in one transaction.
• Pitfall: No internal firewalls; a malicious dApp approval can loot the entire wallet.
• Solution: Decoupled, hierarchical permission systems as seen in Safe{Wallet} and Argent, separating session keys from asset vaults.

Paymaster services that sponsor user gas fees (ERC-4337) create relayer bottlenecks and censorable choke points if not designed for credibly neutral execution.

• Risk: A dominant paymaster like Stackup or Pimlico can front-run or block transactions, undermining decentralization.
• Pitfall: Protocol liquidity becomes dependent on a few relayers, recreating the Infura problem at the account layer.
• Solution: Permissionless relay networks and decentralized auction mechanisms, as pioneered by Ethereum's PBS, applied to the mempool.

Fully upgradeable account proxies (e.g., UUPS/EIP-1822) trade short-term flexibility for long-term trust minimization. Users must trust the developer's upgrade key indefinitely.

• Risk: A compromised admin key or malicious upgrade can rug $100M+ in aggregated user funds.
• Pitfall: The 'immutable' contract you audited today is not the one securing your funds tomorrow.
• Solution: Time-locked, multi-sig governed upgrades with opt-in migration paths, or immutable core logic with modular, swappable peripherals.

Native smart accounts that operate across Ethereum, Arbitrum, Optimism via layerzero or CCIP must synchronize state. Desynchronization leads to double-spends or locked funds.

• Risk: A successful spend on Chain A may not be reflected on Chain B, allowing a replay attack.
• Pitfall: Bridging delays and oracle latency create arbitrage windows attackers exploit.
• Solution: Atomic state synchronization protocols or a primary chain settlement layer, treating other chains as execution shards.

ERC-4337 bundlers, which package UserOperations, have full visibility into transaction intent. This creates a new MEV surface where bundlers can front-run, sandwich, or censor user transactions for profit.

• Risk: User's intent-based trade via UniswapX can be extracted by the bundler before inclusion.
• Pitfall: The economic incentive for honest bundling is weak compared to extractive opportunities.
• Solution: Encrypted mempools (e.g., Shutter Network), fair ordering rules, and CowSwap-like batch auctions at the bundler level.

The power of smart accounts comes from plugins (recovery, automation, spending limits). A malicious or buggy plugin becomes a backdoor with the same permissions as the core account.

• Risk: A WalletConnect-like plugin vulnerability could affect every integrated account simultaneously.
• Pitfall: The security of the account is now the security of its weakest approved module.
• Solution: Formal verification of module contracts, signed permission scopes, and Safe{Wallet} Guard-like transaction pre-flight checks.

Who controls transaction ordering and fee extraction for ERC-4337 accounts? The bundler. This is a multi-billion dollar MEV opportunity and the primary point of centralization.\n- Dominant Model: Pimlico, Stackup, and Alchemy control >80% of bundler market share.\n- Strategic Leverage: Owning the bundler allows for custom fee logic, censorship resistance, and capturing cross-chain intent flow.

The problem: users hate gas fees. The solution: protocol-sponsored transactions via paymasters. This is user acquisition on steroids.\n- Case Study: Friend.tech used a paymaster to subsidize millions of transactions, driving initial adoption.\n- Network Effect: The protocol that pays for its users' gas becomes the default entry point, locking in engagement and data.

Two architectural philosophies are competing. Modular (ZeroDev, Biconomy) uses ERC-4337 for maximum flexibility and bundler competition. Monolithic (Safe{Core}) uses a singleton contract for maximum security and governance control.\n- Trade-off: Modular enables faster innovation and lower fees. Monolithic offers stronger audit surface and established $40B+ TVL.\n- Winner? The ecosystem that can bridge both, like Safe's 4337 module.

Smart accounts don't just sign transactions; they fulfill user intents (e.g., "swap this token for the best price"). This shifts dominance from DEX frontends to intent-solving networks.\n- Parallel: Just as UniswapX and CowSwap abstract execution, smart account architectures like Kernel & Rhinestone will abstract wallet management.\n- Outcome: The protocol that solves the most intents wins the user relationship, becoming the new "browser" for web3.