Ethereum ERC-4337 ‘bundlers’ — How Hard is Joining the Network?

With the introduction of ERC-4337 and account abstraction, a new decentralized layer has been added on top of Ethereum to enable smart accounts — but infrastructure providers suggest it may be difficult to participate profitably right now.

On March 1, ERC-4337, also known as “smart accounts” or “account abstraction,” was deployed on the Ethereum mainnet. Smart accounts are essentially enhanced versions of Ethereum wallets. Smart contract wallets are already available, but they rely on centralized components. ERC-4337 alters this by introducing a distributed network of “Bundlers” and “Paymasters.”

A few subtle but significant changes are under the hood, including adding the “User Intent Layer,” according to Matt Cutler, co-founder and CEO of Blocknative, a core Ethereum infrastructure provider. An Ethereum transaction today, according to Cutler, consists of several distinct steps.

Users use their standard externally-owned account (EOA) or private key to compose a signed transaction, such as transferring a nonfungible token (NFT) to another user. This transaction is then sent to the public mempool, which can be thought of as a shared transaction queue, plucked out by a “Builder” who organizes it into a “profitable block.” The block is then proposed to a Validator, who proposes and publishes it on-chain, completing the transaction.

The new “User Intent Layer” is introduced before the current EOA step in ERC-4337.

This extra layer enables users to initiate more complex transactions in a single step. ERC-4337 makes this possible by introducing an “Alternative Mempool” a network of transaction Bundlers and a new way to earn fees.

A Bundler node functions similarly to the block “Builder.” Instead of assembling a profitable block by organizing signed transactions from the public mempool, a Bundler grabs User Operations, or userOps, from the Alt-Mempool to create the most profitable bundle, which is signed and submitted to the network as a single transaction. This is part of the newly added layer enabling smart accounts.

Bundlers are compensated for providing a much-needed service through userOp gas fees. While anyone can be a Bundler in theory, Cutler cautioned that being a successful one might be a different story.

Bundlers, like Builders, are “specialized actors” comprised of “relatively sophisticated development teams operating significant computational, storage, and networking infrastructure,” he explained.

“ERC-4337 is devoid of trust and permission.” So, if you’re technically savvy, go ahead and stand up and operate your own Bundler. The difficulty is that bundling is a competitive market. So you’ll be competing against relatively sophisticated teams heavily investing in becoming a competitive Bundler,” he explained.

“Bundlers are not the type of tooling you set up, forget about, and it starts printing money for you.” For example, we anticipate Bundling to be far more technically sophisticated than being a validator.” According to Cutler, there are already many open-source bundler code repositories.

The impact of ERC-4337 on Ethereum gas fees is still being debated, especially given the increase in transaction complexity associated with introducing the new User Intent layer. “While it is still too early to tell, my current expectation is that gas prices will not change significantly on average.” If ERC-4337 has an effect, it will be minor — either up or down. “We don’t expect transaction fees to go away or become 100 times more expensive overnight,” Cutler said.