[IP] ETH+ revenue share adjustment

ETHPLUS (ETH+)
1

Summary

This proposal aims to adjust the ETH+ revenue distribution methodology to better align with the current risk profile of the product and the long-term health of the Reserve ecosystem. The ETH+ revenue share is currently defined within the ETH+ methodology, which passed an IP vote in early January. This RFC proposes a change to that methodology.

Proposed changes:

  • Total take rate: 5% → 10%
  • RSR staker share: 5% → 3%
  • Platform fee (RSR buy & burn): 0% → 7%

Net effect on ETH+ holders: This proposal is bundled with the introduction of weETH to the ETH+ basket. The combined effect of the basket upgrade and the revised take rate results in a holder APY of approximately 2.40%. Compared to the pre-eETH basket under the previous 5% take rate, which delivered approximately 2.57% to holders, the net impact is a modest reduction of ~17bps.

Even where yield is marginally compressed, ETH+ continues to offer meaningful advantages over holding any single LST: diversification across multiple providers, deeper DeFi integrations, and a basket that will continue to be optimized as higher-yielding collateral becomes available and liquid.

Looking ahead: Basket composition is not static. As higher-yielding collateral options mature and their liquidity profiles improve, they will be evaluated for inclusion with the goal of closing any gap to single-asset benchmarks and potentially exceeding them.

Problem statement

ETH+ currently operates at a significant negative gross margin, making it the most deeply unprofitable DTF in the Reserve ecosystem. While incentive programs were successful in scaling supply, much of that TVL was concentrated in leveraged positions on Morpho. When market conditions shifted, these positions rapidly unwound, leading to significant deleveraging and the exit of a large portion of ETH+ supply over a short period. This highlighted the fragility of leverage-dependent TVL and the limitations of relying on a small number of counterparties for sustained liquidity.

Entering 2026, ETH+ supply is materially lower. However, even with strong forecasted growth, ETH+ remains structurally unprofitable at a 5% take rate. The revenue generated at current and projected supply levels is not sufficient to offset the cost of serving and growing the product, making the current revenue structure unsustainable without meaningful change.

Rationale

1. Risk profile has changed

When ETH+ launched, RSR stakers were compensated at 5% because they bore meaningful risk — specifically, the risk of slashing in the event of a depeg or collateral failure.

Now that default detection has been turned off, the risk of slashing has been substantially reduced. The historical performance of the underlying collateral has been stable and rebalances have not incurred any bad debt. With this in mind, we now believe that the staking pool is mature and sufficient for an asset of ETH+'s size.

In any market, lower risk means lower expected returns. This adjustment reflects that reality.

2. Governance remains intact

RSR stakers still provide an important function through governance. That role has not changed, and the 3% allocation ensures the staking pool remains robust enough to secure the protocol.

Even with a reduced yield, the staking pool is expected to remain well above the threshold needed for healthy governance — likely staying above $1M for an $80M+ asset.

3. RSR holders benefit (including stakers)

The 7% platform fee will be used for RSR buy and burn.

RSR stakers are also RSR holders. While their direct yield decreases by 2%, they benefit from protocol-level value accrual through the buy and burn mechanism.

This represents a shift in value distribution rather than a loss. Direct yield is exchanged for token appreciation.

For the broader RSR holder community, this is unambiguously positive. Revenue that previously flowed to a small group of stakers now accrues to all RSR holders.

4. Holder yield in context

This proposal is bundled with the introduction of weETH to the ETH+ basket. When evaluating the impact on ETH+ holders, the relevant comparison is the yield holders were receiving prior to eETH inclusion under the original 5% take rate.

Under the pre-eETH basket, holders received an effective APY of approximately 2.57%. Under the proposed final basket with the revised 10% take rate, holders receive approximately 2.40%. The weETH addition partially offsets the increased take rate, and the net impact to holders is marginal.

Importantly, ETH+ provides value that single-asset benchmarks do not capture: diversification across LST providers, composability across DeFi, and an actively managed basket that can adapt to market conditions. These structural advantages should be weighed alongside any marginal yield difference.

Risks

1. Backing shortfall during rebalances

The backing could drop to a point where it does not cover expected loss during basket rebalances. This risk is mitigated by the lindy nature of the underlying assets — ETH+ has never slashed RSR stakers during rebalances — and the imminent introduction of CowSwap solvers into the rebalance process.

2. Yield falling below benchmark

ETH+ yield may fall below single-asset benchmarks such as stETH. However, this is offset by the diversification and DeFi utility benefits that ETH+ provides, as well as the ability to rebalance into higher-yielding weETH and frxETH allocations at a later date. Liquidity profiles support this approach at the current time.

3. Increased susceptibility to governance attacks

With a reduced staking yield, the staking pool could shrink, increasing susceptibility to governance attacks. However, ETH+ is still expected to have approximately $1M governing the DTF, with governance oversight from multiple parties including ABC, CC, StakeDAO, the DTF Champion, and the Governance Facilitator.

Impact by stakeholder

Stakeholder Impact Notes
RSR holders (broad) :white_check_mark: Positive Buy & burn benefits all holders
ETH+ holders :warning: Marginal yield change Offset by diversification, DeFi utility, and future basket optimization
RSR stakers on ETH+ :warning: Reduced direct yield Offset by buy & burn + lower risk profile implies lower expected returns

Timing

This proposal is bundled with the second governance action introducing weETH to the ETH+ basket. The yield boost from weETH partially offsets the take rate adjustment, minimizing the impact on ETH+ holders.

