Article source: ChainFeeds
Author: 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's 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 against operational cost volatility while also offering new speculative opportunities.
Base Gas Market: Bet on future Gas fee fluctuations
Recently, Alkimiya has built such a financial market on Base: the Base Gas Market (not officially launched yet), allowing users to indirectly participate in changes in network economic activities by trading the fluctuations in 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 resources like blockchain transaction fees into tradable assets.
In the Alkimiya Base Gas Market, users can bet on the increase or decrease of Base's total Gas fees through going long (LONG) or going 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 effectively 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 within that 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 exits and settlements will occur at the end of that time period, at which point rewards or losses will be determined based on the changes in total Gas consumption.
For example, suppose A sees that Base has multiple airdrop events over the next two weeks and predicts that these events will lead to a significant increase in Base's total Gas consumption. Therefore, A decides to join a market pool from January 1 to January 15 (for a period of 15 days). During this market period, Gas fees are calculated based on the market to be between 20 ETH/Day and 60 ETH/Day (if exceeded, it will be capped at the maximum/minimum values). A chooses to enter at 42 ETH/Day, predicting that Gas consumption will exceed 42 ETH/Day, and buys 1% of the total Gas fee share of the entire market, meaning he needs to pay an initial margin of: (42-20)*15*1% = 3.3w ETH. If the actual daily Gas consumption remains above 42 ETH/Day, A will profit.
How to participate?
The Base Gas Market provides users with a way to participate in the growth of Base's fundamentals. Unlike investing in Base governance tokens, users can directly bet on the usage and activity 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 volatility, avoiding risks brought about by unstable Gas prices.
Potential external factors affecting 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 adjustments of Blobs (such as an increase in Blob base fees), the settlement costs on L1 may change; changes in OP Superchain's rents may also affect Base's Gas prices, etc.
Ordinary user participation process:
Based on their prediction of Base's Gas consumption, choose a bullish (LONG) or bearish (SHORT) position.
Choose the time period to participate and select 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 offers a Bitcoin transaction fee market to help users hedge against the fluctuations of Bitcoin network Gas. It has introduced 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, and users can buy and sell runes in the market for hedging or speculation. They can also pay a certain fee to redeem the rune for Bitcoin.
