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wallet-wars-smart-accounts-vs-embedded-wallets
Blog

Why Gasless Onboarding Is a Double-Edged Sword for Security

Gasless transactions are the killer feature for user onboarding, but they strip away a critical economic signal. This creates a fertile ground for phishing, spam, and protocol-level attacks that paymasters and smart account providers must now defend against.

introduction
THE TRADE-OFF

Introduction

Gasless onboarding removes a critical user friction but introduces systemic security risks by shifting the cost of failure.

Gasless onboarding abstracts failure costs. Users no longer pay for failed transactions, which disincentivizes careful simulation and floods networks with speculative, low-quality requests. This creates a classic moral hazard where user convenience externalizes costs to relayers and sequencers.

The security model inverts. In a traditional model like Ethereum, the user's gas fee is a spam deterrent. In gasless models used by ERC-4337 bundlers or Polygon's Gas Station, the relayer's capital is the attack surface. Security depends on their ability to filter transactions, not user stake.

Evidence: The EIP-4337 bundler market is already seeing this, where unoptimized bundlers lose money on failed user operations, creating a race to the bottom on filtering sophistication and capital efficiency.

SECURITY & UX TRADEOFFS

The Economic Filter: Gas vs. Gasless Transaction Profiles

Comparing the security properties and user experience implications of native gas payment versus sponsored (gasless) transaction models.

Security & Economic FeatureNative Gas (User-Paid)Sponsored (Gasless)Hybrid (Paymaster/ERC-4337)

Sybil Attack Resistance

High (Cost-Barrier)

None (Requires alternative proof)

Variable (Depends on paymaster policy)

Frontrunning Protection

Via Priority Fee (e.g., EIP-1559)

None (Relayer controls ordering)

Via Bundler (e.g., Pimlico, Alchemy)

User Onboarding Friction

Requires native token & bridging

Zero (Abstracted)

Low (Can abstract with stablecoins)

Protocol Revenue Model

Validator/Proposer MEV + Base Fee Burn

Relayer Fees (e.g., Biconomy, Gelato)

Paymaster Markup + Bundler Tips

Censorship Resistance

High (Permissionless mempool)

Low (Relayer can censor)

Medium (Decentralized bundler network)

Transaction Revert Cost

Borne by user

Borne by relayer/sponsor

Borne by paymaster (with conditions)

Typical Use Case

DeFi power users, Arbitrage

Mass adoption dApps, Gaming

Smart Accounts, Subscription services

deep-dive
THE SECURITY TRAP

The Paymaster's Dilemma: Subsidizing Your Own Demise

Gasless onboarding via paymasters creates a critical dependency that can be exploited to censor or drain a protocol.

Paymasters centralize transaction censorship. The entity paying the gas controls which user operations are included. A protocol like ERC-4337 that outsources this to a single service creates a single point of failure for its own users.

Subsidy models create perverse incentives. A protocol subsidizing user fees for a UniswapX order flow auction must trust the paymaster's logic. A malicious or compromised paymaster can front-run, censor, or drain the sponsoring protocol's wallet.

The dilemma is economic security. Projects like Pimlico and Biconomy offer abstraction, but their whitelist/validation logic becomes the new security perimeter. A bug here bypasses all smart contract audits.

Evidence: The Ethereum Foundation's ERC-4337 bundler had to implement strict rules after early exploits showed how malicious paymasters could drain entire subsidy pools in a single block.

protocol-spotlight
THE ABSTRACTED SECURITY TRADEOFF

How Leading Protocols Are (Attempting) to Mitigate Risk

Gasless onboarding shifts transaction costs to third parties, creating new attack surfaces and trust assumptions that challenge protocol security models.

01

The Relayer Cartel Problem

Paymasters and relayers become centralized choke points. A dominant service like Gelato or Biconomy can censor transactions or front-run user intents, undermining permissionless access.

  • Centralized Failure Point: A single relayer outage halts all gasless activity for dependent dApps.
  • MEV Extraction: Relayers can reorder or replicate transactions for maximal extractable value, a risk highlighted by UniswapX's design.
1-2
Dominant Relayers
100%
Outage Risk
02

The Subsidy Attack Vector

Protocols that sponsor gas open themselves to economic attacks. A malicious actor can spam the network, draining the subsidy pool and creating denial-of-service conditions.

  • Costly Spam: Inexpensive actions on L2s can be amplified to incur massive L1 settlement costs for the sponsor.
  • Pool Drain: Finite subsidy contracts (e.g., ERC-4337 paymaster staked balances) are explicit financial targets.
$10M+
Subsidy Pool Risk
~$0.001
Attack Cost
03

Intent-Based Ambiguity

Frameworks like UniswapX and CowSwap separate declaration from execution, introducing trusted solver networks. Users trade transaction certainty for better prices, relying on solvers not to exploit their broad intents.

