Gas abstraction is infrastructure. It is a core feature for any consumer-facing dApp, akin to a login button. Protocols like ERC-4337 (Account Abstraction) and Particle Network embed it to remove onboarding friction, making it a commodity.
wallet-wars-smart-accounts-vs-embedded-wallets
Blog
Why Gas Abstraction is a Feature, Not a Business
Transaction sponsorship is becoming a commodity. The real battle is in the application layer, where gas abstraction is a feature for user lock-in and data capture, not a standalone business model.
introduction
THE FEATURE
Introduction
Gas abstraction is a fundamental user experience primitive, not a sustainable standalone business model.
The business is elsewhere. Monetizing pure gas sponsorship is a race to the bottom. The real value accrues to the applications and chains that leverage abstraction to drive adoption, as seen with Base's onchain summer and zkSync's native account abstraction.
Evidence: The EIP-3074 debate highlights this. Its core function—sponsored transactions—is a feature wallets and dApps will integrate, not a product users will pay for directly.
thesis-statement
THE FEATURE TRAP
The Core Argument
Gas abstraction is a foundational user experience primitive that will be commoditized, not a sustainable standalone business.
Gas abstraction is infrastructure. It solves a universal user problem—managing native gas tokens—by abstracting it away, similar to how HTTP abstracts network protocols. This makes it a table-stakes feature for any chain or wallet aiming for mainstream adoption, not a value-capturing product.
The business model is flawed. Protocols like Biconomy and Gas Station Network (GSN) pioneered paymaster services, but their revenue is directly capped by and in conflict with the very user friction they aim to eliminate. Successful abstraction destroys its own monetization by becoming invisible.
The future is bundling. The winning model is embedding gas sponsorship into higher-value services. Coinbase's Smart Wallet and Argent absorb gas costs to onboard users into their ecosystems. Layer 2s like Arbitrum and zkSync subsidize gas to drive adoption, treating it as a customer acquisition cost.
Evidence: The ERC-4337 standard formalizes this commoditization. By creating a standard interface for paymasters and bundlers, it ensures gas abstraction becomes a low-margin, interoperable utility, akin to TCP/IP. No one pays a premium for TCP/IP; they pay for the applications built on top.
market-context
THE FEATURE TRAP
The Current Battlefield
Gas abstraction is becoming a commoditized feature, not a defensible business, as infrastructure commoditization accelerates.
Gas abstraction is a feature. It is a user experience improvement, not a core protocol moat. Protocols like UniswapX and CowSwap integrate it to capture more volume, not to sell gas.
The business model is broken. Charging a premium for gas sponsorship faces immediate arbitrage. Users will route through the cheapest ERC-4337 bundler or Paymaster, collapsing margins to zero.
Infrastructure is commoditizing. The EIP-4337 standard and competition between bundler networks (e.g., Stackup, Pimlico, Alchemy) create a race to the bottom on fees and latency.
Evidence: Major L2s like Arbitrum and Optimism now offer native gas sponsorship programs, treating it as a user acquisition cost, not a revenue stream.
key-trends
WHY GAS ABSTRACTION IS A FEATURE, NOT A BUSINESS
Three Trends Proving Commoditization
The race to hide gas fees is a race to zero, where the winner is the protocol that integrates the best plumbing, not the one that builds it.
01
The Problem: Paymasters Are a Commodity
ERC-4337's Paymaster is a standard, not a moat. Any wallet can plug into any Paymaster. The competition is on who subsidizes fees better, not who has superior tech.
- Zero differentiation: Functionality is identical across providers.
- Race to the bottom: Margins are compressed by sponsor subsidies and bundler competition.
- Integration, not innovation: Value accrues to dApps that embed the service, not the service itself.
$0
User Fee
100%
Sponsored
02
The Solution: Aggregation Eats Everything
Just as 1inch aggregates DEXs, next-gen wallets and dApps will aggregate gas abstraction providers. The user sees one seamless experience, the protocol swaps between ERC-4337 bundlers, layer-2 native gas, and intent solvers.
- No vendor lock-in: Users get the cheapest/most reliable route dynamically.
- Protocols become pipelines: Value shifts to the aggregator interface (e.g., Rabby Wallet, Safe).
- Fee abstraction becomes a checkbox: A required feature with no standalone pricing power.
5+
Providers
~500ms
Route Eval
03
The Endgame: Intents Abstract Gas Entirely
Intent-based architectures (UniswapX, CowSwap, Across) make gas fees an implementation detail for solvers. The user signs a desired outcome, and competing solvers internalize the gas cost into their bid.
- Gas becomes a solver's COGS: Not a user-facing concept.
- Abstraction is complete: The business shifts to solver competition and order flow auctions.
- The moat is liquidity and efficiency, not the abstraction layer itself.
