Ethereum Community Proposes Dynamic Fee Structure for App Layer

Two Ethereum community members, Kevin Owocki and Devansh Mehta, have proposed a dynamic fee structure for the Ethereum application layer. The aim is to balance revenue generation for app builders and ensure fairness in fee extraction. The proposal, outlined on April 27, introduces a simple equation using a square root function that proportionally lowers the percentage of fees as the funding capital allocated to a particular project grows. For smaller funding amounts, the fee follows a square root function, providing proportionally higher returns to make building mechanisms for smaller pools worthwhile. For example, if the funding pool is $170,000, then the root of 1000 x 170,000 equals $13,038.4 or 7% is taken as overhead. The authors of the proposal added that fees would be capped at 1% once a particular application's funding pool crossed the $10 million level, ensuring that small app builders can develop decentralized applications without excess fees while also encouraging project and funding growth by capping fees as developers scale their applications.

Owocki and Mehta's proposal reflects the growing calls to reform fee structures and value accrual mechanisms to maintain Ethereum's economic viability against competing networks. The proposal aims to ensure that small app builders can develop decentralized applications without excess fees while also encouraging project and funding growth by capping fees as developers scale their applications. This dynamic fee structure is designed to provide proportionally higher returns for smaller funding pools, making it worthwhile for developers to build mechanisms for these pools. As the funding pool grows, the fee percentage decreases, ensuring that larger projects do not face excessive fees. This approach is intended to strike a balance between revenue generation for app builders and fairness in fee extraction, addressing the concerns of both small and large developers within the Ethereum ecosystem.

On April 20, 2025, Ethereum founder Vitalik Buterin proposed an exploratory suggestion to replace the current fee structure for the application layer on the Ethereum community forum. This proposal aims to introduce a new fee structure that could potentially enhance the efficiency and scalability of the Ethereum network. The suggestion comes as part of a broader effort to address the growing demands on the Ethereum network and to provide a more flexible and cost-effective solution for developers and users alike. The new fee structure proposed by Buterin is designed to offer greater flexibility for developers, allowing them to customize gas fees according to their specific needs. This development is part of a larger initiative to improve the overall user experience on the Ethereum network. By providing developers with the ability to set custom gas fees, the proposal seeks to reduce transaction costs and improve the speed of transactions, making the Ethereum network more accessible and efficient for a wider range of applications.

The proposal also includes the expansion of custom gas tokens to all Arbitrum chains, a development aimed at providing greater flexibility for developers. This move is expected to enhance the scalability and efficiency of the Ethereum network, making it more competitive in the rapidly evolving blockchain landscape. The introduction of custom gas tokens is seen as a significant step towards achieving the long-term goals of the Ethereum community, which include improving the network's performance and reducing transaction costs. In addition to the new fee structure, the proposal also suggests replacing the Ethereum Virtual Machine (EVM) with RISC-V, a move that could further enhance the network's performance and security. This change is part of a long-term plan to improve the execution layer of the Ethereum network, making it more efficient and secure for developers and users. The proposal has sparked a lively discussion within the Ethereum community, with many members expressing their support for the new fee structure and the potential benefits it could bring to the network.

The proposal by Buterin has been met with a mix of enthusiasm and skepticism within the Ethereum community. While some members see it as a bold step towards improving the network's performance and scalability, others have raised concerns about the potential challenges and risks associated with implementing such a significant change. Despite these concerns, the proposal has generated a lot of interest and discussion within the community, highlighting the ongoing efforts to improve the Ethereum network and make it more competitive in the blockchain space. The proposal reflects the community's commitment to innovation and its willingness to explore new solutions to address the challenges faced by the Ethereum network. As the discussion continues, it is expected that the community will work together to refine the proposal and develop a fee structure that meets the needs of all stakeholders, ensuring the long-term success and sustainability of the Ethereum ecosystem.