User acquisition cost (UAC) is broken. In web2, a $50 CAC is acceptable for a high-LTV user. In web3, a user's first transaction fails because they lack native gas tokens, creating a 100% abandonment rate before any value capture.
account-abstraction-fixing-crypto-ux
Blog
Why Sponsored Transactions Redefine 'User Acquisition Cost'
Gas sponsorship is not a cost center; it's a performance marketing channel. This analysis breaks down how Account Abstraction transforms variable operational expense into a measurable, ROI-positive tool for acquiring and retaining active users.
introduction
THE USER ACQUISITION TRAP
Introduction: The Flawed Economics of Onboarding
Traditional web2 user acquisition models are economically unsustainable for mainstream blockchain adoption.
Sponsored transactions invert the model. Instead of paying for ads, protocols like Pimlico and Biconomy pay for the user's initial gas. This shifts the cost from speculative marketing to a direct, measurable on-chain event.
The counter-intuitive insight: Paying for a user's gas is cheaper than traditional CAC. A $0.10 sponsored tx that converts is more efficient than a $5 ad click that doesn't. This turns gas abstraction into a growth lever.
Evidence: Coinbase's Smart Wallet uses this model, reporting a 12x increase in successful user onboarding by eliminating the seed phrase and gas burden, proving the model's viability at scale.
key-trends
SPONSORED TRANSACTIONS
The New Marketing Funnel: From Cost Center to Growth Engine
Sponsored transactions flip user acquisition from a burn rate into a direct, measurable investment in protocol growth.
01
The Problem: The $100 Onboarding Tax
Every new user faces a wallet setup and gas funding barrier, a hidden tax that kills conversion. Traditional Web2-style ad spend is wasted when the final step requires crypto-native behavior.
- ~90% drop-off occurs at wallet creation/funding.
- CAC becomes uncapped and unpredictable.
- No direct link between marketing spend and on-chain activity.
~90%
Drop-Off
Uncapped
CAC
02
The Solution: Pay-for-Performance Gas Sponsorship
Protocols or dApps pay gas for users' first transactions, directly subsidizing the friction point. This turns CAC into a transaction-settled marketing expense.
- Acquire users for the cost of gas (~$0.10-$2), not a $50+ ad click.
- Guaranteed conversion: Payment only occurs on successful tx.
- Integrates with Account Abstraction (ERC-4337) and services like Biconomy and Stackup for seamless UX.
$0.10-$2
CAC
100%
Converted
03
The Engine: Programmable Subsidy Rules
Sponsorship isn't a blunt instrument. Smart contracts enable granular, conditional logic for subsidy distribution, creating a true growth engine.
- Target by cohort: First-time users, high-value minters, specific geographies.
- Limit abuse: Cap per wallet, require specific actions (e.g., swap > $50).
- Measure LTV/CAC instantly via on-chain analytics from Dune or Flipside.
Granular
Targeting
On-Chain
Analytics
04
The Network Effect: Sponsored Transactions as a Service
Infrastructure like Pimlico, Gelato, and Alchemy are building generalized paymaster networks. This commoditizes sponsorship, allowing any dApp to plug into a shared liquidity pool for user acquisition.
- Lowers operational overhead for individual teams.
- Creates a liquid market for gas sponsorship.
- Enables cross-chain onboarding strategies via intents and bridges like LayerZero.
Commoditized
Infra
Cross-Chain
Scale
05
The Metric: Cost Per On-Chain Action (CPOA)
Forget Cost Per Click. The new core KPI is Cost Per On-Chain Action—a fully accountable metric that ties spend directly to protocol utility.
- Action-defined: Cost per swap, mint, stake, or vote.
- Funnel optimization: A/B test sponsorship rules to lower CPOA.
- VC-friendly: Demonstrates capital efficiency and real user growth, not vanity metrics.
CPOA
New KPI
A/B Test
Optimize
06
The Endgame: From Acquisition to Retention
Sponsored transactions are the top of the funnel. The real moat is using gas credits as a retention tool. Think '10th transaction free' or 'gas rebates for stakers'.
- Locks in user loyalty with programmable incentives.
- Turns users into stakeholders by subsidizing governance participation.
- Creates a sustainable flywheel where protocol revenue funds future growth.
Loyalty
Driver
Flywheel
Effect
deep-dive
THE COST OF ACQUISITION
Deep Dive: The Unit Economics of a Sponsored TX
Sponsored transactions transform user acquisition from a marketing expense into a direct, measurable, and programmable on-chain investment.
