Ethereum Paymaster_ Who Actually Pays the Gas

Ethereum Paymaster: Who Actually Pays the Gas?

The entity footing the bill is never the user signing the transaction — that is the entire point of the mechanism. A paymaster is a smart contract that agrees to sponsor gas fees on behalf of a user, and the real money flow depends entirely on which of the four paymaster archetypes is running the show. Most people assume it is free money. It is not. Somebody upstream is always paying, and that somebody is usually extracting value in ways you have not priced in yet.

The Four Paymaster Models and Their Hidden Balance Sheets

Verifying paymasters are the most common. A backend signs off on each UserOperation, and the paymaster contract deposits ETH into the EntryPoint. Who funds that deposit? In gambling and high-frequency betting dApps, it is the operator. They eat the gas to keep users in the funnel. The catch: every sponsored transaction is a customer acquisition cost, and sharp players know how to exploit it. Token paymasters take ERC-20 tokens instead of ETH. Sounds clean until you realize the exchange rate is set by the dApp, not the market — that spread is where the house edge hides.

Then you have the sponsoring paymaster, subsidized by protocol treasuries or venture capital. This is where things get spicy. Subsidies dry up. When they do, the user suddenly faces the real gas bill, and retention collapses. The fourth type is the pre-funded paymaster tied to a relay or bundler, where gas costs are bundled into a service fee. In every single model, the paymaster must maintain a non-zero ETH stake in the EntryPoint, or the transaction reverts. That stake is the collateral, and it is where the real risk sits.

Where the Money Actually Bleeds

Here is the part auditors catch and marketers bury: a paymaster can be drained through simulation exploits. If the paymaster validates a UserOperation without proper simulation, an attacker can craft a call that passes validation but fails execution — gas is still consumed, and the paymaster pays for a reverted transaction. In casino-style dApps with high transaction volume, this is a silent bleed. Bundlers also front gas to the EntryPoint and get reimbursed after. If the paymaster's deposit runs dry mid-batch, the bundler eats the loss and blacklists the paymaster. Reputation systems on the bundler side are brutal.

The gas accounting itself is a trap. Paymasters must prefund based on the maximum gas the UserOperation could consume, not what it actually uses. The difference is locked in the EntryPoint until the transaction settles. For a paymaster sponsoring thousands of micro-bets per hour, that locked capital is enormous. Operators who fail to model this float requirement get rekt during volatility spikes. The actual payer is the paymaster's treasury, and the treasury is funded by fees, token spreads, or plain old marketing budgets.

Stake, Slashing, and the Real Counterparty Risk

Every paymaster must stake ETH in the EntryPoint. That stake is slashable if the paymaster misbehaves — specifically if it throttles or censors UserOperations, or fails to pay. For gambling operators running paymasters, this means a single misconfigured validation rule can trigger slashing and a public reputation hit. Bundlers monitor paymaster behavior and will drop a throttled paymaster within minutes. The counterparty risk is not the user. It is the bundler, the EntryPoint slashing logic, and the token price if the paymaster accepts volatile ERC-20s as payment.

Token paymasters accepting a gambling dApp's native token are essentially running an unhedged position. If the token dumps 40%, the paymaster is still on the hook for ETH gas costs. The spread they charged no longer covers the cost. This is exactly how several paymasters in the iGaming space went insolvent in 2024. They sponsored transactions, accumulated a mountain of worthless tokens, and could not top up their EntryPoint deposit. The users got free bets until the music stopped.

The Float Game Nobody Prices Correctly

Paymasters that sponsor high-frequency betting transactions must maintain a deposit buffer sized to the worst-case gas spike, not the average. Ethereum gas can 10x in minutes during a hot NFT mint or a liquidation cascade. A paymaster with a thin buffer will fail to sponsor, and the bundler drops the UserOperation. The user sees a failed bet. The operator sees churn. The paymaster sees its deposit drained by failed simulations and reverted calls. The only winners are the bundlers, who collect their fee regardless.

Who pays gas? The paymaster's treasury pays in ETH. That treasury is filled by the operator, the token spread, or a subsidy. The user pays in attention, data, or a worse exchange rate. There is no free lunch — only a float game where the slowest to model the capital lockup gets liquidated.