Author: 0XNATALIE
Since the beginning of this year, the community has begun to discuss topics related to Gas fee derivatives. In June, Nethermind researcher Finn proposed a model for pricing Ethereum's base fee options, which attracted 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 while also 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 trade the fluctuations of Base network's Gas fees and indirectly participate in the changes of network economic activities. Alkimiya is a protocol that can trade block space resources (such as transaction fees), helping users hedge 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 total Base Gas fees by going long (LONG) or short (SHORT). If a user believes that Base's revenue will increase in the near future, they can go long to bet on the increase in Gas consumption; if they believe revenue will decrease, they can go short. Since these fees are charged by Base's sequencer, Gas consumption actually reflects Base's usage and revenue. 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, and the pool consists of all long and short positions held during the same period. All users participating in this time period gather in the same pool. Users can enter the pool at any time, and exit and settlement will occur at the end of this time period, at which point user rewards or losses are determined based on changes in total Gas consumption.
For example, suppose User 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. User A decides to join a market pool from January 1 to January 15 (for a duration of 15 days). During this market cycle, Gas fees are calculated between 20 ETH/Day and 60 ETH/Day (if exceeded, 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 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 higher than 42 ETH/Day, User A will profit.
How to participate?
Base Gas Market provides users with a way to participate in the growth of Base fundamentals. 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. Furthermore, users can also use the market to hedge against Gas fee volatility, 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 the adjustment of Blobs (such as increasing the Blob base fee), L1 settlement costs may change; changes in OP Superchain's rents may also affect Base's Gas prices.
Normal user participation process:
Based on your 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's cycle to end, and claim 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 provides a Bitcoin transaction fee market to help users hedge 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, which increases in value when transaction fees rise. Users can buy and sell runes in the market for hedging or speculation and can pay a certain fee to redeem the rune for Bitcoin.