Sponsored transactions invert the acquisition model. Traditional Web2 user acquisition is a marketing expense with opaque ROI. Sponsored transactions are a direct, on-chain capital deployment where the cost-per-user is the gas fee.
The unit cost is the gas price. Each successful sponsored transaction is a verifiable, on-chain proof of acquisition. Protocols like Pimlico and Biconomy provide the infrastructure to abstract this cost from the end-user.
This creates a programmable acquisition funnel. DApps can set rules, like sponsoring only first-time mints or trades above a threshold. This is a more efficient capital allocation than blanket marketing spends.
Evidence: Protocols using ERC-4337 account abstraction and paymasters see a 20-40% increase in successful user onboarding by removing the native token barrier.
USER ACQUISITION COST BREAKDOWN
CAC Analysis: Traditional Incentives vs. Gas Sponsorship
Quantitative comparison of user acquisition cost components and efficiency between traditional airdrop/rebate models and sponsored transaction (paymaster) models.
| CAC Component / Metric | Traditional Airdrop & Rebates | Gas Sponsorship (Paymaster) | Hybrid Model (e.g., UniswapX) |
|---|---|---|---|
Effective Cost per Onchain User | $50 - $500+ | $0.10 - $5.00 | $5 - $50 |
Sybil Attack Surface | Extremely High | Controlled (Tx-gated) | Moderate (Intent-gated) |
Time-to-Value for User | Days to Weeks (claim delay) | < 1 second (sponsored at execution) | Minutes (solver settlement) |
Primary CAC Driver | Token Liquidity & Speculators | Actual Gas Fees Paid | Solver Competition & MEV |
Retention Mechanism | Weak (one-time drop) | Strong (session keys, subscriptions) | Moderate (fee abstraction) |
Requires Native Token | |||
Protocols Exemplifying Model | Uniswap (UNI), Arbitrum (ARB) | Biconomy, Pimlico, Candide | UniswapX, Across, CowSwap |
CAC Payback Period |
| < 1 month (fee-based revenue) | 1-6 months (volume-based) |
counter-argument
THE UNIT ECONOMICS
Counterpoint: Isn't This Just Subsidizing Inefficiency?
Sponsored transactions are not a subsidy but a fundamental redefinition of user acquisition cost and protocol revenue.
Traditional CAC is dead. Paying for a user's gas converts a variable, unpredictable marketing expense into a fixed, auditable cost of sale. This is the same model as AWS's free tier or Stripe's first $1M in processing.
The subsidy funds efficiency. The cost is not for the transaction itself, but for acquiring the user's future, non-sponsored activity. This is a lifetime value arbitrage that protocols like Pimlico and Biconomy monetize.
Protocols become profit centers. Instead of being a pure cost, the gas sponsorship flow becomes a revenue stream for wallets and dApps. This creates a positive-sum ecosystem where user growth directly funds infrastructure.
Evidence: Base's Onchain Summer spent ~$2M on gas fees, driving over 3M new wallets and establishing a dominant onchain brand. The CAC per engaged user was under $1.
protocol-spotlight
FROM COST CENTER TO GROWTH ENGINE
Protocol Spotlight: Who's Executing This Playbook?
Sponsored transactions shift user acquisition from marketing budgets to protocol treasury, turning gas fees into a direct growth lever.
01
The Problem: The $100 Onboarding Tax
New users face a hostile UX: buy ETH, bridge it, pay gas before even using your dApp. This ~$50-100 upfront cost kills conversion. Traditional web2-style ad spend can't solve this native crypto barrier.
~90%
Drop-off Rate
$100+
Hidden Cost
02
The Solution: Paymasters as a Growth Hack
Protocols like Base and Pimlico abstract gas via ERC-4337 Paymasters. The dApp or a sponsor pays, enabling gasless transactions. This turns user acquisition cost into a measurable, on-chain growth metric with direct ROI.
- Key Benefit 1: Frictionless onboarding for non-crypto-native users.
- Key Benefit 2: Precise LTV/CAC tracking via on-chain sponsor analytics.
0 ETH
User Pays
10x+
Sign-up Lift
03
The Arbiter: Intent-Based Architectures
Systems like UniswapX, CowSwap, and Across use intents and solvers. Users sign what they want, not how to do it. Solvers compete to fulfill the intent optimally, often subsidizing gas to win the bundle. This creates a market where user acquisition is baked into execution economics.
