Bundler Fee

A bundler fee is typically composed of two primary components:

• Gas Cost: The actual cost to execute the batch of transactions on the underlying blockchain (e.g., Ethereum).
• Bundler Profit: A margin added on top of the gas cost, which incentivizes the bundler to include the user operations and provides revenue for their service. This structure ensures the bundler's economic viability while keeping user costs transparent.

Bundler fees are determined by a competitive fee market, similar to Ethereum's gas auction. Key factors include:

• Network Congestion: Higher base layer gas prices increase the bundler's costs.
• Operation Complexity: More complex user operations (e.g., multiple contract calls) require more gas.
• Bundler Competition: Multiple bundlers compete to include operations, which can help optimize fees for users. Users can attach a higher max priority fee to incentivize faster inclusion.

A core innovation of account abstraction is that bundler fees can be paid in the chain's native token (e.g., ETH) or in any ERC-20 token held by the user's smart contract wallet. This is enabled by a paymaster, which can sponsor gas or accept alternative payment. It allows for:

• Gasless transactions for users.
• Subsidized onboarding via dApp sponsors.
• Payment in stablecoins to avoid gas token volatility.

Bundlers often implement a refund mechanism. The user specifies a max fee for their operation. The bundler charges only for the gas actually used, refunding any excess. This requires:

• Accurate Gas Estimation: Bundlers must simulate operations to predict gas use.
• Trustless Verification: The smart contract infrastructure must enable secure refunds to the user's account. This protects users from overpaying in volatile network conditions.

The fee mechanism is crucial for the security of the Account Abstraction ecosystem. It must correctly align incentives:

• Bundlers must be profitable to ensure reliable service and prevent centralization.
• Users must pay a fair price for timely inclusion and execution.
• The System must disincentivize malicious behavior, such as bundlers censoring transactions or extracting maximal value (MEV). Proper fee design is foundational to network health.

Bundler fees are analogous to priority fees (tips) in traditional blockchain transactions, but with key differences:

• Scope: A tip incentivizes a single transaction inclusion. A bundler fee covers a batch of UserOperations.
• Complexity: Bundler fees must account for aggregated gas and potentially multi-token payments.
• Abstraction: The fee is often handled by a Paymaster contract, separating payment logic from the user's core transaction intent. This abstraction is a fundamental shift in transaction economics.

The total fee paid by a user is typically broken down into two parts:

• Execution Gas Fee: Covers the cost of executing the user's operation(s) on-chain, paid to the network.
• Bundler's Premium: The bundler's compensation for service, covering overhead, profit margin, and risk of transaction failure.

This structure is often abstracted from the end-user, who pays a single, simplified fee.

Bundler fees are not fixed and are determined by a competitive market. Key factors include:

• Network Gas Prices: The dominant cost driver, fluctuating with base layer congestion (e.g., Ethereum L1 gas).
• Bundler Competition: Multiple bundlers compete on fee efficiency and reliability.
• Operation Complexity: More complex user operations (involving multiple calls or approvals) require more gas.

Bundlers use gas estimation and may employ Priority Fee mechanisms to ensure timely inclusion.

The fee can be paid through different models, a key innovation of account abstraction:

• Direct Payment (Default): The user's smart contract wallet pays the fee from its native token balance (e.g., ETH on Ethereum).
• Sponsored Transactions: A paymaster contract, potentially funded by a dApp, pays the fee on the user's behalf, enabling gasless UX.
• ERC-20 Payment: The fee is paid using an ERC-20 token via a paymaster, abstracting away the need for the native chain token.

It's crucial to distinguish the bundler's role and fee from other network actors:

• Bundler: Aggregates UserOperations from the mempool and submits them to a EntryPoint contract. Earns the bundler fee.
• Validator/Sequencer (L2): Produces blocks on the chain (e.g., Optimism, Arbitrum). Earns transaction fees and/or sequencing rewards from L1 settlement.
• Ethereum Validator: Secures the base layer (L1) via proof-of-stake. Earns block rewards and priority fees.

The bundler fee is a service fee for aggregation, separate from the core protocol's block production fees.

