[DIP-54] Soft Fee Floor for Public Operators and OC Policy Authority

Proposals DIP (DAO Improvement)
1

Proposal Summary

If this proposal were to pass the ssv.network DAO Operator Committee (OC) will be able to request from SSV Labs to filter public operators based on a minimum operator fee decided on by the OC. The initial minimum operator fee to be set is ~0.0028 ETH of annualized fees. After this proposal passes, the OC will be able to request a change to this filter every 6 months.

Motivation

This proposal outlines the ability of the OC to request from SSV Lab or any other team developing a Web App compatible with the ssv.network protocol, on behalf of the DAO, to set and manage a soft fee floor (fee floor) for Public Operators, proposes an initial value, and specifies the implementation.

This initiative is a direct response to the community-raised concerns regarding the long-term economic sustainability of public operators, expressed in a DAO-voted Temp Check and the changes introduced in DIP-50 once on mainnet.

This proposal recommends an initial fee floor value for ETH-denominated clusters. SSV-based clusters remain unaffected by this proposal.

Furthermore, the proposal empowers the Operator Committee to monitor and request SSV Labs, on behalf of the DAO, to update this parameter.

The public operator market is an important component of ssv.network that carries unique potential for economic, technical, and altruistic advantages that can be leveraged further.

However, the current economics of this market have rendered public operators unprofitable, risking mass shutdown. This problem is partially addressed by the network’s transition to an ETH-based fee and accounting model (DIP-50), which resets the economic parameters to viable defaults.

In this more efficient market, the absence of a fee floor could trigger a “race to the bottom.” New, unsustainable operators might draw stakers with excessively low fees, only to fail due to unprofitability. This creates network drag, forces stakers to migrate validators, and undermines network trust. It could also deter new public operators from joining by calling into question the viability of any fee-based business model.

The proposed fee floor is a crucial safeguard to ensure healthy operator economics and protect stakers.

Mechanics

Introducing a fee floor at the smart contract level is technically difficult and would require accounting for a range of edge cases (e.g., some private operators use the operator fee to charge their counterparty).

Therefore, the fee floor will not be enforced at the smart contract level. Instead, the OC will request SSV Lab or any other team developing a Web App compatible with the ssv.network protocol, on behalf of the DAO, to “softly” filter out public operators below this limit during operator selection in the UI, strongly incentivizing operators to keep fees above the floor to remain visible to stakers.

Public operators can still operate below the fee floor without protocol restrictions or disadvantages. The protocol remains unaffected, and operators are free to disregard this fee floor.

Initial Value:

Parameter Value
Fee Floor 0.0027893 ETH

Proposal Particulars

If this proposal were to pass, the following would be its effect:

  • Policy Authority: The Operator Committee (OC) will be granted the policy-making authority on behalf of the DAO to recommend and request any Web App developer to set a fee floor for this parameter at its full discretion, based on a self-imposed, published framework.
  • Framework: The OC must establish a framework to monitor market conditions and operator economics, informing fee updates, and coherent reporting standards:
    1. Any such policy, along with the updated fee, must be published and voted on by a majority of the OC before being implemented.
    2. Any increase of the minimum operator fee must be aligned with the technical limits imposed on the smart contract level, meaning there can’t be an increase above what’s technically possible to match by operators over time.
    3. The maximum update frequency of the floor fee under any policy is limited to twice a year, or it may not be updated at all.
    4. The initial fee floor value set must remain unchanged for at least 6 months after this proposal passes.
  • The OC, with the help of the SSV Foundation, upon the passing of this proposal, should engage with SSV Labs or any other Web App developer to implement a soft fee floor.
3 Likes
2

Update: The wording of the proposal has been slightly adapted to make its intention clearer and improve readability. The substance of the proposal hasn’t changed, nor have any of the proposed values. We’re aiming for Snapshot by EOD this Wednesday.

1 Like
3

Annually seems a little infrequent. I’d suggest semi-annually or quarterly. The price of ETH can change a lot in 12 months.

Another factor in support of more frequent changes is that it doesn’t have any catastrophic effects. Nobody is liquidated or forced out – they just stop appearing in the search results if their base fee is too low after the change.

It does occur to me that this could be a problem if the minimum fee increases substantially, but operators are still limited to increasing their fee by just 10% or 20% per month. They might wind up below the floor and have a hard time increasing their fee above it.

2 Likes
4

I think updating this value should have two goals. 1) track the 0.3% fee or whatever percentage we are targeting, 2) set the correct target %.

I think for 1), this depends on the ETH staking return rate change. I think this changes slowly enough that we can wait a year before updates. In the past year, the average return rate went from around 3.2% to about 2.8% (a 12.5% reduction). If we are nervous about large jumps, maybe add a trigger condition that if the return rate changes by >30% or something, then allow a request to update it.

For 2), it’s just how often we want to reevaluate the value. Once a year sounds fine I think.

5

Update: The OC is allowed to revisit every 6 months instead of 12 months. This doesn’t mean the check will lead to any update and the OC is free to skip an interval and decide not to update the value at all.

6

Voting is now live :vertical_traffic_light:
https://snapshot.org/#/s:mainnet.ssvnetwork.eth/proposal/0x44d13d3312d19944b999b13a310a701380ebbbf6018df6094a852cade3471026

@fod
@spookyg
@derfredy
@h.m.23-0neinfra
@hackworth
@markoinether
@flo
@monitorssv
@yuting
@thomasblock
@llifezou
@sigmaprime
@damon
@lemmagov
@hashkeygov
@ethernodes
@chainupgov
@kenway
@allnodes
@dsrvgov

7

For future reference:
The initial absolute value for the suggested fee floor was established using the original ethNetworkFee from DIP-50 as a baseline (specifically, 0.00929768 ETH annualized / 10 * 3 = 0.0027893 ETH), or simply put, roughly 0.3% of ETH staking rewards generated.

1 Like