Paymasters centralize financial risk. They hold native tokens to sponsor user transactions, creating a high-value, on-chain honeypot. This shifts the attack surface from millions of individual EOAs to a handful of critical smart contracts.
account-abstraction-fixing-crypto-ux
Blog
Why Paymaster Contracts Are the New Attack Surface
Account abstraction's killer feature—the paymaster—is also its greatest vulnerability. We analyze how ERC-4337's gas sponsorship model creates a new high-value attack surface for exploits and intent manipulation.
introduction
THE NEW FRONTIER
Introduction
Paymaster contracts are emerging as the primary attack vector for account abstraction, shifting risk from user wallets to protocol infrastructure.
The attack model is inverted. Traditional exploits target user signing keys, but paymaster attacks target the sponsorship logic itself. A single bug in a paymaster's validation rules drains the entire sponsorship pool, not a single account.
Evidence: The Biconomy paymaster hack in November 2023 drained ~$500k by exploiting a flawed signature validation, demonstrating that infrastructure is now the target. This pattern mirrors the evolution of bridge exploits targeting protocols like Wormhole and Multichain.
thesis-statement
THE VULNERABILITY SHIFT
Thesis Statement
Paymaster contracts are becoming the primary attack surface for account abstraction wallets, shifting risk from user keys to the logic that sponsors gas.
Paymasters centralize financial risk. Account abstraction (ERC-4337) moves gas payment from the user's EOA to a sponsor's smart contract, creating a single, logic-rich target for exploits that can drain pooled funds.
This inverts the security model. Traditional wallet security focuses on key management (e.g., Ledger, MetaMask). Paymaster security depends on contract logic integrity, where a single bug can compromise all sponsored transactions.
The attack surface is expanding. Projects like Biconomy, Candide Wallet, and Stackup operate live paymasters, while Visa's experiments and EIP-7677 for RPC-level sponsorship will accelerate adoption and scrutiny.
Evidence: The Biconomy Hyphen bridge exploit in 2021, which lost ~$8M, demonstrates how a vulnerability in a fee-handling contract (a proto-paymaster) becomes a systemic liability.
market-context
THE VECTORS
Market Context
Paymaster contracts are becoming the primary attack surface for account abstraction, shifting risk from user keys to protocol logic.
Account abstraction shifts risk from private key management to smart contract logic. The paymaster contract now holds the keys to the kingdom, authorizing and sponsoring transactions on behalf of users.
Centralized validation logic creates a single point of failure. Unlike a distributed sequencer network, a compromised paymaster can censor or drain funds for all sponsored users instantly.
The subsidy model is brittle. Projects like Pimlico and Stackup manage complex gas sponsorship rules; a logic error in their fee policies or token price oracles leads to insolvency.
Evidence: The Biconomy Hypersponsorship incident demonstrated this, where a configuration flaw allowed unlimited free transactions, draining the sponsor's wallet.
key-trends
WHY PAYMASTER CONTRACTS ARE THE NEW ATTACK SURFACE
Key Trends: The Paymaster Threat Landscape
The abstraction of gas fees via paymasters introduces a critical new trust vector and attack surface for wallets and dApps.
01
The Centralized Relayer Single Point of Failure
Most paymaster services rely on centralized relayers to sponsor transactions, creating a censorship and liveness risk. If the relayer goes down, user transactions fail.
- Censorship Risk: Relayer can selectively filter transactions.
- Liveness Dependency: User experience is tied to operator uptime.
- Trust Assumption: Users must trust the relayer's integrity.
100%
Uptime Required
1
Single Point
02
The Malicious Paymaster Contract
A paymaster contract has the final authority to pay for and validate a transaction, granting it immense power to manipulate outcomes.
- Transaction Hijacking: Can modify
msg.senderor call data before execution. - Rug Pull Vector: Can drain sponsored gas fees or user funds.
- Front-running: Paymaster logic can be exploited for MEV extraction.
