A Declining User Base And Operational Issues
Recall that the ERC-4337 standard, unveiled on March 1 during WalletCon in Denver, sparked optimism within the blockchain community. The “smart accounts” were expected to revolutionize user experience on Ethereum Virtual Machine (EVM)-compatible blockchain protocols.
The technology promised increased convenience and accessibility by allowing users to avoid using seed phrases and signing for specific transactions. However, recent Data shared by Rising on the X social platform revealed a discouraging trend for ERC-4337-enabled smart accounts.
These statistics show a concerning decline in the use of ERC-4337-enabled smart accounts. Not only have user numbers declined, but transaction activity has remained extremely low.
Furthermore, the operational costs for core infrastructure providers have presented unexpected challenges, raising concerns about the technology’s sustainability and feasibility in its current form.
Poor Retention Rates
Rising’s recent revelations, citing data from BundleBear, highlight the bleak state of ERC-4337-enabled smart accounts. The data revealed a pattern of low account retention, low profitability for core infrastructure components known as bundlers, and low user engagement in the ecosystem.
According to BundleBear’s account abstraction data, the monthly retention rate for these smart accounts could have been better. They hover around 6.89%, especially for accounts created in the last six months.
This statistic indicates a lack of long-term user commitment, raising concerns about the long-term appeal and utility of ERC-4337-enabled accounts. Rising’s analysis also highlighted the financial difficulties bundlers face.
Despite their vital role in enabling smart account functionality on EVM-compatible chains, bundlers have struggled to maintain profitability, primarily due to instances where projects have overpaid in gas fees.
An Optimistic Narrative
Meanwhile, Jesse Pollak, the lead of Coinbase protocols and creator of Base, offers a counter-narrative to Rising’s pessimistic portrayal of ERC-4337-enabled smart accounts. He proposed a measured understanding of the technology’s adoption trajectory.
Pollak argued that adopting this new technology would be gradual rather than sudden. He further explained the early stages of blockchain and crypto adoption, noting signs of promising growth.
“It seems very early,” Pollak said, expressing confidence in the adoption curve’s gradual but steady momentum. He underscored the accounts’ steady rate of growth and the encouraging trend of standardization that is gradually taking shape.
A Shift In Adoption Trend
Pollak also mentioned increased conversations with teams expressing a desire to transition to ERC-4337-enabled smart accounts, indicating a growing interest in the technology among industry players. Furthermore, Dune Analytics data provided insight into the traction gained by ERC-4337-enabled smart accounts.
According to this data, over 420,000 active smart accounts across seven blockchain platforms existed as of August 2023, representing a significant milestone. However, the subsequent months recorded a slight decline in active smart accounts, with 143,000 monthly active accounts in October, indicating a substantial shift in the adoption trajectory.