Ethereum, previously considered the uncrowned king of decentralized applications and smart contracts, is facing many challenges today. Decreasing transaction fees, declining on-chain activity, and the rapidly growing popularity of competing networks such as Solana have raised concerns about Ethereum’s stability and future. Against this backdrop, two Ethereum community members, Kevin Owocki and Devansh Mehta, have proposed a new Dynamic Fee Model that attempts to strike a balance between application builders’ income and network fairness.
What is the proposed Dynamic Fee Structure?
Owocki and Mehta present a simple but effective mathematical model in which fee calculations are done according to √(1000 x N), where N is the funding pool allocated to a project. This model allows smaller projects to earn more revenue, while the fee rate decreases for larger projects.
For example, if an application received funding of $170,000, then Fee = √(1000 x 170,000) = $13,038.4 i.e. approximately 7% of the fee.
What are the benefits for small and big developers?
The biggest feature of this model is that it encourages small developers. Projects with less capital are charged a slightly higher fee so that they can remain permanent, while for projects that receive more than $10 million in funding, the fee is capped at 1%. This also provides an incentive for scaling to a larger level.
Ethereum’s falling fees and activity
In April 2025, Ethereum’s gas fees hit the lowest level in five years at $0.01 , according to onchain analytics firm Santiment. This is mainly due to a drop in demand for DeFi and other smart contract operations. This is leading to fewer transactions on the network and a sharp drop in total fee revenue.
Reaction of Institutional Investors
With the decline in Ethereum’s utility, many institutional investors have started reducing or selling their ETH holdings. Unless there is a solid and positive change, market sentiments towards Ethereum are likely to continue to weaken.
Solana’s Growing Strength
In 2024, Solana surpassed Ethereum, adding 7,625 new developers to its network, while Ethereum added 6,456 new developers. This means that Ethereum’s monopoly position is now in danger. According to a report by Electric Capital, Solana has now become the second most favorite choice of developers.
For Ethereum, it is time for introspection and strategy rebuilding. The new fee model proposed by Kevin Owocki and Devansh Mehta is a positive step that can encourage developers and secure the economic structure of the network. But, amid emerging competitors like Solana and declining investor confidence, Ethereum must re-prove itself through innovation and community support.