Sponsored Gas as the New Ad Network on L2s

Every new user is a churn risk at the wallet funding step. The gas fee abstraction problem kills onboarding and fragments liquidity. This is a UX tax that protocols like Uniswap and Aave cannot solve alone.

• ~40% drop-off at initial funding
• $100M+ in potential protocol revenue lost annually to friction
• Forces dApps into walled garden L2s to hide costs

ERC-4337 Paymasters allow any entity to sponsor gas fees. This creates a real-time auction layer where dApps, L2s, and token projects bid for user attention via gas subsidies.

• Turns gas into a user acquisition cost
• Enables true one-click onboarding (social, card, direct)
• Creates a $1B+ market for sponsored transaction flow, akin to Google Ads for blockspace

Layer 2s like Arbitrum, Optimism, and zkSync are not just scaling solutions; they are the ad exchanges of this new market. They control the auction mechanism, take a spread, and strategically subsidize to bootstrap ecosystems.

• L2 revenue shifts from pure sequencer fees to ad-tech margins
• Strategic subsidies to attract dominant dApps (e.g., UniswapX)
• First-party data on user intent becomes a core asset

Sponsored gas is the gateway to intent-based architecture. Users express a goal ("swap X for Y"), and a solver network (e.g., UniswapX, CowSwap, Across) competes to fulfill it, baking gas costs into the solution.

• Gas becomes invisible, bundled into the service
• Solvers like 1inch Fusion and Across act as sophisticated ad buyers
• Ultimate abstraction enables mainstream adoption beyond crypto-natives

New users lack native gas tokens, creating a massive onboarding barrier. Even experienced users churn at transaction prompts. This stalls growth for dApps and entire ecosystems.

• Onboarding Friction: Requires bridging, swapping, or CEX withdrawals before first interaction.
• Abandonment Rate: Up to ~40% of potential transactions are abandoned due to gas complexity.
• Ecosystem Stagnation: Limits composability and locks users into single-chain silos.

Biconomy abstracts gas entirely via meta-transactions and paymasters, letting dApps sponsor user ops. It's the incumbent infrastructure for frictionless onboarding.

• Paymaster Network: Sponsors gas in any token, settling in stablecoins or the chain's native asset.
• User Abstraction: Enables 1-click transactions from social logins or embedded wallets.
• Scalable Model: Processes millions of gasless transactions monthly across EVM chains.

DApps treat gas sponsorship as a customer acquisition cost, competing on UX to capture and retain high-value users. This creates a direct ROI model superior to traditional ads.

• Performance Marketing: Pay only for successful conversions (completed transactions), not clicks.
• LTV Increase: Reduced friction increases user retention and lifetime value.
• Data Advantage: On-chain sponsorship provides precise attribution and user behavior analytics.

Stackup's bundler and paymaster infrastructure is built for account abstraction (ERC-4337), enabling sophisticated sponsorship logic and intent-based flows.

• Programmable Policies: DApps set rules (e.g., sponsor first 5 txs, or txs over $100 value).
• Intent Integration: Native support for UniswapX and CowSwap-style signed orders.
• Enterprise Grade: Used by major wallets like Safe for scalable gas sponsorship programs.

Sponsored gas platforms are evolving into real-time bidding networks. DApps bid for the right to pay a user's gas in exchange for primacy in their transaction flow.

• Auction Mechanics: Paymasters could auction gas sponsorship, optimizing for dApp budgets and user intent.
• Cross-Chain Attribution: Platforms like LayerZero and Axelar enable sponsored gas for omnichain interactions.
• Vertical Integration: Bridges like Across integrate sponsorship to eliminate all cross-chain friction.

Smart contract wallets like Candide embed sponsorship directly, allowing users to select or auction their transaction flow to competing dApp paymasters.

• User Sovereignty: Users control which dApp sponsors their session, flipping the model.
• Wallet as Platform: The wallet becomes a marketplace for dApp user acquisition.
• Batch Sponsorship: Enables 1 gas sponsorship for multiple actions across different dApps.

Sponsored transactions become a direct subsidy for MEV searchers, centralizing block building power. The entity paying the gas (e.g., a DEX aggregator) gains priority access to profitable arbitrage and liquidation opportunities, creating a feedback loop that sidelines independent builders.