Unlimited
Execution Scope
High
Severity
03
The ERC-20 Gas Token Oracle Manipulation
Paymasters that accept ERC-20 tokens for gas fees rely on price oracles. Manipulating these oracles can bankrupt the paymaster service.
- Oracle Attack: Feed stale or manipulated prices to drain reserves.
- Liquidity Risk: Requires deep pools for token/ETH swaps (e.g., Uniswap).
- Economic Viability: Volatility can make sponsorship unprofitable.
$M
Reserves at Risk
~Seconds
Attack Window
04
The Solution: Verifiable & Decentralized Paymasters
Mitigation requires moving beyond trusted setups. Key approaches include:
- Bundler-Paymaster Separation: Enshrining paymaster logic in the protocol (EIP-4337 vision).
- Intent-Based Design: Using solvers (like CowSwap, UniswapX) to fulfill user intents without direct contract control.
- ZK Proofs: Employing validity proofs to cryptographically verify paymaster rules without revealing full logic.
0
Trust Assumptions
ZK
Verification
05
The Solution: Economic Safeguards & Rate Limiting
Operational security requires hard limits and real-time monitoring to contain damage.
- Stake-Slashing: Enforced via smart contracts for malicious behavior.
- Per-User/Per-Session Limits: Cap sponsorship amounts to limit exposure.
- Real-time Anomaly Detection: Monitor for abnormal gas sponsorship patterns.
-99%
Loss Containment
24/7
Monitoring
06
The Meta-Solution: User-Controlled Paymaster Policies
Ultimate security shifts control to the user's wallet, allowing them to define and sign explicit sponsorship policies.
- Policy Signing: Users sign which paymaster rules are acceptable (e.g., max cost, allowed contracts).
- Session Keys with Limits: Grant temporary, scoped sponsorship authority.
- Wallet Integration: Native support in smart wallets (Safe, Biconomy, ZeroDev) for policy management.
User
In Control
Fine-Grained
Permissions
VULNERABILITY MATRIX
Paymaster Attack Taxonomy
A comparison of critical attack vectors targeting paymaster smart contracts, the new primary on-chain attack surface for gas abstraction.
| Attack Vector | ERC-4337 Native Paymaster | Bundler-Integrated Paymaster | Third-Party Paymaster (e.g., Pimlico, Biconomy) |
|---|---|---|---|
Unbounded Gas Sponsorship | ❌ (UserOp gas limits) | ❌ (Bundler-enforced limits) | ✅ (Centralized risk management) |
Signature Replay Across Chains | ✅ (Per- | ✅ (Bundler context isolation) | ❌ (If |
Oracle Manipulation (e.g., ETH/USD) | âś… (On-chain oracle required) | âś… (On-chain oracle required) | âś… (Centralized oracle single point of failure) |
Deposit Drain via Malicious UserOp | ✅ (Must implement rate-limiting) | ✅ (Bundler can filter) | ❌ (Managed by service provider) |
Storage Slot Griefing | ✅ (Paymaster staked in EntryPoint) | ✅ (Bundler's stake at risk) | ❌ (Stake managed by provider) |
Time-Based Arbitrage | âś… (If using volatile price feeds) | âś… (If using volatile price feeds) | âś… (Sponsorship delay exploitation) |
Required Mitigation | Smart contract audits, gas limits | Bundler policy rules, whitelists | Service SLAs, insurance funds |
deep-dive
THE ATTACK SURFACE
Deep Dive: From Gas Sponsor to Gatekeeper
Paymaster contracts transform a simple utility into a critical security and censorship vector for account abstraction.
Paymasters are the new firewall. They intercept and validate every user operation before it hits the mempool, making them mandatory gatekeepers for transaction flow.
The attack surface is systemic. A compromised paymaster like a Biconomy or Stackup bundler can censor, front-run, or drain funds from all sponsored accounts in its domain.
