Ethereum’s recent upgrade to the ERC-4337 standard is the key to onboarding the $3.7 trillion world of traditional real estate to Web3. Deployed in a surprise announcement at ETHDenver, this new protocol standard caught many people off-guard with its list of improvements. So what is ERC-4337 all about?
What is the ERC-4337 standard?
ERC-4337 ushers in a new standard for Ethereum wallets called account abstraction. Quite simply, Ethereum wallets that opted into ERC-4337 are now “smart wallets” that live entirely on-chain. The wallets are programmable, much like smart contracts themselves, and allow for important benefits such as:
- Account Recovery
- Two-factor authentication security
- Bundled transactions
- Increase interoperability between EVM-compatible tokens
- Setting spending limits on accounts
How can these new features help real estate?
Anyone who has been a part of a real estate transaction can tell you one thing – it is an inefficient process stuck in the Web Zero era. Title searches are slow and aren’t guaranteed to catch everything, people need to drive around in cars to hand physical pieces of paper to each other, and payments can take days to complete.
For years, many people have looked to blockchain technology as a way to modernize some of these pain points. Commonly discussed improvements include:
- Using NFTs to represent property deeds
- Replacing title searches with Etherscan searches
- Collecting rent using stablecoins
- Using contract signatures instead of notarized signatures
While these ideas sound great, there also come with many hurdles to overcome. Account abstraction will help to resolve two of the biggest issues – account recovery and two-factor authentication.
Custodying crypto is a challenge, and losing access to a wallet holding something important like a deed or a landlord’s operating account would be catastrophic. Just using crypto is scary for many people, and the idea of needing to keep a 24-word seed phrase safe forever is a hard sell to anyone already skeptical of the industry.
Fortunately, ERC-4337 allows users the ability to regain control of their wallets, even if the owner were to lose their private keys, with the use of “Guardians”.
Guardians are individuals or entities users can elect to recover an account in the event of losing access to a wallet. An example of a Guardian would be a trusted friend, a university that distributes diplomas as NFTs, or even, someday, a local bank.
ERC-4337 decreases reliance upon seed phrases, greatly helping mainstream adoption
By allowing social recovery for Ethereum wallets, it’s now much more likely that real estate companies will consider using smart contracts technology in their day-to-day business.
Another key feature of ERC-4337 is the introduction of two-factor authentication support. To many, the crypto world is synonymous with getting hacked. \With two-factor authentication, users can finally protect their accounts from hackers gaining access to their wallets, and within minutes, stealing all their assets.
Additionally, wallet owners will be able to set limits for transferable amounts. So, If a wallet contains 100 eth, for instance, users can restrict an ERC-4337-enabled wallet from sending more than 10 eth without first approving the transaction with two-factor authorization.
The ability to properly secure high-value items with two-factor authentication and spending limits makes it much more likely that real estate firms will feel comfortable using blockchain in the future. Before this implementation, there was too much risk involved for traditionally conservative real estate companies to consider using blockchain to any serious extent.
Common 2FA services include Google Authenticator and Authy
Will Account Recovery and Two-Factor Authorization be enough to onboard the real estate industry into Web3?
By themselves, of course not. However, the applications of blockchain technology in real estate are endless. For example, it makes payments significantly easier, faster, and cheaper, resolves the need for inefficient record-keeping of physical papers, and gives us a verifiable method of tracking events over long periods of time. It’s not so much a question of if real estate companies will begin using blockchain, but rather when it will become commonplace.
As our population becomes more comfortable with technology over time, it seems almost inevitable that blockchain technology will disrupt the real estate industry. With quality-of-life improvements from the ERC-4337 update such as account recovery and two-factor authentication, the path to uniting real estate and Web3 seems easier than ever before.
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