Author: 0XNATALIE
Since the beginning of this year, the community has begun discussing topics related to Gas fee derivatives. In June, Nethermind researcher Finn proposed a model for pricing Ethereum's base fee options, garnering widespread attention from the community towards Gas fee derivatives. This financial tool provides participants in the Ethereum ecosystem with a new means to address the uncertainty of Gas fee fluctuations, helping users hedge against operational cost volatility and creating 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 participate indirectly in the changes of the network's economic activities by trading the fluctuations of Base network's Gas fees. Alkimiya is a protocol that can trade block space resources (such as transaction fees), helping users hedge against fee fluctuations and providing more speculative opportunities by converting 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 Base Gas fees through long (LONG) or short (SHORT) positions. If a user believes that Base's revenue will increase over a certain period, they can bet on increased 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 effectively reflects Base's usage and revenue. Therefore, this trading is essentially a speculation on the future development trends of the Base ecosystem.
In this market, each pool corresponds to a time period, and the pool consists of all long and short positions in 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 the time period, at which point rewards or losses will be determined based on the changes in total Gas consumption.
For example, suppose User A sees that Base has multiple airdrop activities in the next two weeks, predicting that these events will significantly increase Base's total Gas consumption. User A decides to join a market pool from January 1 to January 15 (for a period of 15 days). During this market cycle, the Gas fees are calculated to be between 20 ETH/Day and 60 ETH/Day (if it exceeds, it will be capped at the maximum/minimum value). User A chooses to enter at 42 ETH/Day, predicting that Gas consumption will exceed 42 ETH/Day, and buys 1% of the entire market's Gas fee share, meaning they need to pay an initial margin of: (42-20)*15*1% = 3.3w ETH. If the actual daily Gas consumption is always above 42 ETH/Day, User A will profit.
How to participate?
The 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 arising from 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 to Ethereum L1 for settlement. With adjustments to Blobs (such as an increase in Blob base fees), L1 settlement costs may change; changes in OP Superchain's rent may also affect Base's Gas prices, etc.
Ordinary user participation process:
Based on your prediction of Base Gas consumption, choose a long (buy) or short (sell) 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's cycle to end and receive rewards (wETH) based on the actual total Gas consumption changes. (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 fluctuations 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 rise, the value of this rune also increases. Users can buy and sell runes in the market for hedging or speculation, and can pay a fee to redeem the rune for Bitcoin.