- Key Benefit 1: Users get best execution, often for free.
- Key Benefit 2: Solvers absorb cost as customer acquisition spend.
~500ms
Solver Competition
Net Positive
User Price
04
The Enabler: Modular Stack & Account Abstraction
Infrastructure from Stackup, Biconomy, and Candide provides the rails. By separating validation and execution layers, they allow sponsors to pay in any token and offer session keys for batch interactions. This modularity lets any dApp become a gas sponsor.
- Key Benefit 1: Flexible sponsorship (stablecoins, ERC-20s).
- Key Benefit 2: Session-based UX for compound interactions.
Any Token
Pay With
1 Click
Multi-Tx Sessions
05
The Metric: On-Chain LTV > Ad CAC
Sponsored TXs create a transparent funnel. You can track a user from first gasless tx to lifetime protocol revenue. This makes on-chain Lifetime Value (LTV) a primary metric, directly comparable to the sponsor's cost. It's a fundamental shift from opaque ad analytics to verifiable on-chain unit economics.
On-Chain
Analytics
Clear ROI
Per User
06
The Risk: Centralization & Sybil Attacks
Who controls the purse? If a few entities (e.g., LayerZero, EigenLayer) dominate sponsorship, they control user flow. Open markets like Ethereum's PBS are crucial. Protocols must design incentive models that resist sybil attacks on free transactions without creating walled gardens.
- Key Benefit 1: Decentralized solver/validator sets prevent capture.
- Key Benefit 2: Cryptographic proofs ensure sponsor funds are used correctly.
Critical
Decentralization
Zero-Trust
Verification
risk-analysis
REFRAMING ACQUISITION COSTS
Risk Analysis: The Pitfalls of Paymaster Economics
Sponsored transactions shift the economic burden from users to applications, creating a new battleground for user acquisition with hidden systemic risks.
01
The Subsidy Trap: From CAC to Variable Burn
Traditional CAC is a fixed marketing expense. Paymaster subsidies are a variable, on-chain operational cost that scales with usage. This creates unpredictable P&L pressure and can lead to unsustainable winner-takes-most subsidy wars, as seen in early DeFi liquidity mining.
- Risk: Subsidy costs can outpace user LTV, turning growth into a value-destructive loop.
- Data Point: Protocols like Pimlico and Biconomy manage subsidy budgets in the millions of USD per month for top clients.
Variable
Cost Model
LTV/CAC
Ratio At Risk
02
Centralization Vectors in Decentralized Systems
To manage subsidy risk and ensure reliability, applications rely on a handful of professional paymaster operators like Ethereum's ERC-4337 Bundlers. This creates critical centralization points.
- Risk: Censorship and transaction ordering power consolidates with a few entities controlling the user experience gate.
- Example: A dominant paymaster could blacklist dApps or prioritize its own affiliated transactions, undermining network neutrality.
Oligopoly
Operator Risk
Single Point
Of Failure
03
The MEV & Security Liability Shift
Absorbing gas fees makes the paymaster the target for Maximal Extractable Value (MEV) attacks and griefing. A malicious actor can spam transactions to drain a paymaster's wallet.
- Risk: Applications must now secure their gas budget against sophisticated DoS and economic attacks, a complex operational burden.
- Mitigation: Services like Alchemy's Gas Manager implement rate-limiting and fraud detection, adding overhead and cost.
New Attack
Surface
Operational
Overhead
04
Wallet Lock-in and Interoperability Fragmentation
Paymaster logic is often tied to specific smart account SDKs (e.g., ZeroDev, Safe{Core}). This creates vendor lock-in, fragmenting user identity and transaction portability across chains and dApps.
- Risk: Users cannot seamlessly move their "sponsored" identity, reducing composability and increasing switching costs.
- Contrast: Intent-based architectures like UniswapX and CowSwap abstract this away, preserving user sovereignty.
Reduced
Composability
Vendor
Lock-In
05
Regulatory Gray Zone: Who is the Transactor?
When a dApp pays for a user's transaction, it blurs the lines of financial responsibility. Regulators may view the paymaster as the entity of record, creating KYC/AML liabilities.
- Risk: This could force centralized compliance onto decentralized applications, negating core crypto values.
- Precedent: Tornado Cash sanctions demonstrate regulatory focus on infrastructure layers that facilitate transactions.
