Ethereum Community Proposes New Fee Structure
Ethereum community members Kevin Owocki and Devansh Mehta have introduced a proposal for a dynamic fee structure on the Ethereum application layer, aiming to balance revenue generation for app developers with fairness in fee extraction.
The proposal, published on April 27, outlined a simple equation based on a square root function that progressively lowers the percentage of fees as the funding capital allocated to a project increases. Owocki and Mehta explained:
"For smaller funding amounts, the fee follows a square root function (sqrt(1000 x N)), 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."
They added that fees would be capped at 1% once a project’s funding pool exceeds $10 million, ensuring smaller app developers can build decentralized applications without facing excessive fees, while also promoting growth by limiting fees as applications scale.
Owocki and Mehta’s suggestion reflects broader discussions within the Ethereum community about reforming fee structures and improving value accrual models to help maintain Ethereum’s economic competitiveness amid rising challenges from rival networks.
In 2024, the Solana ecosystem attracted more new developers than Ethereum, bringing in 7,625 new developers compared to Ethereum’s 6,456.
Despite Solana’s growth in developer onboarding, Ethereum remains the leading network for decentralized application development, although the 2024 figures reveal that Ethereum's dominance is increasingly being challenged.
Meanwhile, data from onchain analytics firm Santiment shows that Ethereum network fees dropped to their lowest levels in five years as of April 2025.
This decline is attributed to reduced activity on the Ethereum base layer, largely due to waning demand for smart contract operations like decentralized finance.
The decline in network activity is causing some institutional investors to reduce or sell off their Ether ETH $1,815 holdings, as confidence in Ethereum’s long-term prospects weakens amid a lack of clear catalysts for recovery.
Sources:
https://cointelegraph.com/news/ethereum-community-members-propose-fee-structure-app-layer
https://www.developerreport.com/developer-report?s=solana-is-the-2-ecosystem-on-every-continent
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