Centralization risk is inherent. Users delegate payment authority, creating single points of failure. This contradicts the EIP-4337 vision of a decentralized validator pool.
Evidence: The Vitalik Buterin wallet drain via a malicious Safe{Wallet} module demonstrates how a trusted entry point becomes an exploit vector.
risk-analysis
PAYMASTER VULNERABILITIES
Risk Analysis: The Bear Case for Smart Accounts
Smart accounts shift risk from the user's key to the infrastructure, with paymaster contracts becoming a new systemic attack vector.
01
The Centralized Relayer Bottleneck
Most paymaster implementations rely on a centralized relayer to sponsor gas. This creates a single point of failure and censorship.\n- DoS Attack Surface: A targeted attack on the relayer can brick all dependent smart accounts.\n- Censorship Vector: The relayer operator can selectively refuse to process transactions for blacklisted addresses.
1
Single Point of Failure
100%
Account Dependency
02
The Subsidy Logic Exploit
The business logic determining which transactions get sponsored is a complex, on-chain contract vulnerable to manipulation.\n- Drain Attacks: Flaws in validation can allow malicious transactions to drain the paymaster's funding pool.\n- Economic Spam: Attackers can craft transactions to trigger subsidy logic, wasting sponsor funds on junk transactions.
$10M+
Typical Pool Size
1 Bug
To Drain It
03
ERC-4337 EntryPoint as a Superspreader
The singleton EntryPoint contract in ERC-4337, which all UserOperations pass through, amplifies paymaster risk.\n- Protocol-Wide Impact: A compromised or exploited paymaster can affect all bundlers and users in the ecosystem.\n- Upgrade Risk: Centralized upgrade keys for core contracts (EntryPoint, paymaster templates) pose a governance attack risk.
All
Bundlers Exposed
Singleton
Systemic Design
04
The Verifier's Dilemma & MEV
Bundlers must simulate transactions to verify paymaster sponsorship, creating new MEV and trust issues.\n- Simulation Griefing: Attackers can craft transactions that simulate correctly but fail on-chain, wasting bundler resources.\n- MEV Extraction: Bundlers can front-run or censor UserOperations based on paymaster subsidy rules for profit.
~500ms
Simulation Window
Trusted
Bundler Assumption
05
Interoperability Risk with AA Wallets
Wallets like Safe, Biconomy, and ZeroDev implement paymaster features, but their security models differ.\n- Fragmented Audits: Each provider's custom paymaster logic requires separate, rigorous auditing.\n- Wallet-Specific Bugs: A vulnerability in one provider's SDK or contract can compromise all its integrated dApps and users.
Multiple
Provider Models
Cascading
Failure Risk
06
Solution: Decentralized Paymaster Networks
The mitigation path involves decentralizing the sponsorship layer to eliminate single points of failure.\n- Staked Bundler Pools: Require bundlers to stake, slashing them for malicious simulation or censorship.\n- Intent-Based Routing: Use systems like UniswapX or CowSwap's solver network to create a competitive market for transaction sponsorship.
Permissionless
Design Goal
Market-Based
Security
counter-argument
THE ATTACK SURFACE
Counter-Argument: It's Just Another Smart Contract
Paymaster contracts introduce a new, non-standardized attack vector that fundamentally expands the security perimeter of an account abstraction stack.
Paymasters are privileged contracts with unilateral power to sponsor and manipulate user transactions, creating a single point of failure that standard smart contracts do not possess.
Their logic is non-standardized and opaque, unlike core protocol code audited by teams like OpenZeppelin, leading to bespoke vulnerabilities that evade conventional security reviews.
The economic model is the exploit surface. A malicious or compromised paymaster can censor, front-run, or drain sponsored transactions, a risk absent in simple token transfers.
Evidence: The Biconomy paymaster hack in 2023 demonstrated this, where a logic flaw allowed an attacker to steal funds from the sponsoring contract itself.
future-outlook
THE PAYMASTER VULNERABILITY
Future Outlook: The Path to Resilient Abstraction
Account abstraction's systemic risk shifts from user wallets to the centralized, under-audited paymaster contracts that subsidize gas.
