Why ERC-4337's Permissionless Entry is Its Greatest Weakness

Permissionless Entry Creates Systemic Risk. Any developer can deploy a Paymaster or Bundler without vetting, creating a vast, uncurated attack surface. This is the core architectural trade-off that enables innovation but invites exploitation.

The Bundler is a Centralizing Force. In practice, the bundler role consolidates power, mirroring the miner/validator centralization it aimed to solve. Entities like Stackup and Alchemy dominate because the economic model favors large, capital-backed operators.

Paymasters Are Single Points of Failure. A malicious or buggy sponsorship contract can drain all sponsored user funds in a single transaction. Unlike a compromised EOA, a bad Paymaster's failure is catastrophic and non-isolated.

Evidence: The Pimlico ERC-7677 proposal exists specifically to mitigate these risks by decoupling Paymaster approval from execution, proving the core 4337 model is insufficient for production-grade security.

Permissionless entry creates systemic risk. Any developer can deploy a paymaster or bundler without reputation checks, enabling malicious actors to front-run transactions or censor users directly within the standard's framework.

User abstraction shifts risk, not eliminates it. Moving gas sponsorship from the user to a third-party paymaster transfers custody of transaction execution, creating new central points of failure akin to CEX deposit addresses.

The bundler market will consolidate. Economic incentives and MEV extraction will drive bundling to a few professional operators like Ethereum validators or Flashbots, replicating L1's miner extractable value dynamics at the application layer.

Evidence: The proliferation of scam tokens via Uniswap V2's permissionless pools demonstrates how open participation without curation leads to degraded user experience and security, a pattern ERC-4337 repeats for core wallet infrastructure.

Permissionless bundler competition creates a race to the bottom on fees, not security. Bundlers are rational economic actors who will select the most profitable UserOperations from the mempool, not the safest.

User intent is not protected in the public mempool. Unlike a private order flow auction in CowSwap or UniswapX, any bundler can front-run or censor transactions, exposing users to MEV extraction.

The paymaster is a centralized choke point. While bundlers are permissionless, the entities subsidizing gas fees—like Biconomy or Stackup—hold ultimate power. They can blacklist addresses or dictate which dApps succeed.

Evidence: The Ethereum mempool is a known MEV battleground. Without the private transaction channels used by Flashbots or the auction model of Across Protocol, ERC-4337 inherits these vulnerabilities at the account abstraction layer.

Permissionless entry invites economic attacks. Any actor can run a Bundler, but the protocol's paymaster-centric fee model creates perverse incentives. A malicious Bundler can censor or front-run user operations by manipulating gas prices or transaction ordering, exploiting the lack of slashing mechanisms.

Paymasters are centralized choke points. While decentralized in theory, dominant gas sponsorship services like Biconomy and Stackup become de facto validators. User experience depends on their uptime and policies, reintroducing the trusted intermediaries account abstraction aimed to eliminate.

The mempool is a vulnerability. Unlike Ethereum's public transaction pool, ERC-4337's UserOperation mempool is unstructured. This lack of a canonical, enforced mempool standard fragments liquidity and enables MEV extraction by specialized searchers before Bundlers process batches.

Evidence: The proliferation of private Bundler services and the reliance on a handful of Paymaster-as-a-Service providers demonstrates that in practice, the network centralizes around a few profitable, reliable operators, negating the permissionless ideal.

Permissionless entry guarantees failure. The model invites a race to the bottom where bundlers compete solely on price, eliminating margins needed for R&D, security, and reliability. This creates a commodity market for a critical infrastructure service.

The bundler is not a simple relayer. It is a complex stateful actor requiring MEV extraction, transaction simulation, and censorship resistance. A commodity market cannot sustain the capital expenditure for this role, unlike simple sequencers in Arbitrum or Optimism.

Paymasters face the same fate. Their business of sponsoring gas is a thin-margin arbitrage play vulnerable to volatile gas prices and bad debt. Projects like Biconomy and Stackup will either consolidate or pivot to managed services to survive.

The evidence is in L2 rollups. No successful rollup operates its sequencer as a permissionless free-for-all; they are managed, permissioned networks because execution is a strategic asset. Account abstraction's critical path will follow the same consolidation.