Gasless UX creates moral hazard by decoupling transaction initiation from cost payment. Users sign messages without paying gas, but a third-party relayer or protocol like Biconomy or Gelato must subsidize and execute them. This separates the actor who benefits from the action from the actor who bears the cost, a classic setup for exploitation.
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Why Gasless Transactions Create Moral Hazard
An analysis of how abstracting gas fees via Account Abstraction and paymasters removes the natural economic disincentive for spam, shifting the burden to infrastructure providers and creating systemic risks.
introduction
THE HIDDEN COST
Introduction: The UX Mirage
Gasless transactions shift cost and risk, creating systemic vulnerabilities masked by user convenience.
The subsidy model is unsustainable for generalized transactions. While acceptable for specific onboarding funnels, scaling this to all dApp interactions creates a free-rider problem. Protocols like Pimlico with its ERC-4337 bundler service must either monetize via opaque MEV extraction or rely on venture capital subsidies, which distorts real economic demand.
Intent-based architectures amplify this risk. Systems like UniswapX or CowSwap that solve for user intents abstract away execution details, including cost. This pushes complexity and financial risk onto solvers and fillers, who must hedge volatile gas prices across multiple chains, creating a fragile dependency layer prone to failure during network congestion.
thesis-statement
THE MORAL HAZARD
Core Thesis: The Fee Abstraction Feedback Loop
Gasless transaction models, while improving UX, create systemic risk by decoupling user incentives from network costs.
Fee abstraction creates moral hazard by removing the user's direct stake in network efficiency. When a protocol like Particle Network or Biconomy pays the gas, users spam transactions without cost sensitivity, directly inflating L1/L2 gas fees for everyone.
The feedback loop is self-reinforcing. Higher subsidized volume drives up base-layer gas prices, which increases the subsidy burden on the sponsoring protocol. This creates a perverse economic incentive where the most aggressive subsidizer wins users but risks insolvency.
Compare this to a fee market. In systems like Ethereum or Arbitrum, users bid for block space, creating a natural throttle. Intent-based architectures like UniswapX or Across abstract complexity but still anchor cost to the user, preserving this throttle.
Evidence: The 2023 Arbitrum Odyssey event demonstrated this. Free NFT mints, sponsored by the network, caused gas prices on Arbitrum Nova to spike over 0.1 Gwei, a 1000x increase, crippling the chain for all other applications.
key-trends
MORAL HAZARD IN ABSTRACTION
The Gasless Landscape: Protocols & Pressures
Gasless UX shifts transaction costs and execution risk, creating new attack surfaces and perverse incentives for users, solvers, and protocols.
01
The Problem: Unchecked User Intents
Gasless signing decouples authorization from execution, creating a window where a user's signed intent can be held hostage or front-run. The user bears zero gas cost for failed transactions, encouraging spam and reckless signing.
- Risk Window: Intent can be executed minutes or hours after signing.
- Spam Incentive: Users can broadcast infinite orders with no upfront cost.
- Solver Monopoly: Relayers can censor or extract MEV from pending intents.
0 GWEI
User Cost
>5 min
Risk Window
02
The Solution: Commit-Reveal & Reputation
Protocols like UniswapX and CowSwap mitigate hazard by batching intents and using commit-reveal schemes or off-chain solvers competing in a batch auction. Reputation systems penalize bad actors.
- Batch Auctions: Solvers compete for the entire batch, reducing front-running.
- Reveal Delay: Hides exact intent details until execution.
- Staked Solvers: Solvers post bond, slashed for censorship or bad fills.
~70%
MEV Reduction
Staked
Solver Bond
03
The Problem: Subsidy Sustainability
Protocols like Biconomy and Gasless by Gelato absorb gas costs to onboard users, creating a centralized cost sink. This model is vulnerable to subsidy exhaustion and creates dependency, not protocol security.
- Capital Drain: Relayer must fund gas for all failed transactions.
- Central Point of Failure: Relayer downtime halts all 'gasless' transactions.
- Opaque Pricing: True cost is hidden in token inflation or premium fees.
$M Budget
Subsidy Pool
1 Entity
Failure Point
04
The Solution: Verifiable Fee Markets
Systems like EIP-4337 Account Abstraction and ERC-7579 enable users to pay fees in any token, with sponsors defining clear, programmable subsidy rules. Fees are verifiable on-chain, eliminating opaque relayer models.
- Paymaster Rules: Sponsors can set limits (e.g., max gas, allowed contracts).
- Any Token Fees: Users pay with ERC-20s, abstracting ETH requirement.
- On-Chain Audits: All sponsorship logic is transparent and enforceable.
ERC-20
Fee Token
On-Chain
Auditability
05
The Problem: L2 Bridge Front-Running
Gasless bridge claims from LayerZero or Across create a prime MEV opportunity. A user's signed cross-chain intent reveals destination and amount, allowing bots to front-run the arrival of funds on the target chain.
