Why Bundler Profitability is the Unsolved Equation of Account Abstraction

Bundlers perform critical work—aggregating, simulating, and submitting UserOperations—but earn only base fee tips. This is a classic public goods funding failure, where the entity providing the network's utility cannot capture value.

• Revenue: Limited to variable priority fees from users.
• Costs: Must bear gas fees upfront and risk MEV extraction losses.
• Result: Net margins are negative or negligible, forcing reliance on altruism or VC subsidies.

The only proven model for bundler profitability is capturing MEV. Projects like UniswapX and CowSwap act as intent-based bundlers, solving for optimal trade routing and keeping the surplus.

• Mechanism: Bundle user intents, execute via private mempools or on-chain solvers.
• Revenue: Earns the spread between quoted price and execution price.
• Risk: Centralizes around entities with the best solver algorithms and order flow, creating a new oligopoly.

Layer-2 networks like Arbitrum, Optimism, and zkSync have a natural advantage: they already run centralized sequencers. They can subsidize bundling as a loss leader to drive adoption, squeezing out independent operators.

• Tactic: Offer free or subsidized transaction bundling via native SDKs.
• Outcome: Creates a walled garden where the L2's sequencer is the de facto, trusted bundler.
• Long-term Risk: Replaces Ethereum's credibly neutral base layer with branded, centralized service providers.

A Proposer-Builder Separation (PBS) model, adapted from Ethereum consensus, is the canonical academic solution. It creates a competitive market where specialized builders (bundlers) sell bundles to block builders.

• Mechanism: Builders bid for the right to have their bundle included in a block.
• Benefit: Uncouples profitability from direct user fees, enabling permissionless competition.
• Hurdle: Requires deep protocol-level changes and consensus layer coordination; it's years away.

Current "solutions" like Stackup's grant program or Alchemy's sponsored gas are temporary subsidies. They centralize trust and create single points of failure while masking the underlying economic problem.

• Dependency: Bundlers rely on a single entity's treasury or credit line.
• Censorship Risk: The subsidizing entity can arbitrarily filter transactions.
• Outcome: Recreates the Web2 platform risk that crypto aims to eliminate.

Near-term, the path is bundlers evolving into generalized intent solvers. By aggregating cross-domain user intents (swap, bridge, mint) into complex bundles, they can auction fulfillment to specialized solvers like Across or LayerZero, capturing fees.

• Model: User expresses what, not how. Bundler finds optimal execution path.
• Revenue: Takes a cut of the saved value across DeFi protocols.
• Future: Could evolve into a decentralized solver network, distributing the centralized risk.

Today's bundlers rely on MEV extraction (e.g., frontrunning, arbitrage) to subsidize operations. This creates a fragile, misaligned system where user security is traded for revenue.\n- Inconsistent Revenue: MEV is volatile and unpredictable.\n- Security Risk: Incentivizes adversarial behavior against users.\n- Centralization Pressure: Only large, sophisticated searchers can compete.

The future is declarative transactions. Users state what they want (e.g., "swap X for Y at best price"), not how to do it. This turns bundlers into competitive solvers, like UniswapX or CowSwap.\n- Auction-Based Fees: Solvers bid for the right to fulfill the intent.\n- User Pays for Outcome: Fees are for guaranteed execution, not gas.\n- Aligned Incentives: Profit comes from optimization, not exploitation.

The entity sponsoring gas fees (Paymaster) holds ultimate power. They choose the bundler, creating a B2B market for block space. This mirrors how Visa/Mastercard profit from merchant networks.\n- Recurring Revenue: Subscription or per-transaction fees from dApps.\n- Quality-Based Selection: Bundlers compete on reliability & speed.\n- Scale Advantage: High-volume paymasters command bundler discounts.

Fragmentation across ERC-4337, RIP-7212, and proprietary SDKs (e.g., Starknet, zkSync) prevents bundler commoditization. Profitability requires a dominant, liquid market for user operations.\n- High Integration Cost: Bundlers must support multiple specs.\n- Market Silos: Reduces competition and fee pressure.\n- Winner-Take-Most: The chain with the most unified standard wins.

Forget TVL. The new core metric is PPUO = Fee Collected - (Gas Cost + Risk). Sustainable PPUO > 0 requires either high-value intents (e.g., cross-chain swaps via LayerZero, Across) or massive volume (e.g., social recovery, subscriptions).\n- Gas Optimization: Bundlers must be the most efficient executors.\n- Risk Management: Must hedge volatile base layer gas prices.\n- Volume vs. Value: Choose your vertical.

Winning bundlers won't be neutral. They will integrate Paymaster services, solver networks, and chain abstraction layers. Profit pools consolidate, similar to Lido's dominance in LSDs. The infrastructure becomes the product.\n- Capture Full Stack: From user intent to cross-chain settlement.\n- Proprietary Flow: Own the user/developer relationship.\n- Commoditize Rivals: Competing pure-play bundlers get squeezed on margins.