EIP-3074: Transforming Ethereum Transactions Through Sponsored Transactions

What is EIP-3074, and how does it work?

The Ethereum Virtual Machine (EVM) obtains two critical operations: AUTH and AUTHCALL as a result of EIP-3074's implementation. These processes enable a third party to sponsor a transaction, allowing a different organization to bear the obligation of paying for the gas expenses associated with a user's transaction. 

• AUTH
  Through this action of AUTH, a particular invoker contract is given permission to carry out transactions on the user's behalf. It can be withdrawn at any moment and is kept in the user's account. 
• AUTHCALL
  By performing the AUTHCALL action, the authorised invoker contract can make calls on the user's behalf while guaranteeing that the context of the call is the same as if the user had done it themselves. 

How Does EIP-3074 Work?

The mechanics of EIP-3074 can be broken down as follows into several key steps:

• Authorization
  By employing the AUTH action, a user gives a contract permission to act on their behalf. This agreement can be a service that provides transaction sponsorship or a decentralised application (dApp).
• Transaction Creation
  Instead of sending the transaction straight to the Ethereum network, the user interacts with the invoker contract when they wish to complete a transaction. The user does not have to include petrol prices or limitations when they sign the transaction.
• Gas Fee Sponsorship
  The transaction is subsequently sent to the Ethereum network by the invoker contract. It essentially sponsors the transaction by paying the necessary petrol fees on the user's behalf.
• Execution as the User
  The invoker contract can behave as though it were the user by executing the transaction using the AUTHCALL procedure. This guarantees that the transaction is handled with the same context and permissions as if the user had started it themselves.

How does EIP-3074 enable sponsored transactions?

Users can sign transactions using EIP-3074 without mentioning gas prices or limitations. The transaction is then sent to the Ethereum network on the user's behalf by a third-party sponsor, who also pays the required gas fees. This mechanism has the following advantages: 

1. Improved User Experience
   It removes the necessity for users to track their own Ethereum balance for gas expenditures, therefore simplifying interactions with decentralised apps (dApps). 
2. Increased Accessibility
   By removing the gas fee obstacle, EIP-3074 can onboard new users who might not be familiar with blockchain technology. 
3. New Business Models
   Developers can create dApps that pay for transactions or offer subscription services, including petrol costs, to raise user involvement.
4. Enhanced Liquidity
   Without having to worry about gas prices, users may shift assets more frequently, which would improve price discovery and make markets more efficient. 

Addressing Existing Issues

The Ethereum users face two significant challenges, and the EIP-3074 intends to resolve them by its exponential strengths, the challenges being the complexity of existing solutions, such as meta-transactions, and the exorbitant gas costs. Gas expenses have become a substantial source of frustration, particularly during network outages, and they often surpass the cost of minor transactions. To resolve these issues, current solutions frequently involve complex off-chain systems and necessitate User confidence in third parties.

By eliminating the need for complicated systems and lowering user trust requirements, EIP-3074 offers a more sophisticated and safe solution by establishing a native mechanism for sponsored transactions within the Ethereum protocol.

Security Considerations

Even while EIP-3074 has many advantages, there are also significant security issues. Crucial factors include: 

• Secure Invokers
  The design of invoker contracts must guard against misuse and illegal access. Among the best practices are time-locked authorisations and multi-signature schemes.
• Phishing Protection
  To help users confirm the legitimacy of invoker contracts and reduce potential dangers, a phishing protection registry is also added.

EIP-3074 and The Ethereum Ecosystem

The Ethereum ecosystem might be highly influenced by EIP-3074's potential integration, which is enormous. It can increase adoption and innovation by streamlining user interactions and making them more accessible.

The proposal is consistent with broader initiatives towards account abstraction, which aim to make Ethereum accounts more flexible and user-friendly. EIP-3074 makes this easier by allowing third parties to cover gas fees, hence simplifying user interactions with the Ethereum network. The implementation of AUTH and AUTHCALL operations also paves the way for future advanced functionalities.

When be Will EIP-3074 Implemented?

EIP-3074 is still in the proposal stage as of May 2025 and piques significant Ethereum community curiosity. Talks about its architecture, possible security concerns, and the best approach to do sponsored transactions while maintaining network integrity abound.

Once consensus is obtained, EIP-3074 is likely to be incorporated in a future Ethereum upgrade, maybe alongside other key proposals such as ERC-4337 (which focuses on transaction sponsorship without requiring changes to existing dApps).

Linking Account Abstraction

The more general concept of account abstraction, which is closely related to EIP-3074, makes the user experience of the Ethereum network easier to access and more straightforward. Increasing Ethereum's general use and utility in conformity with other efforts, such as ERC-4337 and EIP-5003, is the goal of this proposal, which is not an entirely independent endeavour.  

What to Expect in the Future

EIP-3074, in conjunction with forthcoming proposals such as EIP-7702, could be instrumental in the expansion of the account abstraction strategy, guaranteeing that users with current wallets can capitalise on the improvements in transaction processing and user experience within the Ethereum ecosystem. These improvised changes emphasize on creating a more inclusive and effective environment for all users, therefore benefiting Ethereum's future.

Conclusion

In Ethereum's shift to being a more user-friendly and easily accessible platform, EIP-3074 marks a major forward development. By use of sponsored transactions, this concept aims to transform user interaction with the Ethereum network, therefore facilitating increased involvement with distributed apps.

Stakeholders have to keep updated and engage in debates as the Ethereum community keeps growing and investigating the idea. Together with other projects, such as account abstraction, the effective execution of Ethereum Improvement Proposal 3074 might open the path for Ethereum's next stage of expansion and acceptance. As the network has a wider reach, we should expect a flood of fresh consumers and companies ready to use the special advantages provided by distributed technologies. Subscribe to our weekly newsletter at (add email address) to learn further about such important blockchain-related topics and other web3 development related themes.