[Music]
GM everyone today I'm going to be
talking about the Butterfly Effects and
paradoxes of account abstraction in
defi imagine this in 2018 Unis swap
introduced the automated Market making
model a smart SM contract that runs
billions of dollars of
transactions daily this single
Innovation became like a Cornerstone of
defi setting off a chain reaction of new
protocols in defi Lego blocks in form of
composability and that's essentially the
butterfly effect in action incremental
technological decisions leading to
massive ripples across the entire
ecosystem let's fast forward to today we
stand at another edge of transformative
shift account abstraction on the surface
AA might just seem like a technical
optimization another EIP another EIC but
beneath that there lies a potential to
reshape how users actually interact with
these T5 protocols from simplified
wallet experiences to seamless gas
management AA can remove some of the
most frustrating Dy ux challenges that
plague the ecosystem today however as
with any transformation Innovation AA
brings its own set of challenges and
paradoxes how do we improve security
without compromising on the usability
how do we ensure
decentralization while seamlessly
offering web tool like
ux and how do we Foster innovation
without fragmenting the ecosystem I'm
Niha and I'm going to be uh I'm I work
with safe as a technical product manager
and I'm building AA Dev tooling to build
more secure onchain apps if you're
interested in this topic I'd be happy to
chat with you later so let's navigate
The Butterfly Effects and paradoxes in
the defi realm before everything else
let me quickly explain the concept of
Butterfly Effects this concept comes
from the chaos theory famously
illustrated by the idea that butterfly
flapping its wing in one part of the
world world can set off a hurricane in
another part of the world at its core it
demonstrates how very small or
insignificant changes can lead to large
unpredictable outcomes over time and
this concept is not just limited to
abstract mathematics or weather
conditions it's deeply relevant in the
technological space and especially with
defi as the system is vastly
interconnected and small Innovations or
decisions can Cascade into massive
systemwide
changes now let's take an example in the
tech history about the CI keyboard in
the late 19th century the city keyboard
was designed to prevent typewriters from
jamming by spreading apart frequently
used characters it was a very small and
a practical mechanical decision made at
that time and fast forward to today Cor
is actually the most dominant keyboard
layout globally influencing how billions
of people interact with computers and
mobile devices daily and that small
local decision in the 19th century has
rippled across centuries shaping modern
digital
communication and now if I allude back
to the amm model of Unis swap here's how
the Butterfly Effects come into the
picture Unis swap introd use the amm
model to enable swapping without relying
on order books to match buyers as well
as Sellers and they use a simple formula
to uh facilitate these trades in the
liquidity pools at its core it's a
simple equation x * y = k where X and Y
are two quantities two tokens of the
same value in a pool and K is a constant
that remains unchanged and in a nutshell
here wouse works the liquidity providers
deposit the two tokens into a smart
contract which is the pool and the
Traders can swap between these tokens
directly from the pool paying a small
incentive fee to the lp
providers and why is it transformative
three reasons one accessibility anybody
can become a liquidity provider that
democratizes the liquidity provisioning
efficiency amm
eliminate the need for complex order
books and it reduces the barriers for
decentralized trading third
composability protocols can very easily
integrate Unis swap into their own
ecosystems which enables many swapping
or liquidity
strategies so the incremental change
that we see with Unis swap was that in
2018 the amm model was introduced
removing the need for autobooks in an
exchange and here's the effect so now we
have amm model and anybody can provide
liquidity which democratizes liquidity
and after that it it made dexus to be
more Central to Defi and inspiring more
and more dexes to come up like curve
balancer or sushi swap which cater to
very specific use cases like stable coin
swapping or multi-asset pools and as a
result billions of dollars started
flowing through these contracts
which resulted into the famous defi
summer of
2020 and as defi fa this explosive
growth the onchain ux unfortunately
could not keep Pace these topics still
plag defi to this state I would like to
go over some of the ux issues with defi
number one complex wallet management
today users still rely on private keys
and Seed phrases and may also have
multiple wallet addresses and losing
your private key means losing access to
your funds which can be very
intimidating for a newcomer and as a
result non- Crypton native users find
defi to be very intimidating which
reduces Mass
adoption number two gas fee and
transaction complexity having native gas
token on a new chain is quite confusing
and difficult to achieve and estimating
gas cost is even more confusing
sometimes there to achieve one single