- Intent Leakage: Signed message reveals destination address and amount.
- Guaranteed Profit: Bots can sandwich the inbound asset transfer.
- User Apathy: Zero gas cost means users don't financially feel the MEV loss.
>100ms
Exploit Window
$0 Cost
User Loss
06
The Solution: Encrypted Memos & Threshold Decryption
Advanced bridges use threshold decryption (e.g., Succinct) or encrypted memos so intent details are only revealed to the authorized executor at the last second, neutralizing front-running.
- End-to-End Encryption: Intent payload is encrypted until execution.
- Decryption at Edge: Only the designated relayer or solver can decrypt.
- Zero-Knowledge Proofs: Can prove intent validity without revealing content.
E2E
Encryption
ZK Proofs
Validity
deep-dive
THE INCENTIVE MISMATCH
Mechanics of the Hazard: From User to Paymaster
Gasless transactions decouple the actor who signs from the actor who pays, creating a fundamental misalignment of incentives.
The user is not the payer. In a standard transaction, the signer pays the gas fee, creating a direct cost for their on-chain actions. With a paymaster like Biconomy or Pimlico, the user signs a transaction but a third party sponsors the gas. This separation removes the user's direct economic constraint.
Unbounded computational cost. A user with a sponsored gas budget faces a near-zero marginal cost for on-chain execution. This enables transaction spam and computational waste, as seen in early ERC-4337 implementations where paymasters were exploited for free minting loops. The payer bears the cost for the user's potentially reckless execution.
The paymaster's dilemma. The paymaster's business model relies on user acquisition and volume metrics. Strictly throttling or rejecting user operations hurts growth. This creates a principal-agent problem where the paymaster's incentive to onboard users conflicts with the network's need for efficient resource use.
Evidence: The first major ERC-4337 exploit involved a paymaster contract drained for gas fees after a user looped a mint function thousands of times. This demonstrated the moral hazard is not theoretical; it is an immediate attack vector when incentives are misaligned.
GASLESS TRANSACTION MODELS
Cost Externalization: Who Bears the Burden?
Comparing the economic and security trade-offs of who pays for transaction execution in gasless models.
| Cost & Risk Dimension | Paymaster (e.g., ERC-4337) | Relayer Network (e.g., Gelato, Biconomy) | Intent-Based Flow (e.g., UniswapX, Across) |
|---|---|---|---|
Primary Cost Bearer | Paymaster's ETH balance | Relayer's ETH balance | Solver network (competes for MEV) |
User Pays With | ERC-20 token or sponsored | ERC-20 token or sponsored | Output token (implicit premium) |
Settlement Finality Risk | User (if paymaster reverts) | Relayer (if user tx fails) | Solver (if execution fails) |
Protocol Revenue Source | Markup on gas or subscription | Service fee or markup | Extracted MEV & fee differentials |
Censorship Resistance | Low (Paymaster whitelist) | Medium (Relayer discretion) | High (Permissionless solver competition) |
Typical Cost Premium | 5-20% above base gas | 10-30% above base gas |
|
Requires Native Token Pre-fund | |||
Creates Moral Hazard | High (Paymaster rug risk) | Medium (Relayer spam risk) | Low (Costs are internalized) |
counter-argument
THE MORAL HAZARD
Counterpoint: Isn't This Just Scalability?
Gasless transactions shift the burden of fee payment, creating systemic risk and perverse incentives for network participants.
Shifting the risk burden from user to relayer creates a classic principal-agent problem. The user's intent is executed by a third party who pays the gas, aligning incentives only if the relayer's profit model is perfectly robust.
This is not scalability; it's a subsidy mechanism. True scaling like Arbitrum Nitro or Solana increases network throughput. Gas abstraction, as seen in ERC-4337 Account Abstraction or UniswapX, merely changes who pays and when.
The subsidy creates fragility. A sudden gas price spike or a flaw in a relayer's MEV extraction logic can bankrupt the service, stranding user transactions. This is a systemic risk for intent-based systems like Across Protocol.
Evidence: The 2022 Tornado Cash sanctions demonstrated how OFAC-compliant relayers created a bifurcated mempool, proving that the entity paying the gas ultimately controls transaction inclusion and censorship.
risk-analysis
GASLESS TRANSACTIONS
Systemic Risks & Centralization Vectors
Removing the user's direct cost of computation creates new attack surfaces and perverse incentives.
01
The Spam Attack Vector
Without a native cost barrier, networks are vulnerable to spam and resource exhaustion attacks. A malicious actor can flood the network with worthless transactions, congesting the mempool and denying service to legitimate users. This forces the system to implement artificial rate-limiting, which reintroduces centralization.
- Cost shifted from user to network/solver.
- Requires trusted sequencers or reputation systems to filter spam.
- Creates a free option for attackers to probe the system.
