A new Ethereum hard fork: validators are being asked to donate 10% of their income to network development
An ambitious initiative has emerged on the Ethereum Research forum — Validator Redirected Revenue. The essence of the proposal: within a future hard fork, allow validators to redirect up to 10% of their staking rewards to fund ecosystem projects. If 51% of votes support a rate above 0%, it will become mandatory for all participants.
According to my calculations, with the current staking volume of 35-40 million ETH and a yield of about 1.91%, validators receive approximately 700,000 ETH annually. Redirecting even 5-10% of this amount means an additional 50,000-70,000 ETH that will go toward infrastructure development, research, and network security.
"King of the Hill" mechanism for fund distribution
The authors propose using a distribution contract where validators can set recipient addresses and shares. Every 128 blocks (approximately every five minutes), a new distribution option can be proposed. Ultimately, the one that best matches the majority's preferences will be applied. This model, called "king of the hill," involves finding a winner through pairwise comparison of alternatives.
However, there are risks here. These include validator "cartelization," a conflict of interest between staking operators and ETH holders, as well as potentially excessive issuance. Given that about 90% of coins are currently locked through operators rather than solo participants, with coordination among most platforms, the rate could theoretically be raised to the maximum of 10%.
The "free rider" problem and funding crisis
The main goal of the initiative is to solve the underfunding problem of "public goods" in Ethereum. The authors emphasize that infrastructure, research, and tools are needed by everyone, but it is unprofitable for individual participants to pay alone while others benefit for free. This creates constant efficiency losses that weaken the network's long-term competitiveness.
Currently, structural costs often fall on the Ethereum Foundation, donors, or individual teams. As I have noted before, concerns about future funding could lower expectations for Ethereum's success, pressure ETH's valuation, and lead to a decline in the asset's price. This is a vicious cycle that the Validator Redirected Revenue proposal attempts to break.
My expert commentary: The initiative is logical and timely, but its implementation will be extremely challenging. The key question is how to avoid "cartelization" and maintain decentralized governance. If large staking pools gain control over fund distribution, this could lead to a conflict of interest and undermine trust in the network. In the long term, however, such funding mechanisms are vital for maintaining Ethereum's competitiveness.