With more than a year having flown by, since the inception of ERC-4337, the space has evolved to cater all segments and has ironed the UX standards for years to come.

The backbone of all transactions happening on this standard is a UserOp. In simple terms, UserOps are like customisable transactions that allow developers to define unique logic for how and when they should be executed. This enables a more flexible and powerful transaction model than the traditional transactions we are accustomed to in blockchains like Ethereum.

The major driver of these UserOps are the powerful Paymasters. Paymasters, in the context of ERC-4337 are smart contracts themselves that verify and/or sponsor a transaction for an end user based on certain rules or policies administered by the dApp. This way the end user is abstracted away from holding native tokens of every network they interact with.

In this article, we will:

• Understand the landscape of growth of UserOps and the role of Paymasters.
• Explore different type of Paymasters.
• Analyse Sponsorship and Token Paymasters data
• Check out the top dApps that have enabled the growth of Paymaster backed UserOps.

Almost 20M UserOps in AA since inception, and a MoM average growth of 17% over the last 6 months

User Operations, or UserOps, have experienced tremendous growth over the past year, serving as a testament to the potential growth awaiting the industry.

From doing a few thousands of them in a month, to averaging 2.2M+ UserOps in the last 6 months, the industry has collectively moved forward. April 2024 showcased the largest month of UserOps we’ve seen since the launch of ERC 4337.

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One of the biggest enabler of UserOps, apart from Smart Accounts, are the Paymasters. Paymasters abstract gas complexities with flexible payment options to increase user acquisition and retention.

93.6% of UserOps have been enabled by Paymasters

Whilst it’s true that every Payamster UserOp is a UserOp, its not true every UserOp will be a Paymaster one. What AA traction has shown us is that almost all the UserOps processed have been through a Paymaster. If you look at the last 6 months specifically, that number rises to 97%. If a UserOp doesnt go through a Paymaster, it basically means the user paid gas fees in the native token for their transaction.

Here’s a breakdown of how this percentage looks across our favourite networks:

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Two types of Paymasters - Sponsorship and Token

The Sponsorship paymaster type is designed for dapps or external parties who wish to selectively sponsor the gas fees for their users. This type of paymaster integrates both an off-chain service and an on-chain contract. For example, consider a user initiating a transaction on anichess.com. The dapp first sends the transaction details to the off-chain paymaster service to verify if the transaction meets the sponsorship conditions. Once verified, the service provides an off-chain signature that is set in the UserOp. Once this userOp is executed by any bundler, the on-chain paymaster contract then verifies the signature and agree to pay the gas fee for the UserOp.

The Token paymaster type is used when gas fees can be paid using an ERC-20 token. The interface, be it a dApp or a wallet will show to the user the different gas payment options they have for the transaction they’re making. For example Trust Wallet have launched their smart contract wallet called Swift, which allows users to pay their gas fees across 300+ different tokens. It means if a user does not have a native token of a chain but has other tokens in its wallet, they can use the other tokens to pay gas fees for their transactions.

Of course, whoever is running the token paymaster is taking the risk as they are paying for gas in the native token of the chain whilst receiving different tokens in return.

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The above graph gives a great indication as to how Paymasters are best being utilised, and as we can see Sponsorship Paymaster has been the major use case.

$2.9M in gas fees have been processed by Sponsorship Paymasters

The major use case of paymasters is the ability to sponsor transactions on behalf of the user and when we look at sponsored gas, it gives validation to the idea and continues to add weight to the product market fit for Paymasters.

Here’s a breakdown of Paymasters and the total gas spent (as of 7th May):

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We can see Biconomy leading in terms of total number of Paymaster UserOps, currently holding marketshare of over 50% whereas StackUp leads in terms of total sponsored gas by Paymasters.

Regarding total sponsored gas, we can closely observe the following charts:

The massive surge in August 2023 was nothing but an indication of what the future of Paymaster UserOps would look like and rightly so, the space has grown to consistently hit the highs of August 2023 in 2024.

In 2024, the monthly average of sponsored gas coming from Paymaster UserOps is around $280k.

The above is on the dollar value of gas, the following chart showcases the marketshare on the number of Paymaster UserOps:

Observing the table and chart above, Biconomy right now is the leading solution for the Sponsorship Paymaster, where developers and projects across defi, social fi, game fi and more utilise Paymasters to sponsor gas and provide a seamless UX for their users.

Pay for gas in any ERC20 token

A total of 1.6M UserOps have been paid for in gas by an ERC20, it is still a small number considering the potential of the use-case the Token Paymaster unlocks, and comparing it to the 20mn UserOp figure we currently see in AA.

From being non-existent in the early days of 4337 to growing month on month, the adoption of Token Paymaster is generally on the rise. The adoption of Token Paymaster is equivalent to giving freedom to developers and users to keep their investments safe and pay gas with a token of their choice. Instead of paying gas in Eth, why not in stables and save your Eth? Not financial advice by the way!

