Vitalik Buterin proposes ‘gas insurance’: fixed price for Ethereum transactions?

Ethereum (ETH) co-founder Vitalik Buterin has made a new proposal for an on-chain gas futures market. He wants to give users the opportunity to hedge against future transaction costs. The idea is intended to reduce the unpredictability of gas prices on the network, but the plan is also subject to criticism.

Gas price insurance via the blockchain

Gas is the unit of account used to settle Ethereum transactions. Every action on the network, such as sending crypto or executing a smart contract, costs gas. The price fluctuates depending on how busy the network is. The greater the demand, the higher the costs.

Buterin wants to tackle that volatility. Despite increases in scale and recent upgrades, gas fees remain unpredictable. This is a barrier for users and developers. In a post on According to him, it would function as a “base fee prediction market”, providing participants with certainty about future gas costs.

During previous peak periods, such as the DeFi hype of 2021 and the NFT craze during the previous bull run, costs rose to extreme levels. Although Layer-2 solutions and protocol improvements have partially mitigated these fluctuations, full predictability remains elusive. According to Buterin, his proposal would “give a clear signal about what people expect from future gas costs” and thus reduce the risk for users.

Criticism of feasibility and structure

Not everyone is convinced. Hasu, an advisor at Lido and Flashbots, calls the lack of a natural short position a fundamental problem. “Many people want to hedge against high gas costs, but no one is long on gas,” he wrote on X.

Buterin then proposed that the Ethereum protocol itself take on the short position via an on-chain auction of base fee claim rights. But Hasu doubts whether that will solve the problem. The buyer of gas claims only benefits if gas costs rise, which could create a perverse incentive.

Gnosis founder Martin Koppelmann also points out a complication: Ethereum’s burn mechanism. Validators could logically act as salespeople without this burn, but now they risk losing revenue as gas costs drop.

Buterin’s proposal comes shortly after the Fusaka upgrade, in which Ethereum increased the block gas limit: a next step towards scalability and lower costs.