Exploring the Exciting Use Cases of Decentralized Finance (DeFi) – Part 7

Exploring the Exciting Use Cases of Decentralized Finance (DeFi) – Part 7

The series about DeFi applications in the Web 3.0 world will be followed by a completely new model created and developed by the Ethereum ecosystem called Account Abstraction.

What is an Account Abstraction?

Account abstraction is a type of smart contract in the form of an account with its own logic to be able to determine what is a valid transaction, pay the transaction fee, and initiate the transaction. In computer science terminology, those accounts are considered abstracted, hence the name Account abstraction.

Why was account abstraction created?

In fact, the concept of account abstraction is not really new as Vitalik Buterin mentioned this issue many years ago. However, the upgraded versions of Ethereum many years later have not changed significantly until the most recent update EIP-4337 has updated and improved to be able to launch this new product.

The birth of account abstraction is to solve the problem that most users need to use their accounts for many different purposes, and they have chosen account abstraction as a solution to solve those needs.

*The purpose of implementing AA is to significantly improve user experience in interacting with the Ethereum blockchain across wallets, Dapps, DeFi. The account abstraction also serves as a base layer on Ethereum to decide when an account can pay its own gas fees and how gas fees take place.

Specifically, AA helps address limitations that prevent growth in several important areas:

  • Create a smart contract wallet that uses other types of signature verification than ECDSA (Schnorr, BLS…).
  • Creating a smart contract wallet includes features such as multisig verification, social recovery, and reducing the risk of lost or stolen assets.
  • Privacy protection systems like tornado.cash.
  • Improves the gas fee efficiency of DeFi protocols by preventing transactions that do not meet premium conditions from being included on the chain.
  • Enables users to use another token to pay fees instead of being forced to use ETH (for example, converting that token to ETH needed to pay gas fees right in real-time transactions).*

*Sourced by Coin98

Application of account abstraction

Starknet

What is Starknet?

StarkNet is a Layer-2 decentralized network based on the Ethereum blockchain. This is a project built by StarkWare, a software development company based in Israel, specializing in cryptographic proof systems, with the goal of improving scalability and security in blockchains.

The project launched on the Ethereum Mainnet in June 2020 and has settled over 50 million transactions on Ethereum's private and public testnets before the Mainnet release. It enables decentralized applications to operate at scale while ensuring the security of the Ethereum network.

StarkNet is one of StarkWare two most prominent projects, and it provides a Layer-2 solution for the Ethereum blockchain using the zk-rollup architecture. Together with StarkNet, StarkWare has developed a series of products and technologies such as Cairo, SHARP, VeeDo, StarkEx, StarkNet and StarkGate.

The ecosystem of Starknet is very diverse, attracting a large number of developers to participate in building applications in many different fields, including:

  • DEX: Starkswap, Jediswap, ZKEX,...
  • Lending: Aave, Maker DAO, Curve Zero, zkLend,...
  • Infrastructure: Bridge, Explorer, Wallet,...
  • Gaming/NFT: Dope Wars, Influence, Realms, Game of Blocks, Eykar, bitmapbox, Phi Φ, The Ninth and some NFT Marketplace projects such as Oasis, Mint Square, NFTflow, Briq.

What was Starknet account abstraction created for?

Similar to the purpose of other abstraction accounts, Starknet solves a number of problems for crypto wallet users when participating in the Web 3.0 market:

  • It is difficult to store and remember your wallet account information.

Remember when you created a wallet using MetaMask and Trust Wallet? When creating, you must go through the step of copying a 12 or 24 characters key used as a security character when you log in to your wallet on another device or perform operations on your personal wallet.

However, most users easily forget these keys that leads to a second problem when using the wallet.

  • Unable to recover.

If a user loses their private key/seed phrase, they will permanently lose their account and cannot recover it in any way.

  • Depends on the seed phrase.

If thieves obtain the private key, they can immediately access your wallet and steal these assets by transferring the victim's assets to the thief's wallet.

zkSync 2.0

zkSync is a Layer-2 extensibility solution and is developed by Matter Labs. zkSync uses ZK Rollup technology to reduce network costs and speed up the transaction process while still inheriting the security elements of Ethereum.

On zkSync, assets will be stored in smart contracts on the main network (on-chain) while calculation and data storage are performed off-chain.

This architecture ensures zkSync has the following characteristics:

  • Inheriting the high security of Ethereum
  • Transaction fees are 50 times lower than mainnet on Ethereum.
  • Friendly with smart contracts.
  • Protected more than 5 million transactions.
  • Number of transactions that can be performed per second: 300 TPS.

What is zkSync 2.0 version?

zkSync 2.0 is a ZK Rollups scaling solution compatible with Ethereum servers and powered by zkEVM. zkSync 2.0 is ZK Rollups: a trustless protocol that uses Zero-knowledge proofs to provide scalable low-cost transactions on Ethereum.

zkSync 2.0 will solve 4 painful problems on Ethereum including:

  • Security.
  • Decentralization.
  • Ability of extension.
  • Programming capabilities.

zkSync 2.0 includes zkRollup and zkPorter. Unlike zkSync 1.0 - whose functional scope is purely for payment and transactions, zkSync 2.0 is different. This solution offers the ability to support generalized smart contracts, meaning zkSync Complier will convert smart contracts from local languages. Solidity to zkEVM for EVM compatibility and off-chain data availability - zkPorter.

zkEVM and zkPorter provide the ability for smart contracts on Ethereum to be easily converted to zkSync Layer 2 with minimal code modifications. Because zkEVM and zkPorter are interoperable and composable, zkSync 2.0 can significantly outperform all other scaling solutions.

Features of zkSync 2.0

  • Mainnet-like security without relying on third parties.
  • EVM permissionless compatible smart contracts.
  • Standard Web3 API application programming interface ⇒ beneficial for interoperability between projects/protocols in the future Web3 network.
  • Maintains key EVM features, such as smart contract aggregation capabilities.
  • Introducing new features, such as Account Abstraction (a proposal to allow the contract to be the top-level account that pays fees and initiates transactions) and meta transactions.

How important is Account Abstraction on zksync?

Account Abstraction (AA) is a new feature of zkSync 2.0, allowing accounts on zkSync to perform transactions as an external account (EOA), but can also have arbitrary logic implemented in them, like a smart contract. This solves many of the flexibility and user experience issues of accounts on Ethereum, while taking advantage of zkSync's advantages in speed, cost, and security.

Accounts on zkSync are called Smart Accounts, which are fully programmable, allowing for various customizations such as signing mechanisms, native multi-signature capabilities, spending limits and specific constraints. possible for each application. Additionally, Smart Accounts can also use Paymasters to fund user transactions, allowing users to pay transaction fees with ERC201 tokens.