Fee Abstraction

A model where users sign messages off-chain, and a relayer submits and pays for the transaction. The user never needs gas tokens.

• The relayer is typically a centralized service or a decentralized network of nodes.
• Uses EIP-712 for structured, signable messages.
• Requires a smart contract (e.g., a Forwarder) to validate the user's signature and execute the intended call.
• Common in early implementations before ERC-4337 standardization.

The application developer or protocol directly covers transaction costs for users to reduce friction. This is a business model built on top of paymaster or relay systems.

• Used for onboarding, specific promotional campaigns, or for premium users.
• The dApp operator funds a paymaster contract with gas tokens.
• Costs are treated as a customer acquisition cost or operational expense.
• Requires careful design to prevent spam and manage subsidy budgets.

A user delegates limited transaction authority to a session key for a specific dApp and time period, allowing the dApp to submit transactions on the user's behalf without repeated approvals.

• The session key is pre-funded with gas tokens or linked to a paymaster.
• Enables seamless user experiences in gaming or trading dApps.
• Limits risk by restricting the key's permissions (e.g., max spend, allowed contracts, expiry time).
• Often implemented within smart contract wallets that support account abstraction.

A simpler, non-account-abstraction method where the transaction is structured so the fee payer (delegator) is different from the transaction sender. The user signs a special transaction where the v, r, s signature components allow another address to pay the fee.

• Historically used by some wallets and sidechains.
• Less flexible than paymasters, as it doesn't enable sponsored ERC-20 payments or complex logic.
• Requires direct support from the client or wallet constructing the transaction.

The infrastructure layer that makes paymaster models viable. Bundlers are nodes that package multiple user operations from the mempool, execute them, and submit a single transaction to the blockchain.

• They earn fees for this service and must manage gas estimation and transaction ordering.
• Economic security relies on bundlers being profitable, ensuring reliable transaction inclusion.
• A competitive bundler market is crucial for low fees and censorship resistance in account abstraction systems.

The dominant technical standard enabling fee abstraction is ERC-4337 (Account Abstraction). Its key component, the Paymaster, is a smart contract that can sponsor a user's transaction fees. The Paymaster logic can:

• Accept payment in any ERC-20 token, converting it to native gas.
• Implement gasless transactions by sponsoring fees for specific users or actions.
• Apply custom rules, like fee subsidies for new users or specific dApp interactions.

Fee abstraction fundamentally improves onboarding and interaction by removing key friction points:

• No Native Token Required: Users can transact using only the dApp's own token or a stablecoin, eliminating the need to first acquire ETH, MATIC, etc.
• Sponsored Gas: Projects can pay gas for users, enabling true gasless transactions for onboarding flows or promotional campaigns.
• Predictable Costs: Fees can be quoted and paid in a stable-value asset, removing gas price volatility from user calculations.

Major ecosystems are building native support or tooling for fee abstraction:

• Polygon offers gasless transactions via its PoS chain and SDK.
• Starknet and zkSync Era have native account abstraction with paymaster support at the protocol level.
• Biconomy and Candide provide infrastructure and SDKs for developers to easily integrate paymaster services and gas sponsorship.

Fee abstraction enables new economic models for dApps and wallets:

• dApp-Pays: The application sponsors gas to reduce user friction, treating it as a customer acquisition cost.
• Subscription Wallets: Wallet providers can offer plans where they cover a user's monthly gas fees.
• Token-Pays: Protocols allow fees to be paid with their own utility token, creating a circular economy and reducing sell pressure on the native chain token.

While powerful, fee abstraction introduces new trust and security vectors:

• Paymaster Centralization: Reliance on a single paymaster contract creates a central point of failure.
• Sponsorship Logic: Bugs in the paymaster's validation logic could lead to drained funds or sponsored invalid transactions.
• Economic Attacks: Malicious actors could spam transactions if sponsorship rules are not rate-limited, potentially exhausting the paymaster's funds.

Allows new users to interact with dApps without first acquiring the native token (e.g., ETH, MATIC). This is achieved through sponsored transactions or paymasters, where a third party (like the dApp developer or a relayer) covers the gas fee. This removes a major friction point for mainstream adoption.

• Example: A user can mint an NFT on Polygon using USDC, with the platform's paymaster contract paying the MATIC gas fees.