Paymasters centralize systemic risk. The ERC-4337 standard outsources transaction payment logic to third-party contracts. This creates a single point of failure for millions of smart accounts if a major paymaster like Biconomy or Etherspot is compromised.
Gas sponsorship is a honeypot. Paymasters must hold native tokens or stablecoins to subsidize user fees. This concentrated liquidity becomes a primary target for exploits, far exceeding the value in any individual user's wallet.
Intent-based architectures exacerbate risk. Systems like UniswapX and Across that rely on solvers to fulfill user intents depend on paymasters. A compromised paymaster can censor or front-run entire transaction flows across chains.
Audit surface expands exponentially. Each paymaster implements custom validation logic. The combinatorial complexity of user operations, signature schemes, and sponsorship rules creates vulnerabilities traditional wallet audits never considered.
takeaways
PAYMASTER SECURITY
Key Takeaways for Builders
The abstraction of gas fees via paymasters introduces a critical new attack vector at the transaction orchestration layer.
01
The Problem: Centralized Relayer Trust
Most paymaster flows rely on a centralized relayer to sponsor and submit transactions, creating a single point of failure and censorship. This reintroduces the trusted intermediary problem that account abstraction aims to solve.
- Relayer can front-run, censor, or reorder user ops
- User's transaction intent is exposed pre-execution
- Creates systemic risk akin to MEV in sequencers
1
Single Point
100%
Trust Assumed
02
The Solution: Decentralized Verifiable Paymasters
Shift to a model where paymaster logic is verifiably executed in a decentralized network, not by a single entity. Projects like Ethereum's Pimlico (with its Verifying Paymaster) and Starknet's native paymaster contracts point the way.
- Cryptographic proofs of correct sponsorship rules
- Relayer-agnostic operation prevents censorship
- Enables non-custodial sponsored transactions
0
Trust Assumed
zk
Verifiable
03
The Problem: Logic Explosion in `validatePaymasterUserOp`
The paymaster's validation function is a new, complex smart contract with arbitrary logic that must be bulletproof. A bug here is a direct drain on the paymaster's stake or deposited funds.
- Infinite approval exploits on ERC-20 gas tokens
- Signature replay across different chains or EntryPoints
- Oracle manipulation for dynamic sponsorship rules
$100M+
Potential Loss
High
Audit Criticality
04
The Solution: Formal Verification & Standardized Primitives
Treat the paymaster contract with the same rigor as a protocol's core vault. Use formal verification for critical sponsorship logic. The community must develop and audit standardized, minimal paymaster primitives (like OpenZeppelin for AA).
- Limit validation logic to whitelists & simple rules
- Use battle-tested libraries for signature schemes
- Isolate funds in a cold, delay-withdrawable stake contract
10x
Security Hardened
Minimal
Attack Surface
05
The Problem: Economic Model Fragility
Paymasters must manage volatile gas costs, token exchange rates, and user reputation without being exploited. Flawed models lead to insolvency or force centralization.
- Gas price spikes can bankrupt a fixed-price sponsor
- Sybil attacks on per-user quotas or free tiers
- MEV extraction via transaction ordering in sponsored bundles
-100%
Capital Risk
Complex
Game Theory
06
The Solution: Hybrid Sponsorship & Dynamic Policy Engines
Adopt hybrid models where users pay a base fee, covered by protocols like Gelato or Biconomy, with the paymaster covering the rest. Implement on-chain policy engines with real-time data from Chainlink or Pyth for dynamic, sustainable rules.
- User-Pays-Data, Sponsor-Pays-Execution models
- Staked reputation systems to deter Sybil attacks
- Real-time gas & price oracles for solvency
Sustainable
Economic Model
Dynamic
Risk Mgmt
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