YziLabs Invests in Derivatives Trading Platform KiloEx to Explore High-Speed Trading

Source: KiloEx

Gas: The Culprit Hindering On-chain Prosperity

Starting from the DeFi summer, on-chain finance has been developing for four years. However, to this day, centralized exchanges still hold the majority of liquidity and more web3 users. The reasons for this are quite evident: centralized exchanges have some obvious advantages such as simpler operations and very fast transaction processing. In contrast, decentralized exchanges (DEX) turn most web3 users away due to their obscure concepts, complex operations, and numerous steps.

Furthermore, DEX are even more disastrous for new users. For example, almost all web3 new users have the same question: what is gas? Which token should I buy as gas? How much gas specifically needs to be prepared? In fact, these are just the first steps to understand when using a DEX, yet they are enough to intimidate most users and make them hesitant.

Moreover, using a DEX first requires users to learn how to use a wallet and understand how to sign transactions. For some actions, users even need to sign multiple times to complete an operation. Transaction execution time can also become very slow for various reasons. Clearly, these are things we do not want to see.

Exploring the Current Gasless Transaction Model

As a perpetual contract DEX invested in by YziLabs (formerly BinanceLabs), KiloEx is actively exploring how to achieve gasless transactions to help users easily complete transactions on the platform.

Currently, the mainstream gasless implementation methods mainly include the following two:

1. EOA Based Paymaster

This solution was proposed by the BNB Chain team based on the EIP-4337 protocol (an account abstraction through Entry Point contract specification).

EIP-4337 allows a third party to pay the user's transaction fees, enabling users to complete transactions without holding ETH. However, although EIP-4337 introduces a Paymaster mechanism suitable for smart contract wallets, there are still many users in the EVM ecosystem relying on EOA accounts (externally owned accounts). Therefore, BNB Chain has proposed an innovative Paymaster solution designed specifically for EOA, eliminating the need to migrate EOAs to smart contract wallets to enjoy transaction fee payment and a better user experience. The goal of this solution is to make gas fee payment more widespread, making blockchain interactions for BNB Chain users more convenient and cost-effective.

In this scheme, there has been a significant change in how transactions are processed. Validators no longer individually validate the Gas price of transactions in a block; instead, two separate roles, Builder and Proposer, work together. The Builder is responsible for packaging the block, which includes selecting transactions from the public transaction pool and private transaction stream and combining them. The Proposer validates the block, selecting the most profitable block from the blocks proposed by multiple Builders to be included on-chain.

The specific process of this scheme is as follows: first, users initiate transactions using a compatible wallet and set the Gas price to 0 so that the transaction may potentially receive sponsorship. The wallet then submits this 0 Gas transaction to the Paymaster (a mechanism that supports transaction sponsorship for processing).

Subsequently, the Paymaster verifies if the transaction meets the preset sponsorship criteria, which may involve criteria such as sender or recipient addresses, token types, or transaction amounts. If the transaction meets the sponsorship requirements, the Paymaster creates a sponsorship transaction and sets its Gas price. The original transaction and the sponsorship transaction are then bundled together as a transaction bundle. If the transaction does not meet the sponsorship requirements, it is either rejected or returned to the user for regular transaction processing.

Once the bundling is completed, this transaction bundle is submitted to multiple MEV Builders for processing. MEV Builders select a suitable transaction bundle and incorporate it into a block proposal. Subsequently, the Proposer (block validator) selects the most profitable block from multiple block proposals for on-chain inclusion. Finally, the user's original transaction and the sponsor's transaction are atomically executed to ensure integrity.

Upon completion of the transaction, the Paymaster manager updates the sponsor's account and deducts the corresponding Gas fee. The entire process relies on the Proposer-Builder Separation (PBS) architecture of BEP322, ensuring the efficiency and security of Gas sponsorship to provide users with a smoother blockchain interaction experience.

However, this approach is limited by whether wallet projects have integrated this component. As of now, mainstream wallets such as MetaMask still do not support this feature, leading KiloEx to abandon this scheme.

2. ERC-2771 (Meta Transaction)

First, let's explain what a Meta Transaction is. In the Meta-Transaction mechanism, users can complete transactions without holding gas tokens by relying on Gas Relay to pay the Gas fee on their behalf, enabling seamless on-chain interaction. The entire process is a collaboration among the Transaction Signer, Gas Relay, Trusted Forwarder, and Recipient contract.

First, the Transaction Signer is responsible for locally signing the transaction, which can be completed through the main wallet. It is important to note that the Transaction Signer does not directly interact with the blockchain. It only performs encryption operations locally and submits the encrypted signature data to the backend through an interface, rather than broadcasting it to the blockchain directly.

Subsequently, the Gas Relay (backend service) receives the transaction signature data and is responsible for submitting the transaction to the blockchain. The Gas Relay interacts with a Trusted Forwarder to ensure that the transaction can be validly executed. The Trusted Forwarder contract validates the legitimacy of the signature before on-chain submission and prevents replay attacks. Once the validation is successful, it interacts with the recipient contract to finalize the transaction execution.

KiloEx Instant Transaction Solution: 1CT wallet + Meta Transaction

The 1CT wallet achieves more efficient one-click transactions by eliminating the need for user interaction with the wallet during transactions, significantly reducing the transaction time. It uses a derived Externally Owned Account (EOA) wallet to submit transactions and combines a Trade Delegation mechanism to ensure transaction security and convenience.

When users first use the 1CT wallet, they need to set a 4-digit PIN and use their wallet to prefix message sign the PIN. The website then uses this signed message as a seed to generate a Secp256k1 key pair, encrypts the key material, and stores it on the user's local device. With the introduction of the transaction authorization mechanism, users no longer need to manually sign each transaction but have the 1CT wallet automatically submit transactions, greatly improving transaction efficiency.

Comparing various solutions and considering practicality, KiloEx ultimately adopts the Meta-Transaction approach to achieve gasless transactions. Building on this foundation, KiloEx combines the 1CT wallet to provide users with an exceptionally smooth transaction experience.

For KiloEx users experiencing the instant transaction mode, they only need to sign to create the 1CT wallet, authorize the quota, and confirm the binding relationship before the initial transaction. Subsequent transactions do not require waking up the main wallet for signing again. Moreover, compared to the traditional path, the transaction processing speed of the instant transaction mode is faster. Most importantly, users do not even need to hold gas tokens in their wallets, only stablecoins such as USDT/USDC are required to complete contract transactions.

This article is a contribution and does not represent the views of BlockBeats.