A proposal titled Validator Redirected Revenue was published at the Ethereum Research forum. This initiative suggests allowing up to 10% of staking rewards to be redirected towards funding the ecosystem through a hard fork. 

If 51% of the votes support a rate above 0%, it will become mandatory for all validators.

The financial interconnection of ecosystem participants with a focus on long-term prospects. Source: Ethereum Research.

According to the authors, with 35 million to 40 million ETH staked and a yield of 1.91%, validators earn about 700,000 ETH annually. Redirecting 5–10% would provide the ecosystem with an additional 50,000–70,000 ETH.

Funding recipients would be determined through a distribution contract. Validators could set addresses and shares, which would then be fixed at the execution level. 

Every 128 blocks (approximately every five minutes), a new distribution proposal could be made. The one that aligns best with the preferences of the majority of validators would remain in effect.

The selection model is described as a “king of the hill” approach, where a winner is determined through pairwise comparison of alternatives.

The authors specifically listed the risks associated with such a model: 

  • “cartelization” of validators;
  • conflicts of interest between staking operators and ETH holders;
  • excessive issuance. 

Currently, about 90% of coins are locked through operators rather than individual participants. With coordination among most platforms, the rate could theoretically be raised to the maximum of 10%, according to the proposal.

Background and Objectives

The authors state that the goal of the publication is to initiate a discussion about the underfunding of “public goods” in Ethereum, rather than to push a specific model.

They refer to the issue as a coordination failure: infrastructure, research, security, and tools are needed by everyone, but it is not beneficial for individual participants to pay alone while others benefit “for free.”

“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 proposal states. 

Currently, structural costs are often borne by the Ethereum Foundation, donors, or individual teams. They also describe a vicious cycle: concerns about future funding lower expectations for Ethereum's success, pressure the valuation of ETH, and lead to a decrease in the asset's price.

It is worth noting that in June, former Ethereum Foundation employee Trent Van Epps warned of the risk of a funding crisis for the blockchain.