Ethereum's much-anticipated Pectra update, scheduled for late 2024 or early 2025, promises to revolutionize the way crypto wallets work by enhancing their features and user experience through smart contracts.

The Ethereum Improvement Proposal (EIP) 3074, which is a key part of this upgrade, has been approved recently. This feature will enable standard crypto wallets to function similarly to smart contracts.

EIP-3074 will allow standard externally owned accounts (EOAs), such as those used in MetaMask wallets, to perform operations that are typically associated with smart contracts.

This includes transaction bundling, which allows a single signature for multiple transactions, and sponsored transactions, where a wallet can provide funds for another entity to use.

This update is similar to the account abstraction introduced in ERC-4337. However, there are concerns regarding the potential risks associated with EIP-3074.

An anonymous developer from DefiLlama, known as 0xngmi, highlighted the risks on a social media platform, stating that a single bad signature could drain an address of all its tokens, NFTs, and DeFi positions.

Despite these concerns, Harrison Leggio, co-founder of Gaslite, acknowledged that mistakes are common and that people will always find a way to lose their money.

He also pointed out the misuse of private keys, stating that people often give their private keys to trading bots.

On the other hand, Laurence Day, a software engineer, highlighted the benefit of the EIP in enabling sponsored transactions.

This feature allows the storage of assets in wallets that do not hold Ether, with the sponsoring of gas fees managed through a controlling contract.

Additional capabilities introduced by EIP-3074 include a social recovery feature, which eliminates the need for traditional seed phrases by implementing new operational commands, AUTH and AUTHCALL.

As explained by an anonymous Web3 adviser, Cygaar, AUTH is used for verifying signatures and actions, and AUTHCALL allows for interaction with the target contracts using the originator's address instead of the message sender's.

This update follows the recent Dencun update that reduced layer-2 transaction fees and precedes another planned project known as the "Purge," discussed by Ethereum co-founder Vitalik Buterin.

This next phase aims to streamline the network by eliminating outdated and excess data.