Proposed Ethereum Upgrade Could Allow Layer 2 Developers To Share Fee Revenue

Ethereum developers are proposing an upgrade that would let popular dApps earn a share of the transaction fees they generate on Layer 2.

EIP-6968 proposes a new type of token providing “contract secured revenue” (CSR), allowing developers to claim a percentage of the transaction fees generated by users interacting with their smart contracts.

“With CSR, now projects can band together, create an L2 around their shared memes/values, [and] share sequencer fee revenue based on who drives the most usage,” tweeted Kevin Owocki, one of the proposal’s co-authors. “If adopted, this would allow smart contract developers who deploy on L2s to access a potentially lucrative revenue stream.”’

New revenues generated could fund dApp development, public goods, or enable incentives for developers to join a network.

While Owocki first outlined EIP-6968 in May, the proposal has gained renewed traction following a presentation by Owocki at the recent EthCC conference in Paris.

Funding Development With Transaction Fees

EIP-6968 seeks to shake up the highly competitive Ethereum scaling sector, with CSR providing a new type of incentive for developers.

While Layer 2 rollups are presently the leading scaling solution, top L2 teams including Arbitrum, Polygon, and zkSync are already investing resources into building infrastructure for Layer 3 networks.

L3s typically comprise “app-chains” that host a single dedicated decentralized application. Owocki described EIP-6968 as enabling “ecosystem-chains,” described as a step forward from app-chains.

The proposed upgrade is a modified version of EIP-1559, which went live in August 2021 and introduced Ethereum’s burn mechanism. The authors note that EIP-6968 could be used by any network using EIP-1559.

“Using protocol rewards of an L1 to fund smart contract development would be a big change to the way the current market works,” the proposal reads.

“I’m excited to see what kind of traction this creates within the L2 ecosystem, and envision a virtuous flywheel where we see smart contract developers receive revenue for the value they bring to L2s,” Owocki wrote on the Ethereum Magicians forum.