Why ERC-4337's Bundler Model is Fundamentally Flawed

Bundlers earn only base priority fees, a race-to-zero commodity. To be profitable, they must either:

• Bundle massive volumes to offset thin margins, favoring centralized players.
• Extract MEV via frontrunning or backrunning, creating adversarial incentives.
• Rely on subsidization, which is unsustainable long-term. This creates a natural oligopoly of 2-3 dominant bundlers, mirroring today's relay market.

A profitable, centralized bundler pool is a single point of regulatory failure. Entities like Coinbase or Visa will comply with OFAC sanctions, blocking user ops from blacklisted addresses.

• No forced inclusion mechanism exists for user ops like it does for blocks.
• Altruistic bundlers cannot economically compete to provide censorship resistance.
• The system defaults to the lowest common denominator of its most compliant participant.

ERC-4337's 'permissionless bundler' spec is a technical truth but a practical lie. Running a bundler requires:

• Staking ETH for a reputation-safe mempool (P2P is not enforced).
• Sophisticated MEV extraction tech to be competitive.
• High-availability infrastructure with sub-second latency. This creates high barriers to entry, ensuring only professional, well-capitalized entities participate, centralizing control.

Projects like UniswapX, CowSwap, and Across demonstrate the path forward. Shift from transactional execution (bundlers) to declarative intent fulfillment.

• Users submit what they want, not how to do it.
• Solvers compete to fulfill the intent optimally, baking profit into the solution.
• Decouples execution monopoly from user access, breaking the trilemma. This creates a naturally competitive and user-aligned marketplace.

The permissionless bundler model creates a classic coordination failure. Rational economic actors will consolidate to capture MEV and share fixed costs, leading to centralization.

• Key Risk 1: A few dominant bundlers (e.g., Stackup, Alchemy, Pimlico) control >60% of the network, creating a single point of censorship.
• Key Risk 2: Centralized bundlers can extract maximal MEV, negating the user experience benefits for which AA was designed.

Bundlers are sophisticated block builders. The UserOperation mempool is a new, rich frontier for extractable value, potentially worse than today's public mempool.

• Key Risk 1: Time-bandit attacks and sandwich attacks are trivial to execute on a batch of pending UserOperations.
• Key Risk 2: Users lose the protection of private RPCs (e.g., Flashbots Protect), as all intent must be revealed to the bundler network for execution.

ERC-4337 cannot simultaneously guarantee decentralization, liveness, and censorship-resistance. A decentralized bundler network is inherently slower and less reliable.

• Key Risk 1: To ensure reliable inclusion, dApps and wallets will default to centralized, high-uptime bundlers, centralizing the network by necessity.
• Key Risk 2: Regulatory pressure will target these few compliant bundlers, enabling protocol-level transaction blacklisting (e.g., Tornado Cash-style sanctions).

The sponsored transaction model creates a new financial intermediary. Dominant paymasters become too-big-to-fail liquidity hubs and arbiters of valid transactions.

• Key Risk 1: A liquidity crisis or exploit at a major paymaster (e.g., Visa partnership) could freeze millions of smart accounts simultaneously.
• Key Risk 2: Paymasters define "acceptable" transaction patterns, enabling financial surveillance and de facto KYC at the protocol layer.

Each Layer 2 will implement its own bundler ecosystem and mempool. Cross-chain user experiences will be broken, reverting to the worst aspects of multi-chain bridging.

• Key Risk 1: A UserOperation cannot natively span Arbitrum and Optimism. Users face a fragmented, multi-step process, defeating the purpose of a unified account.
• Key Risk 2: This fragmentation balkanizes liquidity and security, requiring trusted cross-chain messaging layers like LayerZero or Axelar, which introduce their own trust assumptions.

Bundlers must simulate UserOperations locally. A malicious or buggy bundler can submit a batch that creates an invalid state root, wasting the entire block's gas and causing chain re-orgs.

• Key Risk 1: This is a protocol-level DoS vector. A single bad actor can repeatedly force expensive, failed executions, spiking base layer gas for everyone.
• Key Risk 2: The economic penalty (lost gas) is insufficient. Solving this requires complex slashing mechanisms, moving the system towards a heavier, Proof-of-Stake-like security model for bundlers.

Bundlers are profit-maximizing entities that must choose between extracting MEV and providing censorship resistance. In practice, MEV extraction wins, leading to transaction ordering manipulation and degraded UX.

• Centralized Sequencers like those on Arbitrum or Optimism face the same core conflict.
• PBS (Proposer-Builder Separation) on Ethereum L1 doesn't solve this for L2s or alt-L1s.
• Result: User intents are not executed faithfully, undermining the promise of smart accounts.

To be trustless, bundlers must stake ETH, creating a prohibitive capital barrier. This leads to oligopoly formation and defeats permissionless participation.

• Minimum Viable Stake estimates range from 32 ETH to 100+ ETH per bundler.
• This mirrors the validator centralization problems in PoS Ethereum.
• Outcome: A handful of well-funded entities (e.g., Coinbase, Lido, Figment) will control the bundler network, reintroducing trusted intermediaries.

The solution is to decouple ordering from execution. Intent-based architectures (like UniswapX and CowSwap) and shared sequencers like Astria or Espresso point the way forward.

• SUAVE's vision separates the mempool and block building into a dedicated chain.
• Projects like Across and LayerZero's Executor show intent-based cross-chain flows work.
• Builders should design for a post-bundler stack where users express outcomes, not transactions.