Smart Contract Accounts vs Externally Owned Accounts.

Smart Contract Accounts vs Externally Owned Accounts.

What you should probably know

Introduction

Welcome back to The Atlantean’s Publication.

There are primarily two types of accounts used for storing cryptocurrency: a smart contract account, and an external external.

This article highlights the difference between the two.

What are EOAs?

In simple terms, an Externally Owned Account or EOA, is a type of account on the Ethereum blockchain that is traditionally used for storing crypto assets with a public key and an encrypted private key.

The public key is used to identify the EOA on the Ethereum network and the private key is mostly used to sign transactions.

When a user of an EOA wants to perform an act, such as sending ether or interacting with smart contracts, they do this by creating a transaction and signing that transaction with their private key.

The transaction is then broadcast to the network, where it is verified and processed.

Traditional EOAs include:

What are Smart Contract Accounts?

Smart contract accounts are digital accounts on the blockchain that allow users to store, manage, and transfer cryptocurrencies and digital assets much like an Externally Owned Account, but through the use of smart contracts to ensure a more secure and automated way, without the need for a centralized intermediary.

They are essentially self-executing contracts that automatically enforce the rules and regulations of the underlying digital assets that they store.

These Smart Contract Accounts provide a new way to manage digital assets that are both secure and transparent, making them an attractive option for users who value security and flexibility in managing their digital assets.

Types of Smart Contract accounts:

Externally Owned Accounts vs Smart Contract Accounts

Smart Contract Accounts have several advantages over Externally Owned Accounts such as;

  1. Increased Security: They are designed to be more secure than externally owned accounts because they use the security of the blockchain, and the transparency of smart contracts to protect user assets.

  2. Automated Processes: They automate many of the processes involved in managing digital assets, such as transferring funds, and enforcing rules around asset ownership. This reduces the risk of human error and increases efficiency.

  3. Decentralized Control: These accounts are decentralized, meaning that they are not controlled by a central authority. This eliminates the risk of a single point of failure and gives users greater control over their assets.

  4. Transparent rules: Due to the open-source nature of smart contracts, the code that defines the mechanisms that handle transactions and store these user assets is public for viewing and auditing by the blockchain community. This increases transparency and reduces the risk of fraud and manipulation.

  5. Multi-sig functionality: Some smart contract accounts like Safe, offer a multi-signature functionality, meaning that a user can decide to create a smart contract wallet that requires multiple approvals before a transaction can be executed. This helps provide an additional layer of security.

  6. Better User Experience: Smart contract wallets are known to offer a better user experience compared to traditional EOAs. They are mostly better to use and offer a more friendly user interface (UI/UX) that makes it easier and more comfortable for users to manage their assets.

  7. Cost savings: Because smart contract accounts automate many of the processes involved in managing digital assets, they can help users save on transaction fees and other costs associated with traditional financial services.

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