How to Sponsor Transactions Using a Paymaster

Paying for transaction fees on a blockchain can be a hassle, but with the use of a paymaster, it doesn't have to be! In this post, we'll explore what paymasters are, how they work, and how you can set one up for your own use.

What is a Paymaster?

A paymaster is an entity that can sponsor gas fees for transactions on Ethereum-based networks through the use of account abstraction, as specified in the ERC-4337 standard. This enables users to pay for transaction fees in a variety of ways, such as with an ERC-20 token like the stablecoin USDC, a credit card, or subscription service, without having to hold Ether or sacrifice custody of their account.

How do Paymasters Work?

Paymasters work by abstracting the payment of transaction fees, allowing users to pay for their transactions in a way that is convenient for them. When a paymaster sponsors a transaction, it pays the transaction fees on behalf of the user. This can be done through an off-chain service that decides whether to sponsor transactions or through the use of a smart contract that automatically pays for transactions.

An ERC-4337 transaction, a UserOperation, can specify a Paymaster directly. If the Paymaster agrees to pay the transaction, the Paymaster will pay the gas fee. All of this is coordinated through the EntryPoint contract, a singleton that handles the execution and verification of ERC-4337 transactions. In some specific cases, Paymasters must also stake Ether with the EntryPoint for security.