Can On-Chain Options Markets Remain Competitive If Gas Fees Consistently Exceed the Bid-Ask Spread?

No, on-chain options markets cannot remain competitive if gas fees consistently exceed the bid-ask spread. The bid-ask spread represents the cost of liquidity and the profit margin for market makers.

If the gas fee to execute a trade is higher than this spread, it becomes impossible for market makers to profit, and they will exit the market. This would lead to a collapse in liquidity, making the market illiquid and unusable for traders.

For an options market to be viable, transaction costs must be a small fraction of the bid-ask spread.