Ethereum, Despite Attempts To Restructure Revenue Model, Intensifying Competition...Concerns Over Weakened Investor Confidence

Fee structure dynamically adjusted according to project size (Source: Ethereum Research)

Kevin Owocki and Devansh Mehta from the Ethereum community proposed a new dynamic fee structure considering both application layer profitability and fairness. They presented a simple formula based on a square root function where the fee rate decreases as the amount of funding allocated to the project increases.

According to the proposal, for small-scale funding, fees are calculated using the formula "sqrt(1000 x N)", and for a $170,000 fund pool, an overhead fee of approximately 7% is applied. Owocki and Mehta also suggested capping fees at 1% if a specific application fund pool exceeds $10 million. The intention is to allow small app developers to grow without excessive fee burdens.

This proposal is interpreted as an attempt to balance revenue generation and long-term sustainability for app developers within the Ethereum ecosystem. Owocki and Mehta emphasized the need for fee system reform and value accumulation mechanisms to compete with rival networks.

Meanwhile, Ethereum is facing profitability issues amid an increasingly competitive environment. During 2024, the Solana ecosystem attracted 7,625 new developers, surpassing Ethereum, which secured 6,456. Although Ethereum is still recognized as a major developer ecosystem, it does not hold as dominant a position as before.

According to on-chain analysis firm Santiment, in April 2025, as smart contract-related activities decreased on the Ethereum base layer, Ethereum fees fell to their lowest level in five years. This contraction in demand is leading institutions to reduce their Ethereum holdings and partially sell investments. Consequently, cracks are developing in the investor trust Ethereum has built as a smart contract platform, and there is no clear momentum for reversal in the near term.