0 Gas
Attacker Cost
100k+
Spam TX/hr
02
Solver Cartels & MEV Centralization
Gasless models (like UniswapX and CowSwap) rely on third-party solvers to bundle and execute transactions. This creates a natural oligopoly where a few highly capitalized solvers dominate. They can:
- Extract maximal MEV from user flows.
- Censor transactions by excluding them from bundles.
- Collude on pricing, negating the promised cost savings for users. The system's health becomes dependent on a handful of entities.
>60%
Top 3 Solver Share
$B+
Captured MEV
03
The Subsidy Time Bomb
Most 'gasless' experiences are temporary subsidies from protocols or wallet providers (e.g., Biconomy, Gelato). This is a user acquisition cost, not a sustainable economic model. When subsidies end, user experience degrades abruptly. It also creates a moral hazard: users are trained to ignore real resource costs, making them vulnerable to future rug-pulls when a protocol can no longer afford to pay.
- Shifts business risk to token treasuries.
- Distorts true UX and adoption metrics.
$M
Monthly Subsidy
0→100%
Cost Reversion
04
Intent-Based Fragility
Advanced gasless systems use intent-based architectures (e.g., Anoma, Across). Users specify what they want, not how to do it. This outsources complex execution to solvers, creating systemic fragility. A bug in a dominant solver's logic or an oracle failure can cause widespread, correlated settlement failures. The abstraction layer becomes a single point of failure, concentrating technical risk.
1→N
Failure Points
~2s
Solver Latency Risk
future-outlook
THE MORAL HAZARD
The Path Forward: Aligned Incentives
Gasless transactions shift risk from users to third parties, creating systemic vulnerabilities.
Gasless transactions externalize risk. Users sign intent messages without paying gas, but the solvers or relayers who execute them must front the cost. This creates a classic principal-agent problem where user incentives are no longer aligned with network security.
Solver competition creates extractable value. In systems like UniswapX or CowSwap, solvers bid for the right to fill intents. This auction model incentivizes maximal extractable value (MEV) strategies, where solvers profit from transaction ordering at the expense of user execution quality.
The system subsidizes spam. Without a native cost to initiate a transaction, users face no disincentive to broadcast worthless intents. This forces relay networks like Biconomy or Gelato to implement complex, off-chain spam filters, which are less robust than Ethereum's base fee market.
Evidence: The EIP-4337 Account Abstraction standard explicitly separates payment and validation, requiring bundlers to be reimbursed. This design acknowledges the moral hazard and attempts to re-align incentives through a paymaster model.
takeaways
GASLESS TRANSACTIONS
Key Takeaways for Builders
Abstracting gas fees creates a superior UX but introduces critical design and risk vectors that builders must architect around.
01
The Abstraction Layer is a Liability Sink
When users don't pay gas, the relayer or dApp becomes the ultimate payer and risk-absorber. This centralizes financial risk and creates a single point of failure for transaction censorship and MEV extraction.
- Relayer can front-run or censor user transactions for profit.
- DApp treasury bears insolvency risk if gas price spikes unexpectedly.
- Example: Early MetaTransaction models required careful relay design to prevent drain.
1 Entity
Risk Concentrated
100%
Relayer Control
02
Paymasters Enable But Require Over-Collateralization
ERC-4337's Paymaster is the standardized solution, allowing contracts to sponsor gas. However, it's a credit system that must be pre-funded, creating capital efficiency and security trade-offs.
- Capital lock-up: Funds are idle in the Paymaster, creating opportunity cost.
- Oracle risk: Paymaster logic (e.g., swap-for-gas) depends on price feeds from Chainlink or Pyth.
- Sybil resistance: Requires mechanisms (e.g., Web3Auth social, Coinbase's cb.id) to prevent spam.
>100%
Collateral Required
Oracle Risk
Critical Dependency
03
Intent-Based Architectures Are The Endgame
The true solution moves beyond simple gas sponsorship to declarative intents. Systems like UniswapX, CowSwap, and Across let users specify what they want, not how to execute, delegating gas and routing complexity to solvers.
- Solver competition improves execution and absorbs gas volatility.
- User gets guaranteed outcome, not a potentially reverted transaction.
- Shifts moral hazard from a single relayer to a competitive solver market.
Solver Market
Risk Distributed
Guaranteed
Outcome, Not TX
04
The Subsidy Model is Not a Business
Treating gasless transactions as a permanent user subsidy is unsustainable. It's a customer acquisition cost that must be monetized elsewhere via fees, tokenomics, or driving volume to other profitable services (e.g., LayerZero messaging fees, Circle's CCTP volume).
- Burn rate: Direct subsidy scales linearly with usage.
- Monetization lag: Requires deep integration into a broader financial stack.
- Best practice: Use for onboarding, then graduate users to L2s with native account abstraction.
CAC
Not a Product
L2 Native
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