Enables users to pay transaction fees in any ERC-20 token they hold, most commonly a stablecoin like USDC. The paymaster contract automatically swaps a portion of the user's token for the native gas token to settle the transaction. This provides price predictability and convenience.

• Mechanism: Relies on decentralized exchange (DEX) integrations within the paymaster to facilitate the token swap for gas.

Businesses can pre-pay for or subsidize transaction costs for their customers or partners, creating seamless Web2-like experiences. This allows for predictable billing, subscription models for gas, and absorbing costs as a customer acquisition strategy.

• Use Case: A game studio covers all in-game transaction fees, so players never need to think about gas.

Developers can implement fee abstraction as a service, earning revenue by offering gas sponsorship. Combined with session keys, users can approve a series of transactions within a dApp session with a single fee payment or subscription, enhancing UX for complex interactions like gaming or trading.

• Example: A DeFi aggregator offers a premium tier where all swap and approval gas fees are covered for a monthly fee.

Fee abstraction is a core component of ERC-4337 (Account Abstraction). Smart contract wallets (account abstraction) can natively integrate paymaster logic, allowing for sophisticated transaction flows where fees are paid by a different party or in a different token than the transaction initiator.

• Key Benefit: Creates a unified user experience where wallet management and fee payment are abstracted away.

Allows entities to apply transaction policies and rate limiting when sponsoring fees. A paymaster can validate a transaction's logic before paying for it, preventing misuse of sponsored gas. This is crucial for enterprises and institutions requiring compliance controls.

• Example: A corporate paymaster only sponsors transactions that interact with a pre-approved set of smart contracts.

The Paymaster is a smart contract that sponsors user transactions. Its security is paramount, as it must:

• Hold funds to pay for sponsored transactions.
• Implement robust validation logic to prevent abuse (e.g., rate limiting, whitelisting).
• Be upgradeable or have emergency withdrawal functions to protect locked capital. A compromised paymaster can drain its entire balance or be used for transaction spam.

Entities sponsor fees to drive adoption or create new business models. Common approaches include:

• DApp-Specific Sponsorship: A decentralized application pays fees to reduce user friction.
• Token-Based Sponsorship: Projects pay fees only for transactions involving their own token (ERC-4337's validatePaymasterUserOp).
• Subscription Models: Users pay a flat fee (e.g., monthly in stablecoin) for unlimited sponsored transactions. Sustainability requires careful calculation of customer acquisition cost versus lifetime value.

Fee abstraction introduces new economic risks:

• Resource Exhaustion: Malicious users could spam the network if sponsorship lacks limits, wasting the paymaster's funds and bloating the blockchain.
• Oracle Manipulation: Paymasters that use external price oracles (e.g., for gas price or exchange rates) are vulnerable to oracle attacks, leading to incorrect fee payments.
• Tokenomics Bypass: If all fees are paid by sponsors, it can reduce the utility demand and economic security of the underlying native token (e.g., ETH).

In Account Abstraction (ERC-4337), gas is split into two phases:

• Verification Gas: Paid by the paymaster during initial signature and validation checks (validatePaymasterUserOp).
• Execution Gas: Paid for the actual transaction logic in the main execution phase. Paymasters often only sponsor the execution gas, requiring users to cover the (smaller) verification fee. This design prevents denial-of-service attacks where users could request expensive validation without cost.

Sponsoring transaction fees may trigger regulatory scrutiny:

• Money Transmission Laws: A paymaster constantly paying fees for users could be viewed as a money transmitter, requiring licenses.
• Tax Implications: Fee sponsorship might be considered a taxable benefit or income for the recipient user.
• AML/KYC: Sponsoring anonymous transactions could conflict with Anti-Money Laundering regulations if the paymaster is a regulated entity.

A technical walkthrough of a sponsored transaction:

1. User signs a UserOperation with paymasterAndData field set.
2. Bundler submits it to the EntryPoint contract.
3. EntryPoint calls the Paymaster's validatePaymasterUserOp to verify sponsorship rules and deduct advance payment.
4. Execution proceeds; the Paymaster's balance is charged for the actual gas used.
5. Post-Op: If actual gas was less than advance, the excess is refunded to the Paymaster.