$10B+
Settled
0
User Txns
WHY GAS ABSTRACTION IS A FEATURE, NOT A BUSINESS
The Commodity Economics of Paymasters
Comparing the core economic models and strategic moats of major paymaster implementations, highlighting the commoditization of the core service.
| Economic Dimension | Bundler-Integrated (e.g., Stackup, Alchemy) | Standalone Paymaster (e.g., Biconomy, Pimlico) | Protocol-Native (e.g., UniswapX, Across) |
|---|---|---|---|
Primary Revenue Source | Bundler/Sequencer Fees | Paymaster Service Fee (0.1-0.5%) | Protocol Volume & MEV Capture |
Gas Sponsorship Margin | Near-Zero (Cost-Plus) | 1-5 bps on sponsor fee | Negative (Subsidized for growth) |
Strategic Moat | User & App Relationships | Developer SDK & Tooling | Native Liquidity & Intent Flow |
Commoditization Risk | High (RPC endpoint) | Very High (Simple API) | Low (Integrated product) |
Example Fee for $100 TX | $0.10 (gas only) | $0.10 - $0.15 (gas + fee) | $0.10 (gas, protocol-subsidized) |
Key Dependency | ERC-4337 Bundler Market | ERC-4337 & Stablecoin Oracles | Own Settlement & Liquidity |
Business Model Analogy | AWS EC2 (Compute) | Stripe (Payments API) | Amazon Prime (Loss Leader) |
deep-dive
THE REAL BUSINESS
Where Value Actually Accrues: The Application Layer
Gas abstraction is a user acquisition feature for applications, not a standalone business model.
Gas abstraction is a cost center. Protocols like ERC-4337 Account Abstraction and Paymasters subsidize transaction fees to onboard users. This creates a commoditized utility layer where competition drives margins to zero. The value accrues to the application that captures the user, not the infrastructure paying the gas.
The business model is user ownership. Compare Uniswap to a generic gas relayer. Uniswap uses gas sponsorship via UniswapX to capture swap volume and fees. The relayer only earns thin, competed-away margins. Applications monetize attention and activity; gas payers monetize a spread.
Evidence: Layer 2s like Arbitrum and Optimism use sequencer fee subsidies as a growth tactic, not a profit center. Their long-term value is the ecosystem's TVL and transaction fees, not the cost of the gas they front.
case-study
PRODUCT-LED GROWTH
Case Studies: Gas as a Feature
Forward-thinking protocols treat gas not as a revenue line but as a user acquisition cost, embedding payment logic directly into the application layer.
01
The Problem: Onboarding Friction
New users must acquire native tokens before their first transaction, a $10 billion+ barrier to mainstream adoption.
- Key Benefit 1: Zero-gas onboarding via sponsored transactions or paymasters.
- Key Benefit 2: Cross-chain intent execution without managing multiple gas tokens (see: UniswapX, Across).
~90%
Drop-off Prevented
0 ETH
User Cost
02
The Solution: Account Abstraction (ERC-4337)
Smart accounts shift gas management from the user to the dApp, enabling session keys, social recovery, and batched operations.
- Key Benefit 1: Bundled transactions reduce effective gas costs by ~30% for complex interactions.
- Key Benefit 2: Non-custodial sponsorship lets protocols subsidize specific user actions for growth.
10M+
Accounts Created
-30%
Avg. Gas Cost
03
The Business Model: Gas as a CAC
Protocols like dYdX and Friend.tech absorb gas costs to capture higher lifetime value, treating it as Customer Acquisition Cost.
- Key Benefit 1: Predictable unit economics – subsidize first 10 transactions to secure a sticky user.
- Key Benefit 2: Competitive moat – seamless UX becomes a defensible feature against forks.
$5-20
CAC per User
3x
Higher Retention
counter-argument
THE BUSINESS MODEL FLAW
The Steelman: Couldn't a Protocol Win?
Gas abstraction is a commoditized feature that cannot sustain a standalone protocol's moat or revenue.
Gas abstraction is a feature, not a business. It is a user experience enhancement that protocols like UniswapX and CowSwap integrate to reduce friction, not a primary revenue driver.
The moat is non-existent. Any wallet or dApp can implement ERC-4337 Account Abstraction or partner with a paymaster. The winner is the application aggregating users, not the middleware.
Evidence: Look at Across Protocol and LayerZero. Their value accrues from cross-chain messaging security and liquidity, not from who pays the gas. The gas bill is a cost center to be minimized.
risk-analysis
WHY GAS ABSTRACTION IS A FEATURE, NOT A BUSINESS
Risks and Bear Cases
Gas abstraction solves a critical UX problem but faces immense commercial pressure from dominant infrastructure and user expectations of free transactions.
