Written by: 0XNATALIE
Since the beginning of this year, the community has started to discuss topics related to Gas fee derivatives. In June, Nethermind researcher Finn proposed a model for pricing Ethereum base fee options, attracting widespread attention from the community regarding Gas fee derivatives. This financial instrument provides participants in the Ethereum ecosystem with new means to cope with the uncertainty of Gas fee fluctuations, helping users hedge operational cost volatility and offering new speculative opportunities.
Base Gas Market: Bet on future Gas fee fluctuations
Recently, Alkimiya has built such a financial market on Base: Base Gas Market (not officially launched yet), allowing users to trade the fluctuations of Gas fees on the Base network and indirectly participate in changes in network economic activities. Alkimiya is a protocol that allows trading of block space resources (such as transaction fees), helping users hedge against fee fluctuations and providing more speculative opportunities by transforming blockchain transaction fees and other resources into tradable assets.
In the Alkimiya Base Gas Market, users can bet on the increase or decrease of the total Gas fees of Base by going long (LONG) or short (SHORT). If a user believes that Base's revenue will increase in the near future, they can bet on an increase in Gas consumption by going long; if they believe revenue will decrease, they can go short. Since these fees are charged by Base's sequencer, Gas consumption actually reflects the usage and revenue of Base. Therefore, this trading is essentially speculation on the future development trends of the Base ecosystem.
In this market, each pool corresponds to a time period, composed of all long and short positions during the same time period. All users participating in that time period will gather in the same pool. Users can enter this pool at any time, and exit and settlement will occur at the end of that time period, when rewards or losses will be determined based on changes in total Gas consumption.
For example, suppose A sees that Base has multiple airdrop events in the next two weeks and predicts that these events will significantly increase Base's total Gas consumption. Therefore, A decides to join a market pool from January 1 to January 15 (for 15 days). During this market cycle, the Gas fee is calculated between 20 ETH/Day and 60 ETH/Day (if it exceeds, it will be capped at the maximum/minimum value). A chooses to enter at 42 ETH/Day, predicting that Gas consumption will exceed 42 ETH/Day, and buys 1% of the Gas fee share of the entire market, meaning they need to pay the initial margin: (42-20)*15*1% = 3.3w ETH. If the actual daily Gas consumption is always above 42 ETH/Day, A will profit.
How to participate?
Base Gas Market provides users with a way to participate in the fundamental growth of Base. Unlike investing in Base governance tokens, users can directly bet on the usage and activity level of the Base ecosystem by trading total Gas consumption. More users and higher activity levels mean more Gas fees. In this way, users can invest based on Base's Gas usage without relying on token price fluctuations. Additionally, users can use this market to hedge against Gas fee fluctuations, avoiding risks due to unstable Gas prices.
External factors that may affect the Gas market include: Base may increase the Gas Limit, leading to a decrease in Gas prices; Base needs to batch process transactions for settlement on Ethereum L1. With the adjustment of Blobs (such as an increase in Blob base fees), the settlement costs on L1 may change; changes in rental prices in OP Superchain may also affect Base's Gas prices, etc.
Participation process for ordinary users:
Based on their prediction of Base Gas consumption, choose a bullish (long) or bearish (short) position.
Select the time period to participate and choose the corresponding market pool.
Pay the corresponding margin and enter the market pool to start trading.
Wait for the pool cycle to end and receive rewards (wETH) based on the actual changes in total Gas consumption. (See this document for the specific calculation formula)
In addition to the transaction fee market on Base, Alkimiya also offers a Bitcoin transaction fee market to help users hedge against the volatility of Bitcoin network Gas. It has launched Bitcoin transaction fee rate runes (BTC•FEERATE•RUNES), a synthetic asset (rune) directly linked to Bitcoin transaction fees. When transaction fees increase, the value of this rune also rises, allowing users to buy and sell runes in the market for hedging or speculation. Additionally, users can pay a certain fee to redeem the rune for Bitcoin.
