A proposal on the Ethereum Research forum suggests redirecting up to 10% of staking rewards to fund the ecosystem, pending validator approval.
A new proposal titled Validator Redirected Revenue has emerged on the Ethereum Research forum, advocating for the allocation of up to 10% of staking rewards to support the Ethereum ecosystem via a hard fork.
If a majority—specifically 51%—of validators vote in favor of any percentage above zero, this measure would become obligatory for all validators.
Currently, with between 35 million and 40 million ETH staked and an annual yield of 1.91%, validators collectively earn around 700,000 ETH. Redirecting 5% to 10% of these rewards could potentially inject an additional 50,000 to 70,000 ETH into ecosystem funding.
The distribution of these funds would be managed through a contract, allowing validators to designate addresses and share allocations, which would be set at the execution level.
Every 128 blocks, or roughly every five minutes, new funding proposals could be introduced, with the most favored proposal by validators remaining in effect. This selection process utilizes a “king of the hill” model, determining the winner through pairwise comparisons.
However, the proposal acknowledges several risks, including the potential for validators to form cartels, conflicts of interest between staking operators and ETH holders, and concerns over excessive issuance.
Currently, around 90% of ETH is staked through operators rather than individual users. The authors believe that with proper coordination, the maximum rate could be achieved.
Discussion Goals
The initiative aims to spark a conversation about the underfunding of public goods within the Ethereum ecosystem, rather than to promote a specific funding model. The authors highlight a coordination failure where essential infrastructure and tools are needed by all, yet individual participants are reluctant to shoulder the costs alone.
“Everyone benefits from common improvements, but no participant wants to pay when others can enjoy the advantages for free. This creates ongoing efficiency losses that weaken Ethereum's long-term competitiveness,” the authors noted.
Currently, funding for critical infrastructure is often provided by the Ethereum Foundation, individual donors, or specific teams. The authors warn of a vicious cycle wherein fears of inadequate future funding depress expectations for Ethereum's success, negatively impacting ETH's valuation and price. This concern was echoed by former Ethereum Foundation employee Trent Van Epps in June, who cautioned about a potential funding crisis for the blockchain.
