Gas Grant

The primary function of a gas grant is to remove the initial friction for new users. By covering gas fees, it eliminates the requirement for users to first acquire the native token (e.g., ETH, MATIC) before they can interact with a dApp. This is a critical tool for improving user experience (UX) and driving adoption, especially for applications targeting non-crypto-native audiences.

Gas grants are typically implemented via sponsored transaction relayers or paymasters. These are off-chain or on-chain services that:

• Receive and validate a user's signed transaction.
• Prepay the gas cost on the user's behalf.
• Submit the transaction to the network.

This architecture allows the dApp sponsor to fund a relayer wallet, which then processes transactions for eligible users without requiring them to hold gas tokens.

Grants are not blanket subsidies; they are governed by smart contract logic that defines sponsorship rules. Common policies include:

• Whitelisted Operations: Only covering gas for specific smart contract functions (e.g., minting an NFT, swapping tokens).
• User Eligibility: Restricting grants to first-time users, holders of a specific token, or users from a particular region.
• Spending Limits: Capping the total gas subsidy per user or per transaction to prevent abuse.

This ensures grant capital is used efficiently for targeted growth.

With the advent of ERC-4337 (Account Abstraction), gas grant mechanics have become more sophisticated and native to the Ethereum ecosystem. Paymaster contracts within this standard allow sponsors to:

• Pay for gas in any ERC-20 token (not just ETH).
• Implement more complex verification logic (e.g., require a valid session key).
• Enable gasless transactions where the user's signature itself authorizes the sponsor to pay.

This represents a shift from off-chain relayers to on-chain, verifiable sponsorship.

Gas grants represent a customer acquisition cost (CAC) for dApps. Their sustainability depends on the lifetime value (LTV) of the acquired user. Models include:

• Temporary Campaigns: Short-term grants for launch events or user drives.
• Ongoing Subsidies: Permanent feature for core actions (e.g., perpetual protocol governance voting).
• Hybrid Models: Grants for initial interactions, with users paying for subsequent, higher-value actions.

The key metric is the return on investment (ROI) from grant spending measured in user retention and protocol revenue.

Preventing exploitation is critical. Standard safeguards include:

• Rate Limiting: Capping transactions per user or IP address.
• Sybil Resistance: Using proof-of-personhood or social graph analysis to identify unique users.
• Transaction Simulation: Relay services simulate transactions to reject those that would fail or drain the grant wallet.
• Multi-signature Wallets: For managing the grant treasury to prevent single points of failure.

Without these, grant programs can be drained by bots performing useless transactions to collect the gas refund.

Protocols deploy gas grants to encourage specific, valuable on-chain actions that enhance network utility. Examples include:

• Providing initial liquidity to a new pool
• Participating in governance votes
• Executing complex DeFi strategies (e.g., looping, harvesting) By covering the gas, the protocol aligns user incentives with network growth, boosting Total Value Locked (TVL) and governance participation.

Gas grants power meta-transaction systems where a relayer pays the gas fee on behalf of the user. The user signs a transaction, a relayer submits it, and the grant reimburses the relayer. This abstracted experience is essential for creating seamless Web3 applications where users never need to think about gas, similar to traditional web apps. It's a core component of account abstraction and smart contract wallets.

The primary goal is to reduce user friction and stimulate protocol adoption. Instead of users paying gas fees, a sponsoring entity (like a DAO treasury or foundation) deploys a gas relay or meta-transaction system. This system uses a paymaster contract to abstract gas costs, allowing users to sign transactions that are then submitted and paid for by the grant program.

Grants are typically implemented through specific technical models:

• Sponsored Transactions: A central relayer pays gas on behalf of users for pre-approved actions.
• Gasless Transactions (ERC-2771): Uses a trusted forwarder and paymaster to enable meta-transactions where the grant sponsor is the gas payer.
• Gas Refunds: Users pay upfront but are reimbursed in the protocol's native token, a model used by exchanges like dYdX for market makers.

Grants are strategically deployed to bootstrap critical network functions:

• Onboarding New Users: Covering fees for first-time mints, swaps, or wallet creations.
• Incentivizing Liquidity: Subsidizing gas for liquidity providers (LPs) adding to specific pools.
• Developer Onboarding: Covering deployment costs for new smart contracts on a Layer 2 or appchain.
• Governance Participation: Removing cost barriers for voting on DAO proposals.

Benefits include accelerated growth, improved user experience (UX), and targeted ecosystem shaping. However, risks are significant:

• Sybil Attacks: Bad actors can spam the network at the grant's expense.
• Centralization: Reliance on a single paymaster creates a central point of failure.
• Unsustainable Costs: Grant funds can be depleted quickly without careful rate limiting and whitelisting of eligible transactions.

Many Layer 2 (L2) networks like Optimism and Arbitrum have used gas grants to drive adoption. For example, Optimism's Quests program used a gas subsidy to allow users to perform specific on-chain actions for free, directly funded from the Optimism Collective's treasury. This effectively demonstrated the L2's low-cost potential while acquiring active users.

• Paymaster: The smart contract that holds funds and pays transaction fees in gas grant systems.
• Meta-Transaction: A signed user intent that is executed by a third party (relayer) who pays the gas.
• Account Abstraction (ERC-4337): A broader standard enabling gas sponsorship as a native feature via UserOperations and bundlers.
• Relayer Network: A decentralized system for submitting and sponsoring transactions.

A Gas Grant is a subsidy provided by a protocol, DAO, or application to cover the gas fees for users performing designated on-chain transactions. Its primary purpose is to reduce user friction and drive adoption by removing the requirement for users to acquire and manage the native token (e.g., ETH, MATIC) for fees. This is common for onboarding new users, facilitating airdrop claims, or encouraging participation in governance votes.

Granting gas introduces unique security considerations. The key risk is resource exhaustion attacks, where a malicious actor could drain the grant pool by spamming low-value transactions. Mitigations include:

• Rate limiting per user or IP address.
• Transaction validation to ensure only whitelisted contract interactions are funded.
• Grant caps that limit the total gas subsidized per transaction or user.
• Multi-signature or timelock controls on the grant treasury to prevent unauthorized withdrawals.

The economics of a gas grant program must be carefully calibrated. It involves a direct cost-benefit analysis where the grantor spends capital (often in the native token) to generate user activity that provides greater value to the ecosystem. Sustainability questions include:

• Is the grant funded by a protocol's treasury, venture capital, or retroactive funding models?
• What is the user lifetime value (LTV) versus the customer acquisition cost (CAC) represented by the gas grant?
• Poorly designed grants can lead to economic leakage with no net benefit to the protocol.

Gas grants are implemented through several technical patterns:

• Relayer Networks / Meta-Transactions: A relayer pays the fee and submits the user's signed transaction, later reimbursed from the grant pool. (e.g., Gas Station Network concepts).
• Paymaster Systems: In Account Abstraction (ERC-4337) contexts, a paymaster contract sponsored by the grant pays fees on behalf of user operations.
• Grant-Specific Faucets: Dedicated services that distribute small amounts of native token solely for paying gas on a specific dApp.

• Gas Sponsorship: A broader term for any entity paying another's transaction fees.
• Fee Abstraction: The general concept of decoupling fee payment from transaction initiation.
• Account Abstraction (ERC-4337): Enables paymasters to implement sophisticated gas grant logic.
• Gas Token: Historical mechanisms (like CHI, GST2) to hedge gas prices, distinct from a grant.
• Transaction Batching: Reducing overall gas costs, a complementary strategy to grants.