Outside of scalability, one of the biggest things holding crypto back is usability. Right now, there’s a massive barrier-to-entry for everyday users looking to access decentralized applications on Ethereum. It’s the need to pay gas. Don’t get me wrong either, there’s a fundamental need for transaction fees in the network to properly secure the network. But with this, in order to use any applications, users have to hold ether to pay for gas. This isn’t a problem for most experienced Ethereum users. However, for new users, this presents a serious barrier-to-entry. The need to pay gas when interacting with dApps requires every user to go out and buy ether. While this is great in terms of price action and network economics, it does create some friction as users likely have to acquire the asset through a fiat on-ramp. This generally means completing KYC on major exchanges, like Coinbase, linking your bank account or debit card, providing your social security number, and uploading a selfie.
The need for users to have ether to access DeFi applications and other dApps creates a considerable amount of friction in terms of accessibility and usability. Even then, once users have Ether in their wallet, they may be required to have some knowledge about gas prices, especially when the network is congested. In short, the need for paying gas (i.e. transaction fees) presents a significant barrier-to-entry for driving mass adoption.
The answer to this problem? Meta transactions.
Meta Transactions Enable Gasless Transactions
In essence, meta transactions allow users to interact with a public blockchain without paying a transaction fee. This leads to a more seamless UX as users no longer have to understand the inner workings of public blockchains and market dynamics for transaction fees.
At its core, meta transactions are nearly identical to regular network transactions but with the addition of a proxy contract, also known as a relayer. With meta transactions, users still use their signature to send and authenticate transactions. The difference is, once this happens, the transaction is now managed by the relayer who pays the gas and sends the transaction to the receiving address.
By leveraging meta transactions, developers can significantly streamline the user experience for their applications. Ultimately, this feature brings the ecosystem closer to a frictionless user experience when accessing web 3.0 and DeFi.
The Two Types of Meta Transactions
We’ve seen some applications deploy a single relayer or a select few relayers to facilitate meta transactions within their contracts. Given Decentralized Finance (DeFi) and the notion of trustless transactions, centralized relayers contradict the movement as a centralized relayer acts as a single point of failure for the network. In other words, developers can censor transactions or if the relayer goes down, the application may go down with it.
While this is the easiest way for application developers to integrate meta transactions, it does go against the ethos of decentralized networks.
It goes without saying that in a decentralized network, decentralized relays are the ideal solution. Decentralized relayers could watch the transaction pool and act as secondary miners. However, they would still suffer from a synchronization problem. With meta transactions, a relayer can only process one transaction at a time where each relayer will only pick the most profitable transaction. This would result in a saturation of miners competing for the most profitable transactions, where only one of the miners would succeed while all others would fail and lose money on their attempt.
While decentralized relayers are the penultimate solution, they do present some problems in terms of incentivization schemes and a lack of synchronization among miners. Luckily for us, the Ethereum community is filled with brilliant people who love to solve challenging problems like these.
Who’s Pioneering Meta Transactions?
The most well-established initiative pioneering meta transaction is Open Zepplin’s Gas Station Network (GSN). The GSN is an open-sourced community-driven effort comprised of a consortium of different crypto projects pushing for mass adoption. The GSN is an open-sourced SDK creating a decentralized and trustless mechanism for leveraging meta transactions for any Ethereum application. With the GSN, relays will take care of paying for verified transactions, allowing users to quickly onboard and easily access their favorite dApp.
How does it work?
The Gas Station Network consists of relayers, also known as gas stations. Gas stations can accept etherless transactions from users, filling them with gas by signing them, and then returning the transactions to the users and relaying them to the network. With this architecture, trust can be minimized in a decentralized fashion. A single open-source smart contract, called the RelayHub, acts as a registrar for relays and facilitates transactions between the relays and smart contracts.
The RelayHub holds small deposits from dApps and developers in order to compensate relayers for processing transactions. Relayers are required to stake ETH in the RelayHub when they register to prevent certain DoS and other censorship attacks. With this, honest relays can earn transaction fees while malicious relays can have their stake slashed.
From the user’s perspective, everything from selecting a relayer and the delivery of the transaction to the network is done transparently, autonomously and in a timely manner. Ultimately, this leaves users with a seamless UX when interacting with their favorite applications.
Meta transactions significantly abstract the complexities of gas away from the user. As a result, dApp onboarding is made easy and users can begin enjoying the massive benefits that web 3.0 applications provide. Over the next few years, it will come as no surprise if meta transactions become common practice when developing new decentralized applications.
More importantly, meta transactions may be the key to driving more adoption to DeFi applications. Being able to hold Dai and access emerging DeFi applications without ever having to worry about holding Ether or paying gas will likely be a major factor when it comes to mass adoption.
Analyst at Bankless – one of the leading resources for open finance. Lucas is an active contributor to the DeFi ecosystem with appearances in other notable DeFi outlets including The Defiant and Our Network. He has years of experience working with dozens blockchain and token startups where he focused on token economics, marketing, and growth.