How to earn wETH on Base by trading Gas fees?

Author: 0xNatalie Source: ChainFeeds

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 has attracted widespread attention to gas fee derivatives in the community. This financial instrument provides participants in the Ethereum ecosystem with a new means to cope with the uncertainty of gas fee fluctuations, not only helping users hedge the volatility of operating costs, but also bringing new speculative opportunities.

Base Gas Market: Betting on Future Gas Fee Fluctuations

Recently, Alkimiya has built such a financial market on Base: Base Gas Market (not yet officially launched), allowing users to indirectly participate in the changes of network economic activities by trading the Gas fees of the Base network. Alkimiya is a protocol that can trade block space resources (such as trading fees), help users hedge fee fluctuations, and provide 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 Gas cost by taking a long (LONG) or short (SHORT) position. If a user believes that the income of Base will increase in the near future, they can bet on the increase in Gas consumption by taking a long position; if they believe that the income will decrease, they can take a short position. Since these costs are collected by Base’s sequencer, Gas consumption actually reflects the usage and income of Base. Therefore, this type of transaction is essentially speculation on the future development trend of the Base ecosystem.

In this market, each pool corresponds to a time period, and the pool is composed of all long and short positions within the same time period. All users participating in this time period will gather in the same pool. Users can enter and exit the pool at any time, and settlement will occur at the end of the time period, at which time rewards or losses for users will be determined based on the change in total Gas consumption.

For example, suppose Xiao A sees that Base has multiple airdrop events in the next two weeks, and predicts that these events will significantly increase the total gas consumption of Base. So Xiao A decides to join a market pool from January 1st to January 15th (15 days). In this market cycle, the gas fee is calculated based on the market between 20 ETH/Day and 60 ETH/Day (if exceeded, it will be limited to the maximum/minimum value). Xiao A chooses to enter at 42 ETH/Day, predicting that the gas consumption will exceed 42 ETH/Day, and buys 1% of the entire market’s gas fee share, which means he needs to pay an initial deposit: (42-20)151% = 33,000 ETH. If the actual daily gas consumption value is always higher than 42 ETH/Day, Xiao 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 higher Gas fees. In this way, users can invest based on Base’s Gas usage without relying on token price fluctuations. Additionally, users can also hedge against fluctuations in Gas fees using this market to 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 price; Base needs to batch process transactions for settlement on Ethereum L1. As Blobs are adjusted (such as the increased basic cost of Blobs), the settlement cost of L1 may change; changes in OP Superchain’s rent may also affect the Gas price of Base.

Ordinary users participate in the process:

1. According to your forecast of Base Gas consumption, choose to take a long (bullish) or short (bearish) position.
2. Select the time period to participate and choose the corresponding market pool.
3. Pay the corresponding deposit and enter the market pool to start trading.
4. Wait for the end of the pool cycle, and claim rewards (wETH) based on the actual total Gas consumption changes.

In addition to the transaction fee market on Base, Alkimiya also provides a Bitcoin transaction fee market to help users hedge the fluctuation of Bitcoin network gas. It has launched a Bitcoin transaction fee rate rune (BTC•FEERATE•RUNES), a synthetic asset (rune) directly linked to Bitcoin transaction fees. When transaction fees rise, the value of this rune will also increase, and users can buy and sell runes in the market for hedging or speculation. Users can also pay a certain fee to redeem the runes for Bitcoin.