action there are several transactions to
be signed for example to swap on a DEX
you need to approve and then transfer
which requires multiple signatures the
impact is that new users often feel
priced out because of this gas
requirement and on- ramping is quite
difficult the third issue poor
onboarding experience for new users
to set up a wallet to acquire new crypto
to interact with dii protocols often
requires multiple steps and also
requires engaging with several protocols
like exchanges Bridges various apps and
as a result there's a high learning
curve that's involved and that do and
that deters non-technical users and that
kind of limits defi
appeal and finally liquidity
fragmentation this problem is also still
quite persistent it significantly
impacts the efficiency and effectiveness
of the capital markets and this happens
when the capital is spread across
several platforms protocols or chains
rather than being concentrated at a
single venue and it can happen for
several reasons in defi because many amm
protocols exist like curve Unis swap or
sushi Swap and they all compete for
liquidity often split liquidity across
several pools it can also happen because
of several chains we see coming up every
day layer one layer 2 Chains liquidity
is spread across several different
chains and it's also possible because of
isolated liquidity pools within the same
protocol there can exist several similar
pairs like e d and e usdc but it still
results into liquidity fragmentation and
that means that the liquidity providers
may receive receive less incentives or
their Capital remains idle now let's see
how account abstraction can help
mitigate these
issues at its core account abstraction
redefines the concept of user accounts
in the blockchain today user operates
through externally owned accounts or
eoas which are controlled by private
keys and are quite Limited in
functionality in contrast AA Ena builds
accounts to function as smart contracts
allowing for a customizable logic and a
behavior this upgrade introduces a more
flexible a more user Centric model and
there are several ways like in a Swiss
knife in which account abstraction
actually hits the hammer on its nail
there can be very simple onboarding to a
wallet experience in case a user is
locked out of their account there are
social recovery mechanism or multiactor
authentications baked in there are
gasless transactions so the user doesn't
have to worry about having the native
gas token on the Chain users can also
bundle multiple transactions into one
simple transaction for for example for
swapping for approving and this is also
quite gas
efficient security features like uh
setting daily spending limits or session
keys will become a standard and this
significantly reduces the risk of losing
funds or falling victim to a malicious
contract and cross chain and Layer Two
compatibility cross-chain interactions
can be abstracted users interact with D5
protocols without needing to manually
Bridge the assets or even be aware of
the underlying network account
abstraction is not just about solving
these us ux frictions it's about truly
unlocking the potential of defi it
Bridges the gap between between web 3
and web 2 to offer more intuitive more
secure experiences so that many more
non-native crypto users can participate
in defi with ease and
confidence now I want to give you a real
world example of how innovation in defi
is causing major ripples in the world
today poly Market is a decentralized
prediction Market which has taken the
World by storm because of the recent US
presidential election c s something
that's not talked about enough is that
poly Market uses safe in its
architecture if you register on poly
Market using metamask it spins up a safe
proxy wallet for you on polygon poly
Market's use of safe in its architecture
is a critical component to its ux
strategy and security by leveraging
proxy wallets and maintaining a
non-custodial approach poly Market
ensures that its users have control over
their funds while still benefiting from
enhanced functionality and the security
that safe offers and here I would like
to take a look at some
numbers so far poly Market has created
about
420,000
saves and the number of transactions
that went
through
oopsy sorry about that and the number of
transactions that went through safe on
poly Market were about 1.6 million which
is approximately 3.7 transactions per
account quite sticky enough for web 3
and finally so far the betting volume on
polygon uh on poly Market is 5.7 billion
and as we see it the smallest
Innovations in account abstraction like
easy onboarding experience can set off a
Cascade of transformative events in defi
Innovations like account abstraction are
not just a technical upgrade there a
catalyst for the future where Finance
becomes more accessible more secure and
more
efficient while these numbers are quite
optimistic addressing defi gives rise to
several challenges and paradoxes where
solving one problem creates new problems
or it reveals conflicting priorities
let's take a look at
them the first Paradox is of security
versus convenience this highlights the
tension between making systems that are
more secure and ensuring that they
remain convenient for the users to use
