Ethereum block space futures market ETHGas prefers to focus on real-time execution layer?

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Written by Eric, Foresight News

On December 17, ETHGas, an Ethereum blockspace futures market, announced the completion of a $12 million round of financing, led by Polychain Capital, with participation from Stake Capital, BlueYard Capital, Lafayette Macro Advisors, SIG DT, and Amber Group. Founder Kevin Lepsoe said ETHGas completed an undisclosed Pre-Seed round of about $5 million in mid-2024.

In addition, Lepsoe also said that Ethereum validators, block creators, and relay nodes have committed about $800 million to support the market and product development, but not in cash, but in the form of Ethereum block space to provide liquidity to the ETHGas market.

Although the definition of the project is the blockspace futures market, its true vision is to realize “Real-Time Ethereum”.

Block order

Ethereum co-founder Vitalik Buterin proposed the concept of a gas futures market at the beginning of the month, with the core being to solve the problem of Ethereum gas volatility. Similar to the logic of commodity futures in the current market, the biggest effect of locking in forward gas fees through futures is to make gas costs predictable and controllable.

In this way, DApps can lock in gas fee costs and design activities to subsidize users before events such as user claim token airdrops. L2 can also buy futures when gas fees are lower to make the cost of packaging data to L1 and make the cost of trading on L2 stable and predictable, so as to serve some businesses that need to calculate costs in advance, such as US stock tokenization.

According to the document, ETHGas itself will also launch a zero-code tool for DApps, Open Gas, to help them provide gas subsidy programs, which allows users to use DApps and receive gas fees consumed on the ETHGas platform.

The gas futures market is not too difficult in design and development, and the essence is to establish an on-chain futures trading market with sufficient liquidity. ETHGas’ “killer move” is the block space auction market.

The auction market is called Blockspace, where Ethereum validators, block creators, and relay nodes can auction space in subsequent blocks to ensure that the bidder’s transaction will be included in the next block and to ensure the execution efficiency of the transaction. In addition, bidders can even auction the next full block to contain only the bidder’s own transactions or those provided by the bidder.

Comparing a transaction to a package, guaranteeing the inclusion of a block is like guaranteeing that the package will be loaded onto a shipping plane, and guaranteeing the execution of a transaction is like guaranteeing that the package will be delivered to a specific object on time. Photographing a complete block is like renting a whole machine to transport your own package, but at the same time you can also sublease the excess space to other packages.

The ultimate goal of ETHGas is to enable Ethereum “real-time transactions” through Blockspace. This real-time transaction can only be in quotation marks, because the completion of a transaction on the Ethereum mainnet must wait for the completion of the block on the chain, but if a transaction can be guaranteed to be included in the next block, the transaction can also be considered “complete” to some extent. We can understand ETHGas as an execution layer on top of Ethereum, but we still need to wait for ETHGas to answer how real-time transactions will be realized on the front end.

At its core, ETHGas wants to build an orderly block space, rather than competing for block space through disorderly bidding as it currently does, and there are a large number of uncontrollable MEV transactions. Attracting infrastructure operators to join Blockspace through predictable returns to create sufficient liquidity for real-time transactions, resulting in efficiency gains attracting various DApps, which attract users through Open Gas, which brings more transaction volume into the ETHGas network, thereby increasing infrastructure operators’ profits and forming a positive cycle.

Challenges under good vision

For a DApp that is about to launch a token airdrop, it is possible to estimate the number of transactions that will receive the airdrop, book n blocks in advance after a certain time, and then provide a gas subsidy plan, so as to achieve a token claim activity with a controllable budget and no network congestion.

While ideas like this are good, allowing block space to be auctioned can cause a lot of foreseeable problems.

First, if institutional users can auction block space without restrictions, they may auction a large number of entire blocks and resell them to retail investors, which may guarantee and stabilize validators’ income, but it will increase transaction costs for retail investors. In this scenario, retail investors do not have the ability to compete with institutional users due to lack of technical capabilities, and even if retail investors can conduct auctions and even use the futures market to hedge against rising gas fees, it essentially increases transaction costs.

In addition, the futures market can also become a tool for market manipulation, such as large investors deliberately creating a large number of on-chain transactions to increase gas and benefit the futures market, but this move may trigger an increase in transaction costs for other users on the Ethereum mainnet. In addition, as a DApp operator, because it is aware of certain specific timing points that may lead to a surge in trading volume, it can benefit from operations in the futures market in advance, making the futures market an arbitrage market for information advantages, allowing ordinary users who simply use market hedging to incur unpredictable losses.

The birth of a new trading market will inevitably mean that there will be arbitrage space generated by information asymmetry, which will affect the market’s ability to solve the problem itself.