Ronin Transitioning to Ethereum Layer 2, Overhauls Economic Model

Ronin is preparing to transition to an Ethereum Layer 2 infrastructure in late March 2026. The move is part of broader reforms to improve scalability and efficiency within the network.

The economic model is being restructured to eliminate passive staking rewards and replace them with incentives tied to contributions from key builders. This new "reward-by-contribution" approach aims to focus on metrics like TVL and gas consumption.

The transition also involves shifting governance from a validator-based system to a token-weighted voting model, allowing RON holders to influence key decisions like buybacks and DeFi initiatives.

The network's new model is designed to strengthen RON's fundamentals and incentivize impactful participants while creating a more resilient token economy. Revenue generation will be bolstered by expanded fee splits from the Ronin Marketplace and sequencer profits.

The reforms are part of a broader effort to address structural vulnerabilities highlighted by past incidents, such as the 2022 $625 million theft from the Ronin Network, which exposed critical security flaws in cross-chain bridges.

What Are the Key Changes to the Economic Model?

Ronin is eliminating the legacy validator system and passive staking rewards. Instead, the new "proof of allocation" mechanism provides targeted incentives to builders who contribute significantly to the ecosystem.

This model replaces previous passive incentives with rewards based on contributions like TVL, gas consumption, user retention, and transaction volume. By aligning incentives with ecosystem growth, the network aims to foster long-term value.

How Will Governance and Treasury Strategies Change?

Governance is transitioning from validator-based systems to a token-weighted voting model. RON token holders will now have a direct role in decision-making, including buybacks and DeFi-related initiatives.

The treasury will be strengthened through expanded revenue sources, including transaction fee splits from the Ronin Marketplace, sequencer profits, and new income from ecological applications and game tokens.

This shift is intended to align the interests of token holders with the network's long-term success and to ensure the treasury remains robust in support of future development.

What Are the Risks or Limitations of the Transition?

The transition to Ethereum Layer 2 and the overhaul of economic incentives could introduce short-term instability, as users and developers adapt to the new model.

The elimination of passive staking may also affect liquidity and participation, particularly among smaller stakeholders who previously relied on those rewards.

Additionally, the network must address lingering concerns about security and infrastructure reliability, as demonstrated by past attacks.

The reforms aim to reduce vulnerability to rug pulls and other risks by focusing on governance and security enhancements. However, the effectiveness of these measures will depend on successful implementation and ongoing community trust.