Why Smart Accounts Inevitably Lead to Rent Extraction

Smart accounts centralize transaction flow. Unlike EOAs where users sign and broadcast directly, smart accounts delegate execution to third-party bundlers like Stackup or Pimlico. This creates a mandatory intermediary layer for every user action.

Bundlers become the new miners. They control transaction ordering and inclusion, replicating the MEV extraction dynamics of block builders. This is not a bug; it's a structural consequence of separating signing from execution.

Paymasters enable rent-seeking. Services like Biconomy and Candide that sponsor gas fees will monetize through opaque surcharges or order flow auctions. The 'gasless' experience has a hidden cost.

Evidence: The EIP-4337 standard formalizes this economic split. Early data from Ethereum's PGN shows over 90% of UserOps are processed by just three bundler providers, demonstrating rapid centralization.

Account abstraction's core flaw is the separation of transaction sponsorship from execution. This creates a two-tiered market where bundlers and paymasters act as mandatory gatekeepers, not neutral infrastructure.

Bundlers capture ordering rights, a power analogous to block builders in MEV supply chains. This incentivizes vertical integration with entities like Flashbots SUAVE or private order-flow auctions to extract maximal value.

Paymasters control subsidy economics, deciding which tokens or sponsorships are viable. This centralizes power with the largest liquidity providers, mirroring the dominance of Circle's USDC or Ethereum's Lido in their respective sectors.

The duopoly is inevitable because the business logic for bundling and gas sponsorship requires scale and capital. The result is rent extraction through priority fees, MEV capture, and token listing fees, negating user savings from gas abstraction.

Smart Accounts are rent-seeking infrastructure. They monetize the user's transaction flow by inserting a new fee layer between the user and the base chain. This is the bundler fee, extracted for the service of ordering and submitting UserOperations.

The rent is extracted via priority fees. Bundlers like Pimlico and Stackup compete not on price, but on speed and reliability, creating a market for MEV-aware ordering. This transforms user intent into a monetizable data stream.

Paymasters enable rent extraction on value flow. Services like Biconomy and ZeroDev sponsor gas, but capture a premium or require token staking. This centralizes the payment rail, creating a fee abstraction tollbooth on every transaction.

Evidence: The ERC-4337 standard formalizes the bundler and paymaster as profit centers. Projects like Etherspot and Candide are venture-backed to capture this new revenue stream, not to reduce user costs.

Network effects create moats. The utility of an account abstraction standard like ERC-4337 increases with adoption, creating a winner-take-most dynamic similar to EVM dominance. Competing bundler or paymaster services face an adoption barrier, not just a technical one.

Protocol-level lock-in is sticky. Once a dApp like Uniswap or Aave integrates a specific paymaster for sponsored transactions, switching costs for users and developers are high. This creates vendor lock-in at the application layer, insulating incumbents.

Fee markets are not commodities. Unlike simple gas auctions, bundler selection and paymaster services involve complex reputation and MEV capture. This complexity favors large, integrated players like Stackup or Alchemy, not a fragmented market of pure competitors.

Evidence: Look at Lido's dominance in Ethereum staking or the Uniswap Labs frontend fee. Competition exists, but concentrated market power and user inertia enable sustained rent extraction. Smart account infrastructure will follow the same path.

Smart accounts are rent-extraction engines. Their business model depends on capturing and monetizing user flow, from bundling to gas sponsorship, creating a fundamental conflict with open networks.

Protocol-owned liquidity wins. Systems like UniswapX and CowSwap demonstrate that controlling the settlement layer and intent flow is more profitable than competing on pure execution.

Permissionless stacks become commodity backends. Infrastructure like EigenLayer and AltLayer provide generalized security, reducing rollups to featureless execution layers competing on cost alone.

Evidence: The 80/20 rule applies. Arbitrum and Optimism already capture the majority of sequencer revenue from their ecosystems, a dynamic that smart account providers will replicate and intensify.