• Risk: Re-creates the PBS centralization problem from Ethereum L1 on L2s.
• Outcome: >60% of sponsored flow could be captured by 2-3 dominant players like Flashbots or Jito-style entities, reducing chain neutrality.

Removing the user's gas cost eliminates the primary sybil resistance mechanism. A malicious sponsor can flood the network with valueless transactions for pennies, mimicking a Denial-of-Service attack.

• Attack: Spam to censor real users or manipulate sequencer mempool state for MEV.
• Mitigation Failure: Rate-limiting per sponsor is trivial to bypass via multiple wallet addresses, a lesson from EIP-4337 bundler design.

The sponsor, by paying for execution, may be deemed a financial service provider. This creates a KYC/AML liability minefield, especially for cross-chain intents via Across or LayerZero.

• Precedent: FinCEN guidance on anonymizing crypto mixers.
• Consequence: Major protocols (UniswapX, CowSwap) may restrict sponsored gas to whitelisted jurisdictions, fragmenting liquidity and UX.

Sponsored gas on an L2 (e.g., Arbitrum, Optimism) does not cover the eventual L1 settlement cost. During network congestion, if the sequencer's batch submission fails due to high L1 gas, the sponsored L2 transaction is orphaned.

• Systemic Risk: Creates a fragile dependency where L2 UX is hostage to L1 gas auctions.
• User Impact: Failed transactions appear successful to the user, breaking atomicity guarantees for cross-rollup intents.

A sponsor becomes a centralized filter. A wallet provider or RPC endpoint (like MetaMask, WalletConnect) could refuse to sponsor transactions interacting with blacklisted addresses (e.g., Tornado Cash).

• Risk: Protocol-level neutrality is bypassed for application-level policy.
• Outcome: Recreates the web2 ad-network dynamic where the payer (Google Ads) dictates permissible content.

Sponsorship is a customer acquisition cost with unclear ROI. When bear market liquidity dries up, sponsors pull funding, causing a sudden reversion to user-paid gas and mass UX degradation.

• Precedent: Celcius Network and other entities subsidizing Ethereum gas in 2021.
• Metric: Models break if user LTV < sponsored gas cost, a likely scenario for most non-DeFi transactions.

Protocols spend $50M+ annually on airdrops and liquidity incentives to acquire users, with >90% churn. This is a leaky bucket where the L2 captures no recurring value from the marketing spend.

• Value Leak: Incentives flow to mercenary capital, not the chain.
• High Friction: Users must hold native tokens, creating onboarding barriers.
• No Retention: Airdrops are one-time events with no loyalty mechanism.

L2s like Base (with Onchain Summer) and Blast are treating block space as an ad network. DApps or brands pay the network to sponsor user transactions, embedding promotions directly into the UX.

• Recurring Revenue: L2s monetize block space directly, creating a sustainable fee market.
• Frictionless UX: Users interact without holding gas tokens, enabling true mass adoption.
• Targeted Marketing: Sponsorship can be tied to specific actions (e.g., first swap, NFT mint), offering superior ROI vs. blunt airdrops.

This model relies on intent-centric architectures pioneered by UniswapX and CowSwap. Users express a desired outcome ("swap X for Y"), and solvers compete to fulfill it, bundling sponsored gas into the solution.

• Solver Networks: Entities like Across and Socket become natural gas sponsors to capture order flow.
• Atomic Composability: Sponsorship can be bundled across multiple actions in a single transaction.
• MEV Resistance: Intent architectures reduce frontrunning, making sponsored bundles more predictable and secure.

The ultimate competition shifts from TPS to user attention. The L2 with the most sophisticated sponsorship auction and bundling engine wins, becoming the default platform for onchain customer acquisition.

• Auction Dynamics: Real-time bidding for gas sponsorship per block, similar to Google AdWords.
• Data Layer: Rich onchain activity data allows for hyper-targeted sponsorship campaigns.
• Protocol Dominance: Winners will be L2s that own the standard for sponsored transactions, akin to EIP-4337 for account abstraction.