Proper fee design is critical for network security and health:

• Incentive Alignment: Fees must be high enough to cover bundlers' gas costs plus a profit margin, ensuring a sustainable service layer.
• Denial-of-Service (DoS) Protection: Fees prevent spam by making it costly to flood the mempool with invalid operations.
• Trust Assumptions: Users must trust that bundlers will submit their operations honestly. Fees are bonded or at risk if a bundler acts maliciously (e.g., censoring or front-running).

Consider a user sending a USDC transfer via a smart contract wallet on Ethereum:

1. User signs a UserOperation requesting the transfer.
2. A bundler selects this op from the mempool, estimating it will cost 100,000 gas at a gas price of 20 gwei.
3. The bundler sets a total maxFeePerGas of 22 gwei (20 gwei for execution + 2 gwei premium).
4. The bundler submits a batch to the EntryPoint, paying ~2,000,000 gwei (0.000002 ETH) as the L1 transaction fee.
5. After execution, the user's wallet is debited for the gas used, and the bundler's premium is transferred to the bundler's address.

The total Bundler Fee is typically composed of two primary components:

• Execution Gas: The cost to execute the user's intended actions (e.g., token transfers, smart contract calls) on the destination chain.
• Bundler Profit Margin: An additional premium, often calculated as a percentage of the gas cost or a flat fee, that incentivizes the Bundler to include the User Operation in its bundle. This fee is paid in the native currency of the chain (e.g., ETH, MATIC) and is deducted from the user's smart contract wallet balance.

The fee structure is critical for the security and liveness of the ERC-4337 network. A sufficient profit margin ensures a competitive market of Bundlers, preventing centralization and censorship. If fees are too low, Bundlers have no incentive to include transactions, leading to network congestion and failed User Operations. The fee must also account for the Bundler's risk, such as the potential for transaction reversion or fluctuating gas prices between simulation and on-chain execution.

Bundlers operate in a competitive fee market similar to block builders in Ethereum's base layer. Users can signal willingness to pay higher fees via priority fees to have their operations processed faster. Bundlers employ MEV (Maximal Extractable Value) strategies, such as ordering transactions within a bundle for optimal profit, which influences the fee economics. This creates a dynamic where fee estimation services are essential for user experience.

A Paymaster is a contract that can sponsor transaction fees on behalf of users, enabling gasless transactions or payment in ERC-20 tokens. In this model, the Bundler Fee is ultimately paid by the Paymaster, which must be reimbursed. This adds a layer of economic trust, as the Bundler must verify the Paymaster's ability to pay, often through a deposit staked in the EntryPoint contract.

A standardized data structure representing a user's intent in Account Abstraction (ERC-4337). It is not a traditional transaction but a pseudo-transaction object that a bundler packages and executes. Key fields include:

• sender: The smart contract account address.
• nonce: Prevents replay attacks.
• callData: The execution logic for the account.
• signature: User's verification data.
• paymasterAndData: Information for gas sponsorship.

A smart contract that can sponsor transaction fees for users, enabling gasless transactions or payment in ERC-20 tokens. The paymaster contract:

• Verifies the user operation is eligible for sponsorship.
• Prefunds the EntryPoint to cover the operation's gas costs.
• Is reimbursed by the bundler, with fees deducted from the prefunded amount.

The singleton, audited smart contract that acts as the central orchestrator and security checkpoint for ERC-4337. Its core functions are:

• Validating each user operation's signature and nonce.
• Executing the batch of operations submitted by a bundler.
• Handling deposit stakes from paymasters and bundlers for security.
• Compensating the bundler, deducting fees from the paymaster or user account.

In the context of MEV (Maximal Extractable Value), an aggregator is a service that bundles transactions from multiple users to optimize for fee savings or execution quality. While a bundler is specific to ERC-4337, a general transaction aggregator:

• Sources transactions from a mempool or private channels.
• Uses sophisticated algorithms to order and bundle them.
• Submits the bundle to a block builder or validator to capture MEV opportunities.

The fundamental cost required to execute a computation or store data on an EVM blockchain, paid in the network's native token (e.g., ETH). The bundler fee is ultimately derived from these gas costs. Components include:

• Base Fee: A network-determined, burned fee per unit of gas.
• Priority Fee (Tip): An extra incentive paid to the block proposer.
• Gas Limit: The maximum units of gas a transaction can consume.