White Star Capital Digital Asset Fund - newsletter #118
Unlocking Blockchain Mass Adoption: Account Abstraction Explained
Unlocking Blockchain Mass Adoption: Account Abstraction Explained
White Star Capital Digital Asset Fund - newsletter #118
In the early days of the internet, creating an account required asking a moderator to create a username-password record in their database. Eventually, this became increasingly automated and self-service, where now users can, for example, reset forgotten passwords.
In Web3, the UX of interacting and holding private keys (the crypto equivalent of passwords) has taken longer to develop to a similar degree of user control. Currently, if you lose your private keys, you lose all access to your funds as there is no alternative account recovery process. Account abstraction, a narrative that has recently taken off in the crypto world, solves for this problem. It has gotten so many of us excited as it will be key to mass adoption of crypto, as it overcomes one of the biggest UX hurdles.
What is the status quo?
The state of the blockchain, and hence the state of accounts, can only be modified through transactions. Today, there are two account types on Ethereum: Contract Accounts and Externally Owned Accounts (EOAs- i.e. regular user accounts). For anything to happen on-chain, a transaction must be initiated and paid for by an EOA, which is controlled through its private key. The private key creates a signature that proves to the blockchain it’s your account. So the concept of the account ( the object holding the tokens) and the signer (the object authorised to move these tokens) are essentially the same thing on the Ethereum blockchain.
The fact that your private key is your account is great for simple implementation and usability- but, crucially, that means losing your keys means losing your account. Worse still, if someone else accesses your private key, they can use and drain your funds. The alternative of custodial accounts like Coinbase or Binance are hardly a panacea as we’ve seen recently, and besides are also vulnerable to hacks or arbitrary seizures/freezes by third parties like governments.
So the solution? Decouple the object holding your tokens (the account) from the object authorised to move these tokens (the signer). How?
Account Abstraction
Account abstraction turns accounts into smart contracts with their own logic to define what a valid transaction is. It’s no longer one-account-fits-all-use-cases. Instead, each user can have an account that is adapted to their needs. This essentially makes user accounts more ‘programmable’- you remove the logic of signing transactions from the account, and you ‘abstract’ it out, unlocking flexibility. You can now write separate accounts for e.g. different signing schemes, withdrawal limits, multi-sigs or changing the signer of your account on a periodic basis. Most significantly, social recovery- if a private key is lost or compromised, account abstraction allows wallets to add mechanisms to replace the key controlling the account.
This unlocks a bright future for blockchain companies and the use cases across different web2 and 2.5 businesses. Smart accounts could also make subscriptions possible through transaction delegation. Smart accounts make “pull” payments, initiated by a biller, possible. So, for example, a company could set up an auto payment smart contract on its website and list out its functions — e.g., it will only initiate one transaction per month and set a maximum amount that it will charge. The user can then approve these conditional pull payments via their smart account, enabling automated bill payments after their bi-weekly pay comes in.
This is super exciting because it allows the non-custodial blockchain UX to scale, unlocking flexibility across applications and protocols. The possibilities are truly endless, and every crypto company and protocol should be exploring how AA can be implemented to make their users’ lives significantly easier. We expect to see new use cases we hadn’t even thought of to emerge on chains that support account abstraction such as StarkNet and zkSync 2.0. This is extremely promising for Ethereum, the EVM, and crypto adoption broadly.
🔦 White Star & Portfolio Spotlight
DFNS uncovers critical vulnerability in ‘Magic Links’
DFNS finds that ‘Magic Links,’ or one-time URLs generated by a website or app to authenticate a user, could pose considerable security risks for developers.
ALEX launches the first permissionless AMM pool on the platform
The pool was created by ALEX community members without participation from the ALEX Lab Foundation.
Africa-based Coronation launches a borrower pool on Atlendis
Coronation - a leading investment brand based in South Africa - launches a new pool on Atlendis, giving LP’s a wider range of exposure to the region.
Alethea.AI partners with Polygon to launch first ever AI collectible campaign using CharacterGPT
Alethea’s CharacterGPT generative AI solution was used to create Polygon CEO Sandeep Nailwal’s permissioned digital twin.
