If you have used or played with crypto, you are familiar with gas fees — the charges cryptocurrency users must pay in a blockchain’s native coin to process transactions or execute smart contracts.
They are a significant yet necessary hurdle to broader crypto adoption and place a limit on the scalability of Web3 platforms.
Gas fees on the Ethereum blockchain can soar into the hundreds of dollars when network traffic is high, making it vastly more expensive to transfer money on the blockchain than via a traditional bank or payment platform — and even on a good day, you will need to take into account at least a few dollars to do something on-chain.
But a solution is in the mix: account abstraction can enable users to pay gas fees with any payment method, pay someone else’s gas fees, or invite someone else to pay theirs.
That unlocks many new ways for Web3 users — and cryptocurrency in general — to change how they operate and will make life much simpler for people stepping in for the first time.
Key Takeaways
Gas fees are charges that users must pay in a blockchain’s native coin to process transactions or execute smart contracts — and they can be a hurdle to broader crypto and Web3 adoption.
Account abstraction is a feature that ‘abstracts away’ native gas fees on a blockchain, allowing users to pay for transactions using any tokens, or fiat, or having other users or decentralized apps (dApps) pay fees on their behalf.
Various industry players, including crypto exchanges like OKX, wallet providers like Trust Wallet, and payment networks like Visa, are embracing account abstraction to offer users more seamless and cost-effective transaction experiences.
How Gas Fee Abstraction Works
Account abstraction is a feature that ‘abstracts’ away the native gas fees on a Layer 1 or Layer 2 blockchain. Until now, users have had to manage gas fees directly, holding different cryptocurrencies in their wallets to pay for transactions on various blockchains.
This often increases the cost and complexity of transactions, as users need to pay for expensive on-ramp services to convert fiat currencies into native tokens or purchase the tokens on a centralized crypto exchange and then transfer them to their crypto wallet.
These extra steps can make transactions more complicated for all but the most advanced users and lack the immediacy of other financial transactions. They also expose users to cryptocurrency exchange rate volatility, which can result in their assets losing value on conversion.
Instead, abstraction allows users to pay for transactions using tokens issued by the decentralized app (dApp) they want to use and send tokens across blockchains without having to hold multiple native tokens solely to cover various gas fees.
Or an alternative option – dApps can pay for fees themselves, offering “no fees” to their users.
Wallet and payment providers have started to introduce options to make use of account abstraction.
Crypto exchange OKX offers an account abstraction-powered Smart Account feature in its wallet, which enables users to pay for transactions on multiple blockchains using the USDC or USDT stablecoins.
They can also conduct gasless transactions if third-party dApps choose to sponsor their on-chain interactions — OKX currently supports eight blockchains: Ethereum, Polygon, Arbitrum, Optimism, BNB Chain, Avalanche, and OKT Chain, as well as Linea, which targets Ethereum scalability.
OKX Chief Innovation Officer Jason Lau said: “Our aim is to provide users with the most accessible, secure, and powerful Web3 gateway. The Smart Account feature will play a significant role in achieving this goal
“Account abstraction technology is a game-changer for the broader adoption of Web3 and enables new use cases and user experiences.”
Self-custody crypto wallet provider Trust Wallet last month launched the beta version of a new SWIFT smart contract wallet powered by account abstraction.
It accepts more than 200 tokens for gas fees and has added discounts for using the TWT token as well as gas fee sponsorship with partners for the beta testing phase.
It supports seven blockchains, including Arbitrum, Polygon, BSC, opBNB, Base, Optimism, and Avalanche, with plans to add more.
Card payment network Visa has been working on a solution to allow users to pay gas fees directly in fiat money using a Visa card. This would use Ethereum’s ERC-4337 standard and a paymaster contract.
Ethereum’s Dencun upgrade
The Ethereum Foundation unveiled updates to the ERC-4337 standard on January 10, aiming to increase the accuracy of gas fee estimation and reduce costs. The update, known as Dencun, was completed on March 13 and facilitates the creation of customizable Web3 wallets with features including subsidized gas fees, spending caps, multi-signature transactions, contract and account whitelisting, as well as improvements in gas efficiency within rollups and embedded privacy.
Blocknative CEO Matt Cutler said in a Blockworks podcast that “account abstraction is probably the biggest upgrade to the user experience on Ethereum as anything in the history of the network.”
“Account abstraction introduces a new layer on top of everything else… What smart contract wallets do is rather than a user signing transactions, a user expresses intent”.
An intent, for example, could be swapping one token for another.
Cutler continued: “Because you’re expressing intent, you could have your gas price paid in USDC or any ERC-20 — or even off-chain assets like a credit card, credit card points or miles. It opens things up quite a bit underneath the covers for new types of transactional experiences to happen.”
Another benefit of these evolutions includes a new class of builder called a ‘bundler’, Cutler said, which “takes these user intents, rolls them together into a giant signed transaction”. The bundler supplies the gas and submits the transactions to the network via new alt mempools.
This “allows wallets to do much more powerful things on behalf of end users, but it also creates all sorts of new possibilities and new threats potentially at the core of the network. That’s driving a renaissance in wallet innovation that’s necessary. There’s certainly room for a lot of innovation.”
Why Abstraction is a Game Changer for Web3 Apps
In a meta transaction, in which someone other than the user pays the gas fees, the user experience is simplified beyond being able to pay with methods other than the native coin. Whether you’re gaming, trading, or engaging with decentralized finance (DeFi) protocols, abstraction ensures a consistent experience across blockchains without having to be concerned about calculating and paying gas fees.
“You can provide Web2-like transaction experiences, but have it go on Web3,” Cutler said.
For example, an artist can reward fans with exclusive experiences via a non-fungible token (NFT), “but that requires a superfan be crypto-aware, have a wallet and know what it is.”
Instead, an artist could work with a platform such as Spotify, which “uses their credit card number, and the credit card becomes an account abstraction wallet. So you have a private key associated with your credit card wallet, and you can literally drop an NFT into a Visa card.”
The fan could then show their credit card at an event, and the asset associated with it would give them access to a VIP area. They could also sell, share, or leverage the NFT.
“Suddenly, these experiences get wide open, all enabled by Web3, but massively simpler for all members of the supply chain,” Cutler said. “We’re going to see the rise of intent-based wallets. Most users are not going to be aware that they’re moving from one to the other – it’ll feel very similar to the end user.”
“There’s a lot of conversation about where the next billion users come from, and it’s either going to be bottom-up organic growth, or it’s going to be viral applications that bring new people into the ecosystem.
“Or it’s going to be top-down inorganic growth where we’re going to meet users where they already are, like existing credit cardholders or existing brokerage account holders,” Cutler said.
“There’s suddenly these things that you already have and know and use and are familiar with will get superpowers because account abstraction allows them to become conversant and usable and secure in this Web3 environment.”
The Bottom Line
The complexity of wallets and the necessary evil of gas fees are stumbling blocks to the future, but burying transaction fees out of sight reduces barriers to entry for non-technical users, fostering increased accessibility and broader adoption.
This is set to drive Web3 adoption, as users can participate without having to understand or be concerned about transaction fees.
Users can engage seamlessly with a wider range of decentralized applications within specific projects, such as gaming or NFT collections, without having to hold various cryptocurrencies purely to cover the gas fees.
