On Blockchain Metatransactions

Abstract: In cryptocurrencies, transaction fees are typically exclusively paid in the native platform currency. This restriction causes a wide range of challenges, such as deteriorated user experience, mandatory rent payments by decentralized applications, and blockchain community rivalries (e.g., coinism). Ideally, in a truly permissionless blockchain, transaction fees should be payable in any other cryptocurrency via so-called metatransactions. In this paper, we formalize metatransactions, review existing ideas, and describe novel metatransaction design approaches. Under the assumption of sufficient market liquidity, we argue that metatransactions do not lower the security of cryptocurrency platforms. However, without changing the underlying blockchain, metatransaction designs typically increase transaction costs and reduce the blockchain transaction throughput.