Ethereum Proposes Dynamic Fee Structure to Boost App Builder Revenue

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 comes at a time when Ethereum faces increasing competition from other blockchain networks. In 2024, the Solana ecosystem onboarded more developers than the Ethereum network, attracting 7,625 new developers compared with Ethereum’s 6,456. Despite the surge in software developers building on the Solana network in 2024, Ethereum remains the dominant ecosystem for attracting developer talent, although the 2024 data shows that position is no longer uncontested. The Solana network is now the number two choice for decentralized application developers and is catching up to Ethereum. This reduced demand is leading to many institutions scaling back their Ether (ETH) holdings or selling off portions of their investment as investor sentiment toward the first-ever smart-contract platform continues to erode without any clear catalysts for a reversal.

On April 20, 2025, Ethereum founder Vitalik Buterin proposed a new fee structure for the application layer of the Ethereum network. This proposal, published on the community forum Ethereum Magicians, suggests replacing the current fee structure with a more flexible and efficient system. The new structure aims to provide greater flexibility for developers and improve the overall efficiency of the network. The proposal comes at a time when the Ethereum community is actively seeking ways to enhance the scalability and efficiency of the network. The current fee structure has been a point of contention, with many developers and users calling for a more flexible system that can better accommodate the growing number of applications and users on the network. The new fee structure proposed by Buterin is designed to address these concerns. It introduces a more dynamic fee system that can adjust to the changing demands of the network. This would allow for more efficient use of resources and reduce the overall cost of transactions for users. The proposal also includes measures to ensure that the new fee structure is fair and transparent, with clear guidelines for how fees will be calculated and distributed.

The Ethereum community has responded positively to the proposal, with many members expressing support for the new fee structure. Developers, in particular, have welcomed the increased flexibility that the new system would provide. They believe that it will allow them to build more innovative and efficient applications on the Ethereum network. The proposal is still in the exploratory stage, and the community is actively discussing its potential implementation. If approved, the new fee structure could have a significant impact on the Ethereum network, making it more efficient and user-friendly. It would also position Ethereum as a leader in the blockchain industry, setting a new standard for fee structures and network efficiency. The proposal by Buterin is part of a broader effort by the Ethereum community to improve the network. In recent months, there have been several initiatives aimed at enhancing the scalability and efficiency of the network. These include the expansion of custom gas tokens on Arbitrum, a Layer 2 scaling solution for Ethereum, and the development of new execution layers that can better support the growing number of applications on the network. The Ethereum community is known for its collaborative and innovative approach to problem-solving. The proposal by Buterin is a testament to this, as it reflects the community's commitment to continuous improvement and innovation. As the discussion around the new fee structure continues, it is clear that the Ethereum community is dedicated to building a more efficient and user-friendly network.

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