🏦 Enterprises & Institutions
NFT startup Candy Digital taps Getty Images for ‘70’s music and photos
The Gary Vee-backed startup continues its shift beyond sports-themed collectibles in this new partnership with Getty Images.
401(k) Provider ForUsAll to offer crypto investments into CoinDesk indices constituents
This will be the first index-based digital asset offering available through a 401(k), says ForUsAll.
Visa's crypto strategy remains intact despite crypto winter
U.S. payments giant Visa remains committed to investing in the crypto sector and supporting the technology despite recent failures in the industry.
Goldman Sachs says it’s open to adding staff to Digital Assets team
The investment bank’s tokenization platform was used by Hong Kong to sell digital bonds last week.
Starbucks's web3 Odyssey is seeing early signs of success
Starbucks’s Odyssey program, an extension of Starbucks Rewards that seeks to expand brand loyalty in the virtual world, is seeing encouraging signs, Bank of America said.
Fujitsu and Mitsubishi look to create Japanese 'metaverse economic zone'
A new project, dubbed Ryugukoku, brings together Japanese conglomerates to build an interoperable metaverse for information dissemination, marketing and work style reform for domestic enterprises.
Deloitte, Sinclair Broadcast launching new sports metaverse experience
Deloitte and Sinclair Broadcast Group said they'll be launching a new metaverse sports fan community experience leveraging Epic Games' Unreal Engine to "enhance the ways in which fans and audiences can build connections and engage with the content they love."
Electronic Arts founder Trip Hawkins is now making NFT games
Hawkins has joined startup Games for a Living to help create NFT and token-fueled video games, starting with Elemental Raiders.
Latin American crypto exchange Bitso and Mastercard launch debit card in Mexico
The exchange launched a progressive rollout for over 100,000 users who had requested the card in Mexico after enabling the card in November for a group of customers to get feedback.
Amazon NFTs will be tied to Real-world Assets, token possible
Amazon marketplace will tie digital ownership to physical goods delivered to customers’ doors
⚖️ Government & Regulation
Thailand waives crypto tax for investment tokens
The tax exemption could see the government forgo up to $1 billion in revenue over the next two years.
BIS develops cross-border retail CBDC payment system
The Bank for International Settlements has wrapped up its “Project Icebreaker,” together with the central banks of Israel, Norway and Sweden.
Dubai’s crypto industry welcomes new licensing regime amid global regulatory uncertainty
The emirate’s ambitious framework tackles a broad range of assets and activities, designed to attract firms seeking regulatory clarity.
💰 Funding & Exits
Ethereum L2 Scroll reaches $1.8 billion valuation in new funding round
Investors in the $50mm round included Polychain Capital, Sequoia China, Bain Capital Crypto, Moore Capital Management, Variant Fund, Newman Capital, IOSG Ventures and Qiming Venture Partners, Scroll said Monday.
NFT Platform Few and Far Raises $10.5M in a Round Led by Pantera Capital
The fundraising also attracted participation from Cypher Capital, Huobi Ventures, Hypersphere, Metaweb, Mantis Partners, and K5 Global.
Helika closes $4M seed funding round To expand analytics product offering For Web3
The round was led by Diagram Ventures with participation from Fenbushi Capital, Sfermion, Big Brain Holdings, Builder Capital and Sparkle Ventures (strategic venture arm supported by Animoca Brands and The Sandbox)
Impossible Cloud raises $7.6M to decentralize cloud services with Web3
HV Capital and 1kx led the heavily oversubscribed round, with more investment from Protocol Labs, TS Ventures, and very early Ventures. In addition to capital contributed by the founders, the seed round brings the company’s funding to date to more than $10.9 million.
Conflux raises $10 million from DWF Labs in token round
DWF Labs bought the Conflux tokens, which will “linearly unlock over a period of time,” Conflux co-founder Fan Long told The Block.
Singapore digital asset exchange DigiFT raises $14.2m to fund expansion
The new funds will be used to support licence applications in Asia, the Middle East and Europe and technology development, and to beef up the company’s innovation capabilities, said DigiFT’s founder and chief executive Henry Zhang.