and striking the right balance between
the two is the key to Great user
experience one of the advantages of
account abstraction is its ability to
provide Advanced security features such
as multisig wallets social recovery me
mechanisms and these features enhance
the security of user assets by reducing
the risks associated with the private
key L however adding extra steps or
extra layers of security comes at a
great expense of convenience for
instance in a multisig wallet it
requires several parties to sign off a
transaction before it hits the chain or
with social recovery mechanisms it is
designed to involve several trusted
parties which require some coordination
and forethought and while these features
make accounts more secure they also
introduce friction in day-to-day
use the second Paradox that I want to
talk about is customization versus
standardization while account
abstraction offers great level of
flexibility to users to Define their own
account behavior and this includes
custom uh transaction logic as promised
by ERC
7579 or automated workflows users can
create account personas that fit to
their needs for either trading
strategies or rebalance ing portfolios
or just to hold assets however with
increased customization comes the risk
of fragmentation and standardization is
very critical to ensure that different
wallets protocols Services they work
seamlessly together and everybody can
create their own custom account
behaviors and the risk of
incompatibility with different protocols
or apps grows and this Paradox centers
around challenges of offering enough
customization to me the needs of the
user while maintaining enough
standardization to ensure
interoperability and what if I tell you
there was a way to transcend these
paradoxes and this is where AI agents
intents come into the big CH intents are
a fundamental shift in how users
interact with defi uh decentralized
systems instead of micromanaging every
single transaction the user simply
expresses their desired outcome whether
it's swapping tokens or executing a
yield farming strategy these are all
high level goals that can be abstracted
away while interacting with multiple
protocols and the where this is where AI
agents also kick in these intelligent
agents can interpret users intents and
navigate decentralized
ecosystems and optimize the outcomes
autonomously and imagine an AI system
where it's continuously monitoring
several different liquidity pools
without any kind of human
intervention in a in essence like
intense and AI agents they resolve the
very paradoxes that we discussed in the
previous slides and have the potential
to set off a ripple effect in defi to
another
level there are two use cases that I'd
like to discuss here an AI agent can be
used in decentralized trading for
example the user expresses the intent to
maximize profits by grid trading
strategy where token X and Y should be
within a price range of $100 to
$120 the workflow would look like this
the agent would be constantly monitoring
the price of X and Y in several
different pools and as soon as the price
in the grid hits to the lower level of
100 or 105 it places buy orders and as
soon as it hits a higher range it places
sell orders and this would be occurring
in a gas efficient manner potentially
potentially transaction badges because
there are several token involved which
can save gas and the outcome is that the
user achieves their desired profit
targets without needing to manually
track or execute these
traits the final use case that I want to
talk about is with poly Market the user
might Express an intent to maximize
returns by betting on most likely
outcome of the US presidential election
to reallocate funds based on real time
changes in the probabilities and here's
how it would look like with the workflow
so the AI agent would be constantly
monitoring offchain data news reports or
social media sentiments and it defines
some probability estimates bets can be
placed on the highest expected value
based on the current odds and the
transaction costs and if new data
suggests a shift in probabilities
between different candidates then the AI
agent would dynamic Ally reallocate the
funds to a more favorable outcome and as
a result the US can the you user can
actually maximize their potential
earnings while minimizing risk without
needing to interfere manually because AI
agent would just take care of uh
readjusting the portfolio and in this
Essence we see how the future of web3
can look like where decentralized
systems become more intuitive and
automated and AA provides the
programmable infrastructure and AI
agents
provide in uh user intents to be read in
a more intelligent Manner and together
they can Empower users to interact with
defi in a more smarter and a more
accessible
way and with this I want to close by
saying that whether you're a user a
developer or a product leader your
actions today could spark the next wave
of innovation and let's Embrace this
responsibility and continue building a
decentralized future one small flap at a
time and the question I want to pose to
you today is that was what small
decisions will you make today that will
shape D5 for tomorrow and with this I
close my talk I'd be hanging at the a
community Hub later today and happy to
chat with you
[Applause]