Looking at the chart below, almost 14% of all UserOps go through a Token Paymaster in 2024.

Albeit its early, adoption is rapidly growing! It’s great to see initial traction where projects and companies are at the forefront of utilising the novel token paymaster. Alfafrens on Base, CyberConnect, Eesee on Blast, Trust Wallet, Obvious Wallet and Kwenta are a few examples who have leveraged the full power of the Token Paymaster to provide their users a seamless experience using their dapp and wallet.

Theoretically, Token Paymasters can offer gas payment options in any token. The paymaster itself should be responsible for dealing with a mixture of assets it brings in exchange for paying gas in the native token for the transaction to go through. At Biconomy we support over 300+ tokens in our token paymaster.

In our recent integrations, we’ve seen more than 66 ERC20s being used to pay for gas using the Token Paymaster with the most popular choices being stablecoins covering ~98% of Token Paymaster UserOps, until Alfafrens came along on Base with the whole app using Degen as its base currency and thus the gas token itself is Degen so users don’t need to top up ETH on their wallet to pay for gas.

Believe it or not, Degen is the most popular token we’ve seen being used as gas. As of publication, already 616k transactions used Degen to pay gas! After Degen, the most widely used token that is not a stablecoin being used for gas is TWT, given the launch of Trust Wallet Swift, TW’s new smart wallet. Biconomy has enabled users to pay gas in a wide variety of ERC20s such as FTM, DODO, INJ, LINK and many more. If you want to experience the magic of Token Paymasters as well, head over to Biconomy Paymast Dashboard.

Token Paymaster crosses $400k in Volume

Total Token Paymaster Volume at Biconomy has crossed $230k, as of 7th May. This represents 29% of total Biconomy paymaster volume ($530k vs $230k for sponsorship paymaster and token paymaster respectively) which is the highest we’ve seen so far.

As of publication, total volume of token paymaster at Biconomy, largely driven by Alfafrens, has crossed $400k in volume.

Let’s look at a couple of examples of dApps utilising Token Paymasters:

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AlfaFrens

We already talked a bit about Alfafrens, lets get deeper into it. Users do benefit from specific sponsored transactions, but most transactions in Alfafrens require users to pay gas in Degen. Given the apps growth, it has surpassed the stablecoin traction we’ve seen. As of 7th May, 55 ETH worth of Degen, equating to $164k of volume, was used to pay gas on Alfafrens! As of publication, its at 110 ETH worth of Degen with no signs of stopping.

Daily Chart of Volume driven by the biggest SocialFi dApp on Base:

Trust Wallet

Trust Wallet, one of the biggest names in the industry have adopted this solution by Biconomy. If you’ve used the Trust Wallet Swift, you would have experienced Token Paymasters where Trust Wallet users have paid for gas in 45+ tokens thus far using Biconomy’s robust infrastructure. Trust Wallet does use other providers such as Stackup along with Biconomy, so the data below only showcases the volume processed by Biconomy.

Eesee

Eesee is one of the biggest dApps on Blast. On Eesee, the currency on the dapp is actually USDB, meaning it makes sense that gas should also be paid in USDB. Given this tailored UX Eesee enabled for their users, essentially paying gas in a stablecoin, it has driven transactional token paymaster volume of ~$60k.

From what we’re aware on the market, Biconomy’s token paymaster provider is the largest so far in terms of number of integrations with different applications spanning different networks.

Before we conclude, its also interesting to note that although Account Abstraction (with ERC 4337) has been live since Feb 2023, 83% of the Paymaster UserOps growth has only come in the last 6 months alone which is a testament to the adoption of account abstraction.

Conclusion

Account abstraction adoption is not really bad, but its also not great either as we can we see majority of the growth have come from Paymasters mainly. What is clear is that use cases for sponsored transactions is transitioning from a ‘nice to have’ to a ‘must to have’ for any consumer facing application and wallet.

We can definitely expect volumes to increase as we see more apps and chains willing to sponsor gas fees in order to streamline the end user’s UX.

What is surprising is seeing the slower adoption of the token paymaster where the majority of volume and usage comes a couple of main sources. If we expect to make payments clean and easy, then we can expect stablecoins to rise in volume and users paying their fees in stablecoins. Apps that have a favoured in app currency, we can also expect gas to be also paid in those tokens to ensure a streamlined UX. Overall, we’ll be seeing many ways of dapps enabling intuitive UX for their users, and all the above is only just the beginning!

We’re super excited for the AA market. Yes it’s still early, yet its on the rise!

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This piece was authored by Ahmed Al-Balaghi and Shantanu Gupta

Thanks to Kofi, David Kim, Ryan Li, Shruti Gandhi for reviewing and providing feedback.

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