In a move to improve economic incentives within the Ethereum ecosystem, community members Kevin Owocki and Devansh Mehta have proposed a new dynamic fee structure for the application layer.
The proposal, introduced on April 27, seeks to balance revenue generation for decentralized application (dApp) builders with fair fee extraction as the network faces mounting competition and declining activity.
Under the proposed model, a simple square root function would govern fee calculations, offering higher fee percentages for smaller funding pools and gradually decreasing rates as funding grows. Specifically, the equation uses the square root of 1,000 times the pool size to determine overhead fees. For instance, a project with $170,000 in funding would incur roughly 7% in fees, calculated as the square root of 1000 × 170,000, equaling approximately $13,038.40.
Notably, the proposal introduces a cap: once a project’s funding surpasses $10 million, fees would be limited to just 1%. According to Owocki and Mehta, this structure is designed to encourage early-stage development by providing sustainable revenue for small projects and supporting scalability for larger initiatives without excessive costs.
The push for a revamped fee system comes as Ethereum’s dominance in developer adoption faces fresh challenges. In 2024, the Solana network attracted more new developers than Ethereum for the first time, onboarding 7,625 developers compared to Ethereum’s 6,456, according to industry data. While Ethereum remains the leading smart contract platform, its once-unquestioned position is now being contested.
Compounding the pressure, Ethereum’s transaction fees recently fell to five-year lows, as reported by on-chain analytics firm Santiment. The decline stems from reduced demand for base-layer smart contract operations such as decentralized finance (DeFi) activities. This slump in usage has prompted several institutional investors to reduce or sell off their Ether (ETH) holdings, with market sentiment weakening in the absence of strong bullish catalysts.
If you want to read more news articles like this, visit DeFi Planet and follow us on Twitter, LinkedIn, Facebook, Instagram, and CoinMarketCap Community.
“Take control of your crypto portfolio with MARKETS PRO, DeFi Planet’s suite of analytics tools.”
