What Are Meta Transactions Without Fees?
Last week we onboarded friends at Tezos. The hardest part was explaining transaction fees, i.e. why you need to buy tez to send other tokens, buy NFTs and put tokens into liquidity pools.
While giving explanations, we learned about meta transactions, a mechanism where transaction fees are paid by a third party. In this post, we’ll discuss how it works and why it might be a great solution for the mass adoption of crypto.
Why Do We Need Transaction Fees?
Transactions and smart contract calls are, in fact, requests to change the blockchain state. When they are processed, the baker does the work: it calculates the result of the transaction, finds the desired records in the blockchain and smart contract stores, and overwrites them.
According to the rules of the protocol, the baker’s work is paid for by the sender of the transaction, and, what is more, mandatorily in the protocol’s native token, tez.
Can I Pay the Fees in Other Tokens or Fiat Money?
You can if you use the meta transaction mechanism. They work like this:
- The user creates a transaction request, signs it with their key and passes it to the relay.
- The relay wraps the user’s request in its own transaction and passes it to the contract.
- The contract unwraps the transaction and fulfils the user’s request.
As a result, the relay pays native transaction fees in tez instead of the user, and in turn can charge it in any token. A similar principle has long been used by payment providers and fiat-to-crypto exchanges, which incorporate transaction fees into the exchange rate, i.e. the user pays the fees in fiat money.
How Can Meta Transactions Boost Mass Adoption?
First, they will make blockchain protocols more convenient for making payments. Last week, Tether announced that USDT transactions have surpassed VISA and MasterCard ones in 2022.
Meta transactions of stablecoins, with fees paid in the same stablecoins, could attract even more users who need a secure, stable and cheap means of payment.
Second, meta transactions are needed to implement the best decentralized exchanges. For example, when trading BTCUSDT futures, users always pay trade commissions in USDT, and when selling Bitcoin on the BTC/USDT spot market, they pay in Bitcoin. With meta-transactions, DEX and the decentralized derivatives marketplaces on Tezos would be able to implement a similar commission mechanism without forcing traders to mandatorily use tez.
Third, meta transactions would make it easier for users to onboard rollup and sidechain-based applications. With low transaction fees, project developers could even subsidize a certain number of transactions.
Does Tezos Have Meta Transactions?
There is no standard solution yet, but some projects are already working on simplifying user onboarding. For example, fxhash recently integrated NFT buying with regular bank cards via ApplePay.
In addition, the Rarible marketplace has integrated the EURL stablecoin for the purchasing of NFTs on Tezos.
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