Fee Abstraction

Context

The concrete use cases which motivated this module include:

• The desire to use IBC token as transaction fees on any chain instead of having to use native token as fee.
• To fully take advantage of the newly represented Osmosis swap router with the ibc-hooks module and the async-icq module.

Description

Fee abstraction modules enable users on any Cosmos chain with IBC connections to pay fee using ibc token.

Fee-abs implementation:

• Fee-abs module imported to the customer chain.

The implememtation also uses Osmosis swap router and async-icq module which are already deployed on Osmosis testnet.

Prototype

Firstly, we narrow the feature of fee-abs from allowing general ibc token as tx fee to allowing only ibc-ed osmosis as tx fee. If thing goes smoothly , we'll work on developing the full feature of fee-abs.

Fee-abs mechanism in a nutshell:

1. Pulling twap data and update exchange rate:

• Periodically pulling twap data from osmosis by ibc-ing to async-icq module on Osmosis, this twap data will update the exchange rate of osmosis to customer chain's native token.

2. Handling txs with ibc-osmosis fee:

• The exchange rate is used to calculate the amount of ibc-osmosis needed for tx fee allowing users to pay ibc-osmosis for tx fee instead of chain's native token.

3. Swap accumulated ibc-osmosis fee:

• The collected ibc-osmosis users use for tx fee is periodically swaped back to customer chain's native token using osmosis.

We'll goes into all the details now:

Pulling twap data and update exchange rate

For this to work, we first has to set up an ibc channel from feeabs to async-icq. This channel set-up process can be done by anyone, just like setting up an ibc transfer channel. Once that ibc channel is there, we'll use that channel to ibc-query Twap data. Let's call this the querying channel.

The process of pulling Twap data and update exchange rate :

Description : For every update exchange rate period, at fee-abs BeginBlocker() we submit a InterchainQueryPacketData which wrapped QueryArithmeticTwapToNowRequest to the querying channel on the customer chain's end. Then relayers will submit MsgReceivePacket so that our QueryTwapPacket which will be routed to async-icq module to be processed. async-icq module then unpack InterchainQueryPacketData and send query to TWAP module. The correspone response will be wrapped in the ibc acknowledgement. Relayers then submit MsgAcknowledgement to the customer chain so that the ibc acknowledgement is routed to fee-abs to be processed. Fee-abs then update exchange rate according to the Twap wrapped in the ibc acknowledgement.

Handling txs with ibc-token fee

We modified MempoolFeeDecorator so that it can handle ibc-osmosis as fee. If the tx has osmosis fee, we basically replace the ibc-osmosis amount with the equivalent native-token amount which is calculated by exchange rate * ibc-osmosis amount.

We have an account to manage the ibc-osmosis user used to pay for tx fee. The collected osmosis fee is sent to that account instead of community pool account.

Swap accumulated ibc-tokens fee

Swap with Osmosis's tokens

We use osmosis's ibc hook feature to do this. We basically ibc transfer to the osmosis crosschain swap contract with custom memo to swap the osmosis fee back to customer chain's native-token and ibc transfer back to the customer chain.

Swap with others ibc-tokens

We use packet-forward-middleware to do this. The ibc-tokens will be transferred to the host chain with the specific MEMO to forwarding transfer to osmosis crosschain swap contract. After that, Osmosis chain will swap to customer chain's native-token and ibc transfer back to the customer chain.

Resources

• Main repo: https://github.com/notional-labs/fee-abstraction
• Contract repo: https://github.com/notional-labs/feeabstraction-contract