A new decentralized layer, called ERC-4337 or “smart accounts,” has been added to Ethereum to enable the creation of supercharged Ethereum wallets without relying on centralized components. These wallets rely on a distributed network of “Bundlers” and “Paymasters.” While smart contract wallets already exist, they are dependent on centralized components, which ERC-4337 eliminates. However, infrastructure providers have warned that it may not be easy to participate profitably in this new system at the moment.
Matt Cutler, CEO of Block-native, a core Ethereum infrastructure provider, explained that the new ERC-4337 “smart accounts” involve subtle but significant changes under the hood. One of these changes is the addition of a “User Intent Layer.” Currently, an Ethereum transaction involves several distinct steps, according to Cutler.
Currently, to make an Ethereum transaction, a user accesses their standard externally-owned account (EOA) or private key to compose a signed transaction. They then send it to the public mempool, which is like a shared queue for transactions. A “Builder” organizes the transaction into a “profitable block,” which is then proposed to a Validator and published on-chain to complete the transaction. However, with ERC-4337, the new “User Intent Layer” is added before the EOA step to streamline the process.
The “User Intent Layer” added by ERC-4337 enables users to initiate more complex transactions in a single step. To accomplish this, ERC-4337 introduces an “Alternative Mempool” and a network of transaction Bundlers. This system also offers a new way to earn fees.
Becoming a Bundler
A Bundler is a node that performs a similar function to the block “Builder” in the ERC-4337 system. Instead of organizing signed transactions from the public mempool to create a profitable block, a Bundler selects User Operations (userOps) from the Alt-Mempool to create a profitable bundle, which is signed and submitted to the network as a single transaction.
However, according to Matt Cutler of Blocknative, while anyone can theoretically be a Bundler, being a successful one may be difficult. Bundlers are specialized actors made up of relatively sophisticated development teams with substantial computational, storage, and networking infrastructure.
According to Matt Cutler, ERC-4337 is trustless and permissionless, meaning that anyone with technical expertise can set up and operate their own Bundler. However, he warned that being a successful Bundler is challenging because it is a competitive market. Competing against relatively sophisticated teams that invest heavily in being a competitive Bundler can be difficult.
Furthermore, Bundling requires more technical sophistication than being a validator. Therefore, Bundlers are not a tool that can be easily set up, forgotten about, and expected to generate revenue.
There is an ongoing discussion about whether ERC-4337 will affect Ethereum gas fees. This is due to the increase in transaction complexity resulting from the addition of the new User Intent layer.