The most important innovation of account abstraction and ERC-4337 is not contract-based wallets: it’s the ability to abstract (separate) the need for separate EOAs or contract accounts.

Account abstraction enables the creation of smart accounts, which are independent smart contracts that can initiate and execute transactions without the need for an EOA. Any custom operation that can be defined in the form of smart contract code can be implemented in smart accounts.

The operation of smart accounts, or account abstracted wallets, is fairly simple. Instead of sending regular transactions as EOAs do, smart accounts use objects called UserOperations, which represent an operation that is to be conducted on behalf of the user.

The UserOperation object has multiple data elements that describe the type of transaction, the token, limit≤ and price for gas at various steps of the transaction, the signature to validate the transaction, and other metadata.

Every time a smart account sends a UserOperation, it goes into the common waiting area for all UserOperations called the alt mempool. These requests are then bundled by bundlers, who are similar to nodes verifying regular transactions. They even use the same logic as mining or validator nodes to prioritize transactions where they can extract the most value.

The bundled UserOperations are sent through a single whitelisted “Entry Point,” where every individual UserOperation is verified and executed by calling different functions. As UserOperations can include any type of logic, it allows users to implement various customizations to how they want to manage their accounts and the funds in them.