Web3 Infrastructure Startup Portal Raises $5.3M
Portal, a Web3 wallet infrastructure startup, has raised $5.3 million in a funding round that included Slow Ventures and Haun Ventures, the venture capital firm founded by Andreessen Horowitz alum Kaite Haun, according to a press release provided to CoinDesk.
Mangrove DAO - Raises USD 7.4 million to revolutionize decentralized finance
Led by Cumberland, Greenfield Capital and followed by CMT and gumi Cryptos Capital (gCC), this round succeeds the company's seed funding round of USD 2.7 million in July 2021, which was backed by prominent VCs including Wintermute Ventures, QCP Soteria Node, Monday Capital, Noia Capital, Zeeprime, Atka Capital and Stake Capital.
Kresus Raises $25M in Series A Funding
The round was led by Liberty City Ventures, JetBlue Ventures, Franklin Templeton, Marc Benioff, Cameron & Tyler Winklevoss, Craft Ventures, and other blockchain focused investors.
Investment firm republic purchases 10M Astra Protocol tokens
Switzerland-based decentralized know-your-customer (KYC) platform Astra Protocol said investment platform Republic will acquire 10 million ASTRA, the protocol's native fixed-supply utility token.
Coinbase has acquired One River Digital Asset Management
Coinbase has acquired One River Digital Asset Management (ORDAM), a premier institutional digital asset manager and SEC-registered investment adviser. ORDAM will transition to become Coinbase Asset Management (CBAM), and will operate as an independent business and wholly-owned subsidiary of Coinbase.
Econia Labs acquires Laminar Markets
The acquisition is set to pave the way for the next generation of on-chain trading on the Aptos network
🚀 Project Launches & Updates
Yuga Twelvefold Bitcoin NFT auction raises $16.5 million
Yuga Labs’ buzzy and controversial auction of its debut Bitcoin NFT collection concluded Monday, with 288 successful bidders nabbing as many pieces in the limited series, spending a combined $16.49 million worth of BTC.
Crypto startup LI.FI spins up Bridge, DEX aggregator
Crypto trading aggregator LI.FI has rolled out a token bridge and decentralized exchange aggregator that the startup’s founder said reduces the cost of moving crypto assets across chains.
EOS Blockchain plans second innings ahead of April’s EVM launch
Crypto trading aggregator LI.FI has rolled out a token bridge and decentralized exchange aggregator that the startup’s founder said reduces the cost of moving crypto assets across chains.
PancakeSwap version 3 is coming to BNB Smart Chain
Decentralized cryptocurrency exchange PancakeSwap announced Saturday that a new version of its application is rolling out to users next month on BNB Smart Chain.
Chainlink price feeds go live on Base, Coinbase’s Layer 2 Testnet
Base also joins the Web3 services platform's Scale program, allowing developers to construct smart contracts that can react to external information at a subsidized cost.
ConsenSys says zkEVM Public Testnet to go live March 28
ConsenSys launched a private zkEVM testnet in December but is now opening it up for anyone to join.
Crypto exchange Kraken to launch new crypto bank in US amid regulatory issue
US-based crypto exchange Kraken is still launching a new Wyoming-based crypto bank despite the U.S. Securities and Exchange Commission’s (SEC) recent banning of the exchange’s staking service.
🔥 Other Bits We're Excited About
Flashbots makes privacy-enhanced block builder open source on Ethereum Testnet Sepolia
Research shared by the team details that block builders will be able to build blocks without accessing private data of users' transactions.
Demand for blockchain devs Is Soaring—but not just in crypto
Demand for blockchain programming skills increased by 552% in 2022, as per a report by DevSkiller, compiling over 200,000 skills assessments. Tech firms can use these assessments as part of their hiring process to vet a developer’s proficiency.
Elon Musk and Tesla accepting Bitcoin 'opened door' for Adidas' Web3 plans
The EV company's short-lived experiment with Bitcoin helped crypto advocates at Adidas "start the conversation" around blockchain, said its Web3 lead.
Salesforce Web3 lead: Every brand's web site will support crypto wallets
Salesforce's Web3 lead Marc Mathieu sat down with Decrypt's Dan Roberts at NFT Paris to talk about the CRM giant's crypto strategy, why "we had to" embrace Web3, and why the crypto wallet is "the new cookie" online.