01
The Commoditization Trap
Gas payment is a utility, not a premium service. Once a standard like ERC-4337 Account Abstraction is adopted, the value accrues to wallets and dApps, not the underlying paymaster. The business model collapses to thin-margin infrastructure, competing with giants like Alchemy and Particle Network on price.
- Winner-Take-Most Dynamics: Network effects favor the largest bundler/paymaster pools.
- Race to Zero Fees: End-users expect sponsors (dApps) to pay, destroying direct monetization.
~$0.001
Per Op Fee
>60%
Margin Compression
02
The Sponsorship Sustainability Problem
DApps sponsor gas to acquire users, but this is a customer acquisition cost, not a durable revenue stream. When growth stalls or token incentives dry up, sponsorship budgets are the first cut. Projects like Biconomy and Stackup are vulnerable to client churn based on macroeconomic cycles.
- Client Concentration Risk: A few large dApps drive most volume.
- CAC > LTV: The lifetime value of an acquired user rarely justifies indefinite gas subsidies.
3-6 Months
Avg. Campaign Lifespan
>90%
Sponsored Volume
03
Regulatory Attack Vector: Money Transmission
A paymaster that holds user funds to pay gas on their behalf may be classified as a Money Services Business (MSB). This creates a regulatory moat for non-custodial wallets but a fatal liability for centralized gas abstraction services. Coinbase's Smart Wallet navigates this via its existing licenses; pure-play startups do not.
- KYC/AML Overhead: Compliance destroys the permissionless ethos and adds cost.
- Jurisdictional Arbitrage: Not a strategy, it's a temporary loophole.
50+
State Licenses (US)
$10M+
Compliance Cost
04
The Modular Stack Disintermediation
In a modular blockchain world, gas abstraction is just another middleware layer. Rollup stacks like Arbitrum Orbit or OP Stack will eventually bake native gas sponsorship into their protocol design. Why use a third-party paymaster when the L2 sequencer can handle it at the base layer? This mirrors how LayerZero faces existential risk from native interoperability.
- Protocol-Level Feature: Value capture shifts to the settlement layer.
- Reduced MoAT: Customizability becomes a standard config option.
L2 Native
Future State
-80%
Addressable Market
future-outlook
THE PIVOT
The Next 18 Months: Bundling and Vertical Integration
Gas abstraction will become a commoditized feature, forcing infrastructure providers to bundle it with higher-value services or own the user relationship.
Gas abstraction is a feature, not a business. Standalone gas sponsorship protocols like Biconomy and Gelato face margin compression as wallets and chains integrate it for free. The value accrues to the entity controlling the user interface, not the middleware.
The bundling war has started. Leading wallets like MetaMask and Rabby now bundle gas sponsorship, RPC endpoints, and bridging. The winning stack will offer a seamless cross-chain UX where gas, bridging, and swapping are a single transaction.
Vertical integration is the endgame. Protocols that own the user, like dYdX or Uniswap, will embed gas abstraction directly. This bypasses middleware fees and captures the full transaction value, mirroring the Coinbase L2 model where the exchange owns the chain.
Evidence: The success of Arbitrum's native account abstraction and zkSync's paymaster system proves chains will subsidize gas to drive adoption, eroding the standalone market.
takeaways
GAS ABSTRACTION IS INFRASTRUCTURE
TL;DR for Builders and Investors
Gas abstraction is a foundational protocol-level feature, not a standalone business model. Its value accrues to the applications and chains that implement it.
01
The Problem: Paymasters Are a Commodity
Sponsoring gas fees is a pure cost center with zero network effects. Any entity with capital can run a paymaster. The business model of charging a premium on gas is unsustainable against native chain subsidies or app-level bundling.
- No Moat: Service is indistinguishable; users don't care who pays.
- Race to Zero: Margins are competed away to near-zero.
- Value Capture: Fees flow to the underlying L1/L2, not the abstraction layer.
0%
Sustainable Margin
1
Click to Replace
02
The Solution: Embed It & Enhance UX
Gas abstraction's real value is as an embedded feature that radically improves user experience and unlocks new design space. It's a wedge for adoption.
- Acquisition Tool: Enable gasless onboarding and one-click transactions.
- Product Innovation: Enables session keys, subscription models, and intent-based flows.
- Cross-Chain Primitive: Essential for seamless omnichain UX across ecosystems like Polygon, Arbitrum, and Solana.
70%+
Higher Conversion
10x
UX Improvement
03
The Model: Infrastructure-as-a-Feature
Successful implementations bake gas abstraction into a larger, defensible product. The feature drives volume to a core business with real moats.
- Wallet Play: Safe{Wallet}, Rainbow use it to retain users.
- App-Chain Play: dYdX Chain, Aevo subsidize gas to attract traders.
- Bundler Play: Stackup, Pimlico monetize via bundling and MEV capture, not gas markup.
App
Value Layer
Infra
Cost Layer
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