How to earn wETH on Base by trading gas fees?

Author: 0XNATALIE

Since this year, the community has begun to discuss topics related to gas fee derivatives. In June, Nethermind researcher Finn proposed a model for Ethereum base fee option pricing, which attracted widespread attention from the community to Gas fee derivatives. This financial instrument provides participants in the Ethereum ecosystem with a new means of coping with the uncertainty of Gas fee fluctuations. It not only helps users hedge against fluctuations in operating costs, but also brings new opportunities for speculation.

Base Gas Market: Bet on future gas cost fluctuations

Recently, Alkimiya built such a financial market on Base: Base Gas Market (not yet officially launched), which allows users to indirectly participate in changes in network economic activities by trading the gas fee fluctuations of the Base network. Alkimiya is a protocol that can trade block space resources (such as transaction fees). By converting blockchain transaction fees and other resources into tradable assets, it helps users hedge fee fluctuations and provide more speculation opportunities.

In the Alkimiya Base Gas Market, users can bet on the growth or decrease of the total Base Gas fee by going long (LONG) or short (SHORT). If a user believes that Base's income will increase in the future, he can bet on the increase in Gas consumption by going long; if he thinks the income will decrease, he can go short. Because these fees are charged by Base's sequencer, Gas consumption actually reflects Base's usage and revenue. Therefore, this kind of transaction is essentially speculation on the future development trend of the Base ecosystem.

In this market, each pool corresponds to a time period. The pool consists of all long and short positions within the same time period. All users participating in this time period will be gathered in the same pool. Users can enter the pool at any time, and exit and settlement will occur at the end of the time period, at which time the user's rewards or losses will be determined based on changes in total Gas consumption.

For example, suppose Little A sees that Base has multiple airdrop activities in the next two weeks and predicts that these events will cause Base's total Gas consumption to increase significantly, so Little A decides to join an airdrop from January 1st to January 15th. (15-day) market pool. During this market cycle, Gas fees are calculated based on the market between 20 ETH/Day and 60 ETH/Day (if exceeded, they will be limited to the maximum/minimum value). Little A chooses to enter the market 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, which means he needs to pay an initial deposit: (42-20)*15 *1% = 3.3w ETH. If the actual value of daily Gas consumption is always higher than 42 ETH/Day, Little A will make a profit.

How to participate?

Base Gas Market provides users with a way to participate in the fundamental growth of Base. Different from investing in Base governance tokens, users can directly bet on the usage and activity of the Base ecosystem by trading the total Gas consumption. More users and higher activity levels mean more gas charges. In this way, users can invest based on Base's Gas usage without having to rely on token price fluctuations. In addition, users can also use this market to hedge fluctuations in Gas fees and avoid risks caused by unstable Gas prices.

External factors that may affect the Gas market include: Base may increase the Gas Limit, resulting in a decrease in Gas prices; Base needs to batch transactions to Ethereum L1 for settlement. With the adjustment of Blobs (such as the increase of Blob base fee), the settlement cost of L1 may change; the rent change of OP Superchain may also affect the Gas price of Base, etc.

Ordinary user participation process:

1. Based on your prediction of Base Gas consumption, choose a bullish (long) or bearish (short) position.
2. Select the time period to participate and select the corresponding market pool.
3. Pay the corresponding margin and enter the market pool to start trading.
4. Wait for the pool period to end and receive rewards (wETH) based on actual changes in total Gas consumption. (See this document for specific calculation formulas)

In addition to the transaction fee market on Base, Alkimiya also provides a Bitcoin transaction fee market to help users hedge against fluctuations in Bitcoin network Gas. And launched Bitcoin transaction rate runes (BTC•FEERATE•RUNES), a synthetic asset (rune) directly linked to Bitcoin transaction fees. When transaction fees increase, the value of this rune will also increase. , users can buy and sell runes on the market for hedging or speculation. And runes can be redeemed for Bitcoin for a fee.