Ethereum's Upcoming Pectra Upgrade Enhances Crypto Wallets

Ethereum’s highly anticipated Pectra upgrade, scheduled for late 2024 or early 2025, is set to introduce a range of new functionality and improved user experience (UX) for crypto wallets. One of the key features is EIP-3074, an Ethereum Improvement Proposal approved for inclusion in the next update.

Single tweet TL;DR:
– EIPs 2935 & 3074 are included in Pectra
– EOF & EIP 7623 were CFI'd, with final decisions expected 🔜
– EIP-7667 was CFI'd for Osaka, the EL upgrade after Prague, alongside the Verkle migration pic.twitter.com/OwY6WZUPek
— timbeiko.eth ☀️ (@TimBeiko) April 11, 2024

EIP-3074 will allow regular crypto wallets, known as externally owned accounts (EOAs), to function like smart contracts. This means users can bundle transactions and only sign once or delegate funds from their wallet for use by another party, a capability similar to account abstraction introduced in ERC-4337.

While this added functionality promises greater convenience, some experts have raised security concerns. An anonymous DefiLlama developer, “0xngmi,” claimed on X (formerly Twitter) that the downside of EIP-3074 is “now it’ll be possible to fully drain an address (all tokens, all NFTs, all DeFi positions…) with only one bad signature.”

downside of EIP 3074 is that now it'll be possible to fully drain an address (all tokens, all nfts, all defi positions…) with only one bad signature
— 0xngmi (@0xngmi) April 11, 2024

However, Gaslite co-founder Harrison Leggio argued that while security risks exist, “people will always find a way to lose their money,” citing examples of users carelessly sharing their private keys with trading bots.

Ethereum’s Sponsored Transactions & Social Recovery

Software engineer Laurence Day highlighted the EIP’s “most obviously useful application” as sponsored transactions. These allow users to store assets in a wallet without Ether and sponsor gas fees from a separate contract controlling the wallet.

EIP-3074 will also introduce a social recovery feature, eliminating the need for the traditional 12 to 24-word seed phrase to recover wallets.

An anonymous Web3 adviser, “Cygaar,” explained that the EIP essentially turns wallets into smart contracts by adding two new operating instructions: AUTH for verifying signatures and actions and AUTHCALL for executing calls with the originator’s address as the caller.

So how can we turn existing EOAs into smart contracts?

By adding two new opcodes (computer instructions) – AUTH and AUTHCALL. These two opcodes work in tandem to allow a smart contract to act on behalf of an EOA.

Here's a quick overview on how they work (feel free to skip).
— cygaar (@0xCygaar) April 11, 2024

The Pectra update follows the recent Dencun update, which reduced Layer 2 transaction fees on Ethereum. It also aligns with Ethereum co-founder Vitalik Buterin’s “Purge” initiative, which aims to simplify the network by removing old and excess history.

Furthermore, the author’s views are for reference only and shall not constitute investment advice. Before purchasing, please ensure you fully understand and assess the products and associated risks.