Ethereum's Pectra upgrade, scheduled for late 2024 or early 2025, promises to significantly improve the functionality and user experience of crypto wallets. The Ethereum Improvement Proposal (EIP) 3074, a crucial component of this update, is set to allow standard crypto wallets to operate like smart contracts. This means that regular externally owned accounts (EOAs), such as those used in MetaMask wallets, will be able to execute operations typical of smart contracts.

The key features of EIP-3074 include transaction bundling, which enables a single signature for multiple transactions, and sponsored transactions, where a wallet can allocate funds for use by another entity. This development mirrors the account abstraction introduced in ERC-4337.

However, the upgrade has raised some concerns. An anonymous developer from DefiLlama, known as 0xngmi, highlighted potential risks associated with EIP-3074 on a social media platform on April 11. According to 0xngmi, a single bad signature could potentially drain an address of all its tokens, NFTs, and DeFi positions.

Despite these security issues, Harrison Leggio, co-founder of Gaslite, acknowledged that mistakes are common in the crypto world. Leggio noted on the same platform, "people will always find a way to lose their money." He further commented on the misuse of private keys, stating, "People literally GIVE THEIR PRIVATE KEYS TO TRADING BOTS."

The update also introduces 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.

The Pectra upgrade follows the recent Dencun update that reduced layer-2 transaction fees and precedes another planned project known as the "Purge." This next phase aims to streamline the network by eliminating outdated and excess data.