KYC/AML
Liability
Entity of Record
Uncertainty
06
The Long-Term Equilibrium: Who Pays?
The endgame is not free transactions. Costs will be internalized via higher product fees, token inflation, or data monetization. The question is which model is most sustainable and transparent.
- Analysis: Successful models will align subsidy costs with direct revenue streams (e.g., taking a spread on swaps).
- Future: Protocols like Across with embedded relayer fees show a path where the user 'pays' without holding gas tokens.
Cost
Internalization
Sustainable
Models Win
future-outlook
THE ACQUISITION STACK
Future Outlook: The Bundled Acquisition Suite
Sponsored transactions are evolving from a user convenience into a core component of a protocol's growth engine, fundamentally altering the calculus of user acquisition cost.
Sponsored transactions invert acquisition cost. Traditional web2-style marketing burns cash for top-of-funnel awareness. Sponsored gas, bundled with airdrops or quests, directly subsidizes the on-chain activation cost, converting marketing spend into guaranteed, measurable on-chain actions.
The suite bundles gas, liquidity, and identity. A complete acquisition stack isn't just paying for a swap. It's a package: ERC-4337 Account Abstraction for sponsored gas, a UniswapX-like solver for cross-chain liquidity, and an on-chain credential like EAS Attestations to prove the user completed the desired action, creating a closed-loop growth system.
This makes L2s and dApps direct competitors. The battle shifts from pure TVL to developer acquisition budgets. A protocol like Aevo or Blast will compete by offering the deepest subsidies for specific actions, turning their treasury into a user acquisition war chest with perfect on-chain attribution.
Evidence: Protocols like Pimlico and Biconomy already manage sponsored transaction infrastructure for dApps, demonstrating the demand for this model. The next step is bundling these services into a single SDK that handles gas, cross-chain intent execution via Across or LayerZero, and verifiable completion.
takeaways
SPONSORED TRANSACTIONS
TL;DR: Key Takeaways for Builders
Sponsored transactions shift the cost of user onboarding from a marketing expense to a protocol-level infrastructure investment, fundamentally altering UA economics.
01
The Problem: The $100+ User Onboarding Funnel
Acquiring a non-crypto-native user requires paying for their gas, airdrops, and bridging fees. This upfront cost kills unit economics before the first real transaction.\n- CAC includes gas for wallet creation, token approval, and first swap.\n- Friction of managing native gas tokens (ETH, MATIC) causes >60% drop-off.\n- Result: DApps compete on subsidies, not product.
$100+
Est. CAC
>60%
Drop-off
02
The Solution: Protocol-Pays Model (See: Biconomy, Gelato)
The dApp or a third-party paymaster sponsors gas fees in any token (including stablecoins), abstracting blockchain complexity entirely.\n- User Pays Zero: Interacts with USDC, not ETH. Removes the biggest cognitive barrier.\n- DApp Controls Spend: Set budgets, whitelist operations, and track LTV vs. CAC in real-time.\n- Scalable: Paymasters batch transactions, reducing effective gas cost by ~20-40%.
$0
User Gas
~30%
Gas Savings
03
The New Metric: Cost Per Onchain Action (CPOA)
Forget CAC. The new benchmark is the marginal cost of a user's first valuable onchain action (swap, mint, stake). This aligns incentives with actual protocol usage.\n- Measure: Gas cost of a user's first swap sponsored by your dApp.\n- Optimize: Use session keys via ERC-4337 Account Abstraction to bundle multiple actions into one sponsored session.\n- Result: Acquire users for the cost of a coffee, not a marketing campaign.
<$1
Target CPOA
ERC-4337
Enabler
04
The Strategic Moat: Embedded Sponsorship
The winning model isn't just sponsoring gas; it's embedding sponsored transactions into the product's core flow, creating seamless onboarding loops.\n- Example: A game mints a free NFT for a user, sponsoring the gas, which becomes their in-game asset.\n- Integration: Use Safe{Wallet} smart accounts with Pimlico paymaster infrastructure for programmable sponsorship rules.\n- Outcome: User acquisition becomes a feature of your protocol's infrastructure.
Safe{Wallet}
Smart Accounts
Pimlico
Paymaster
ENQUIRY
Get In Touch
today.
Our experts will offer a free quote and a 30min call to discuss your project.
NDA Protected
Confidentiality24h Response
Time to ValueDirectly to Engineering Team
No Sales Fluff10+
Protocols Shipped
$20M+
TVL Overall