ETHGas raises $12 million in token round as it launches Ethereum blockspace futures market with $800 million in liquidity commitments

ETHGas has raised $12 million in a seed funding round as it launches what it describes as the first futures market for Ethereum blockspace, alongside $800 million in liquidity commitments from validators, block builders, and other Ethereum participants.

The seed round was led by Polychain Capital, with participation from Stake Capital, BlueYard Capital, Lafayette Macro Advisors, SIG DT, and Amber Group, ETHGas said Wednesday. The project previously raised an unannounced pre-seed round of about $5 million in mid-2024, founder Kevin Lepsoe told The Block.

The new funding round began in July and closed last month, Lepsoe said. It was structured entirely as a token round using a simple agreement for future tokens (SAFT), the same structure used in the project’s pre-seed round, Lepsoe added. He declined to disclose the project’s post-money valuation and said no board or advisory seats were granted as part of the round.

Alongside the funding, ETHGas said Ethereum validators, block builders, and relays have committed roughly $800 million to support the marketplace and product development. These commitments are not cash investments, but liquidity in the form of Ethereum blockspace supplied into the ETHGas marketplace in exchange for higher and more predictable yields, Lepsoe said.

How ETHGas works

ETHGas has built a marketplace for Ethereum blockspace futures that allows blockspace to be bought and sold in advance, rather than only at the moment a block is produced.

Blockspace is the capacity inside Ethereum blocks that determines which transactions are included, in what order, and at what cost. Lepsoe said ETHGas sits upstream of Ethereum’s existing block production pipeline, known as proposer-builder separation. It does not replace the current system, but plugs into it.

Traditionally, blocks and their transactions are finalized every 12 seconds. ETHGas’s blockspace futures enable validators to sell blockspace up to 64 blocks, or about 12.8 minutes, in advance, Lepsoe said.

"Think of this like an oil or energy producer selling their offtake days, weeks, or months in advance and an airline or steel plant buying that capacity to secure delivery," Lepsoe said. "There are a number of reasons why commodities futures markets exist (i.e., reduce risk for all players, increase transparency, eliminate cartels, and so forth)."

Validators can sell different types of blockspace commitments through ETHGas, Lepsoe said. These include whole blocks sold in advance; inclusion guarantees, which ensure a transaction will be included in a specific block; execution guarantees, which ensure inclusion at a specific price or predefined blockchain state; and multi-block commitments, such as buying several consecutive blocks or a full minute of Ethereum time.

“This enables them to capture much more MEV [maximal extractable value], which results in significant boosts in yields to ETH validators/stakers — this is why validators want to join ETHGas,” Lepsoe said.

From a user’s perspective, the marketplace allows traders, applications, and institutions to hedge gas costs, prepay for execution, and avoid gas price spikes altogether.

“We have interest from many TradFi [traditional finance]/sovereign funds to understand and acquire blockspace,” Lepsoe said. “With many TradFis and RWAs [real world assets] moving onto Ethereum, there is significant interest in understanding the power dynamics of how blockspace works when we have trillions of dollars of assets onchain.”

ETHGas also has “much larger commitments coming down the pipeline with huge interest from DATs [digital asset treasury companies],” Lepsoe said, adding: “We’re already powering some, but can’t speak publicly on it. More on this in January.”

ETHGas earns revenue by taking a 5% fee on blockspace futures trades. In the future, it also plans to charge fees for applications that require real-time settlement.

A step toward ‘real-time Ethereum’?

Beyond futures markets, Lepsoe said ETHGas is also working on making Ethereum significantly faster.

“In contrast to enabling searchers to extract MEV [Maximal Extractable Value] by combining multiple blocks of MEV, ETHGas has also added the capability to break a block into 100s of sequential pieces, each 50-100ms, making Ethereum effectively 100-200x faster,” Lepsoe said. “While it virtually eliminates MEV, it enables AMMs [automated market makers] to almost instantly earn $2-3 billion more through arbitrage trading alone.”

Ethereum researcher Justin Drake has publicly argued that pre-confirmations and real-time execution are necessary to improve Ethereum’s user experience. Ethereum co-founder Vitalik Buterin has also called for a “trustless onchain gas futures market,” a view ETHGas says aligns with its approach.

“When we make Ethereum real-time, MEV disappears,” Lepsoe said. “This recent development now competes with the current spot market based on MEV extraction. This has not yet been broadly deployed, though it has run successfully on mainnet. ETA Q1 for full rollout.”

ETHGas has 18 contributors spread across Asia, Europe, and the U.S., with roughly half of the team based in Hong Kong, Lepsoe said, adding that there are no immediate hiring plans.

ETHGas is a spinout from Lepsoe’s other project, Infinity Exchange, a fixed-income protocol that is currently paused. Lepsoe said the work on ETHGas grew out of efforts to address MEV and liquidation risks that have kept institutional capital from operating onchain.

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