Ethereum Block Space Futures Market ETHGas Aims to Become a Real-Time Execution Layer?

Author: Eric, Foresight News

On December 17, the block space futures market ETHGas announced the completion of a $12 million funding round, led by Polychain Capital, with participation from Stake Capital, BlueYard Capital, Lafayette Macro Advisors, SIG DT, and Amber Group. Founder Kevin Lepsoe revealed that ETHGas had completed an undisclosed Pre-Seed funding round of approximately $5 million in mid-2024.

Lepsoe also stated that Ethereum validators, block builders, and relay nodes have committed around $800 million to support market and product development, not in cash investments but by providing liquidity to the ETHGas market in the form of Ethereum block space.

Although the project is defined as a block space futures market, its true vision is to achieve "Real-Time Ethereum."

The Order of Blocks

Ethereum co-founder Vitalik Buterin proposed the concept of a Gas futures market earlier this month, aiming to address the issue of Ethereum Gas volatility. Similar to the logic of commodity futures in traditional markets, locking in future Gas costs through futures would make Gas expenses predictable and controllable.

This would allow DApps to lock in Gas costs before events such as users claiming token airdrops and design activities to subsidize users. L2s could also purchase futures when Gas fees are lower to stabilize the cost of bundling and submitting data to L1, making transaction costs on L2s stable and predictable. This would serve businesses that require pre-calculated costs, such as tokenized U.S. stocks.

According to the documentation, ETHGas will also launch a no-code tool called Open Gas specifically for DApps to help them provide Gas subsidy programs. This tool will allow users to claim the Gas fees they consumed on the ETHGas platform after using a DApp.

Developing a Gas futures market is not particularly challenging, as it essentially requires building a sufficiently liquid on-chain futures trading market. ETHGas's "killer feature" is its block space auction market.

This auction market, named Blockspace, allows Ethereum validators, block builders, and relay nodes to auction space in subsequent blocks, ensuring that bidders' transactions are included in the next block and guaranteeing the execution efficiency of those transactions. Additionally, bidders can even purchase an entire block to include only their own transactions or transactions they provide for others.

Comparing transactions to packages, guaranteeing block inclusion is like ensuring a package is loaded onto a transport plane, while guaranteeing transaction execution is like ensuring the package is delivered to the intended recipient on time. Purchasing an entire block is akin to chartering an entire plane to transport one's packages, but with the option to sublet the extra space to other packages.

ETHGas's ultimate goal is to achieve "real-time transactions" on Ethereum through Blockspace. This "real-time transaction" can only be in quotes because the completion of transactions on the Ethereum mainnet must wait for the block to be finalized. However, if a transaction can be guaranteed to be included in the next block, it can, in a way, be considered "already completed." ETHGas can be understood as an execution layer on top of Ethereum, but how real-time transactions will be reflected on the front end remains to be seen as ETHGas provides answers.

ETHGas aims to create an orderly block space, as opposed to the current system of chaotic bidding for block space with numerous uncontrollable MEV transactions. By offering predictable returns to attract infrastructure operators to join Blockspace and create sufficient liquidity for real-time transactions, the resulting efficiency improvements will attract various DApps. DApps, in turn, will attract users through Open Gas, and users will bring more transaction volume into the ETHGas network, thereby increasing the returns for infrastructure operators and forming a positive cycle.

Challenges Beneath the Ideal Vision

For a DApp about to conduct a token airdrop, it could estimate the number of transactions for claiming the airdrop, pre-book n blocks after a specific time, and provide a Gas subsidy program, thereby achieving a budget-controlled and network-congestion-free token claim event.

Although such visions are ideal, allowing block space to be auctioned may lead to many foreseeable issues.

First, if institutional users can auction block space without restrictions, they might purchase entire blocks in large quantities and resell them to retail users. While this would ensure stable and predictable returns for validators, it could increase transaction costs for retail users. In this scenario, retail users lack the technical capability to compete with institutional users, and even if they could participate in auctions or use futures markets to hedge against rising Gas fees, it would essentially raise their transaction costs.

Additionally, the futures market could become a tool for market manipulation. For example, large players could deliberately create a high volume of on-chain transactions to drive up Gas fees and profit from the futures market, but this could increase transaction costs for other users on the Ethereum mainnet. Moreover, as DApp operators are aware of the specific timing of events that could cause a surge in transactions, they could profit from operations in the futures market in advance, turning the futures market into an arbitrage playground for those with informational advantages and causing unpredictable losses for ordinary users who simply use the market for hedging.

The birth of a new trading market inevitably creates arbitrage opportunities due to information asymmetry, potentially undermining the very problems the market aims to solve. For ETHGas, balancing this issue and preventing a "positive cycle" from turning into a "death spiral" may require some necessary restrictions.