  • Solver Collusion: A small set of solvers can manipulate prices or withhold liquidity.
  • Execution Risk: The final transaction path is opaque, potentially including unexpected intermediaries or layerzero cross-chain hops.
~3s
Solver Auction Window
5-10
Active Solvers
04

The Smart Account Wallet Drain

ERC-4337 smart accounts enable gasless UX but expand the attack surface. A single bug in a widely used account implementation (e.g., Safe{Core} Account Abstraction Kit) or a malicious signature scheme could lead to mass asset compromise.

  • Singleton Risk: Ubiquitous smart account code becomes a high-value exploit target.
  • Session Key Peril: Convenient 'session keys' for gasless gaming can grant excessive, persistent permissions.
1 Bug
Mass Compromise
Unlimited
Session Key Scope
counter-argument
THE TRADEOFF

Steelman: "It's Just a Cost of Business"

Gasless onboarding is a critical user acquisition tool that introduces systemic security risks by externalizing transaction costs.

Gas sponsorship is a subsidy that shifts the cost of user transactions from the user to a third-party relayer or protocol. This creates a misalignment where the economic actor initiating the transaction bears no direct cost, a fundamental break from blockchain's native security model.

The attack surface expands because subsidized transactions are a free resource for malicious actors. This enables spam, Sybil attacks, and resource exhaustion against applications and relayers, as seen in early ERC-4337 bundler implementations and Polygon's gasless relayer incidents.

Relayers become centralized bottlenecks and high-value targets. Services like Biconomy and Gelato must implement complex rate-limiting and fraud detection, centralizing trust and creating a single point of failure for the user experience they aim to improve.

Evidence: The EIP-4337 account abstraction standard explicitly separates the paymaster (who pays) from the user (who signs), formalizing this security-economic split. This requires robust paymaster stake slashing mechanisms to prevent abuse, adding protocol complexity.

FREQUENTLY ASKED QUESTIONS

FAQ: Gasless Security for Builders

Common questions about the security trade-offs and hidden risks of gasless onboarding for decentralized applications.

The primary risks are smart contract bugs in paymaster logic and centralized relayers acting as single points of failure. While users fear hacks, the more common issue is liveness failure if a relayer like Biconomy or Pimlico goes offline, freezing your app's user experience.

takeaways
GASLESS ONBOARDING SECURITY

TL;DR: Key Takeaways for Protocol Architects

Abstracting gas fees improves UX but introduces new attack surfaces and centralization vectors that architects must design around.

01

The Problem: Spam and Sybil Attacks

Removing the native token payment barrier makes spam and Sybil attacks trivially cheap. This can cripple network-level security and distort governance.\n- Cost to attack: Drops from ~$1 per tx to near-zero.\n- Impact: Can overwhelm sequencers, inflate state size, and manipulate airdrop farming.

$0
Attacker Cost
1000x
Spam Volume
02

The Solution: Decentralized Paymasters & Reputation

Shift the trust from a single sponsor to a competitive market of decentralized paymasters (e.g., Pimlico, Stackup, Biconomy).\n- Mechanism: Users sign intents, paymasters compete to sponsor and bundle them.\n- Security: Paymasters apply reputation scoring and rate-limiting per user/key, absorbing spam costs.

Multi-Sig
Trust Model
~50ms
Sponsor Latency
03

The Problem: Centralized Relayer Risk

Most gasless schemes rely on a centralized relayer to pay fees and submit transactions, creating a single point of failure and censorship.\n- Risk: Relayer can front-run, censor, or go offline, breaking the UX promise.\n- Example: Early MetaTransaction implementations on Ethereum were vulnerable to relayer capture.

1
Failure Point
100%
Censorship Power
04

The Solution: Intent-Based Architecture & SUAVE

Move from transaction submission to intent expression. Users declare what they want, a decentralized network of solvers (e.g., UniswapX, CowSwap) competes to fulfill it.\n- SUAVE aims to be a decentralized mempool and solver marketplace, mitigating relayer centralization.\n- Result: Censorship-resistant flow where no single entity controls transaction ordering.

Solver Market
Architecture
0
Trusted Relayers
05

The Problem: Subsidy Sustainability & MEV

Who pays and why? Protocol subsidies are unsustainable. The real model is MEV capture or fee abstraction, which creates perverse incentives.\n- Risk: Paymasters become MEV extractors, optimizing for their profit, not user optimality.\n- Example: A paymaster might route a swap to a venue with worse rates but higher kickbacks.

MEV-Driven
Business Model
-20%
User Slippage
06

The Solution: Transparent Auction & User-Owned Accounts

Design systems where the economic incentives are aligned and transparent.\n- Verifiable Auctions: Use schemes like CowSwap's batch auctions to prove optimal execution.\n- Account Abstraction: Let smart accounts (ERC-4337) manage sponsorship, allowing users to choose and switch paymasters based on performance metrics.

ERC-4337
Standard
Auditable
Execution
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Gasless Onboarding: The Hidden Security Risks in 2024 | ChainScore Blog