This is considered the appropriate moment to make this change. The weETH addition softens the impact on holder yield, making now the least disruptive time to adjust the revenue structure.

Open for discussion

Feedback from the community is welcome. This RFC is intended to start the conversation, not end it.

3 Likes
2

Thanks @starl3xx for taking the time to put this together. I appreciate that while these proposed changes will negatively impact some, the conversation is well overdue in the context of a recent reduction in the staking risk layer and the deep unprofitability of ETHplus, as highlighted by Nevin in the latest community call. Although uncomfortable I do agree that without a change to the revenue share, ETHplus will remain deeply unprofitable and is increasingly likely to be sunset. Against that backdrop, some repricing of both holder yield and RSR staking rewards feels unavoidable.

With regard to ETHplus holder yield, I think your analysis is correct. Once we rebalance into the final basket as outlined in the interim report as part of the Q1 rebalance, we expect to achieve a blended yield of ~2.68%. Under the current 5% take rate this would result in a net holder yield of ~2.55%. By increasing the total take rate to 10%, this would fall to ~2.41%. This is a relatively modest reduction, particularly when considered alongside the other advantages you have highlighted such as improved diversification, stronger curation and deeper DeFi integrations. I remain confident that if passed, the basket can be actively managed to consistently outperform the stETH benchmark while remaining aligned with the broader ETHplus methodology.

RSR stakers do see the largest reduction in direct revenue under this proposal, but I think this aligns with the recent reduction in their risk layer. Default detection has already been disabled and the upcoming upgrade to protocol version 4.2.0, which introduces CowSwap fillers, will further improve the efficiency and reliability of collateral basket rebalances.

ETHplus currently has a TVL of ~$69m and at a blended yield of 2.68% generates roughly $1.85m in annual yield. Under the existing 5% take rate, approximately ~$92k per year flows directly to RSR stakers. With ~880m RSR staked, this supports a headline RSR staking APY of ~6.8%. Under the proposed split, the direct allocation to RSR stakers falls from 5% to 3%, reducing that cashflow to roughly ~$55k per year. Holding all else equal, this implies a meaningful reduction in headline RSR staking yield, falling by approximately 2.6% to ~4.2%.

In practice, I do not expect the RSR staking APY to fall all the way to ~4.2%. It is more likely that the system reprices through participation rather than yield, with some RSR stakers exiting until an equilibrium closer to ~6% is reached. Holding everything else equal, including staking APY, this implies the dollar value of RSR staked on ETHplus would fall from roughly ~$1.35m to ~$800k. At that level, bonded RSR supporting ETHplus would represent approximately ~1.1% of current ETHplus TVL. While this is not unreasonable and broadly in line with some DeFi protocols today, it is on the thinner side. For that reason, this metric should be monitored closely over time, particularly if the growth currently forecast for ETHplus begins to materialise. If this proposal passes, I will begin tracking and reporting on this as part of the quarterly reports.

In summary, while both ETHplus holders and RSR stakers will see a reduction in yield, the nature and scale of those changes matter. A ~14bps reduction in ETHplus holder APY does not meaningfully affect long term competitiveness, while RSR stakers are repriced in a way that reflects their reduced risk profile, with the protocol level burn partially offsetting lower direct yield. Against the backdrop of ETHplus remaining deeply unprofitable without structural change, doing nothing is not a neutral option.

While this proposal has short term drawbacks, I see it as a meaningful step toward a more sustainable and decentralised ETHplus. Capturing value at the protocol level creates the ability to later incentivise and propagate ETHplus through DeFi integrations rather than relying on discretionary or external support.

That said, while I think this proposal heads in the right direction it is not black and white and contains a fair amount of nuance. I would welcome further input from ETHplus holders and governors alike before this proposal graduates to IP.

2 Likes
Ham Delegate Platform
3

It would be great to get your thoughts on this @Raphael_Anode. / @zeb . How do you feel this scenario matches up against other DAOs? Is there a data source where these kind of metrics can be compared?

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How would that buffer size have performed during past rebalances? If it would have meant haircuts to the underlying, would that happen again in this regimen? If not, why not?

It seems you did a lot of work on improving liquidity of the components, so this does have to be taken into account too.

If that’s missing the point of your question let me know.

5

Thanks for getting back Raph.

Sorry I should have been clearer with my question. I agree with Starl3xx assessment that the dollar value of staked RSR is likely to drop to ~$800k-$1m if this proposal passes. Given ETHplus TVL is ~$67m this means that staked RSR supporting the governance activities of ETHplus would represent roughly 1.1% of the current TVL. While not unreasonable, I do think this is on the thinner side. If it drops much lower i’d be concerned about the increased possibility of governance attacks and would have to be closely monitored in the weeks and months after the proposal passes.

I wondered with your experience participating in and working with other DAOs if there was some kind of precedent for this? e.g a widely accepted minimum or historical examples of when the percentage has dropped too low and measures have been put in place to increase it back to healthy levels.

In response to your comments, I’m happy with the level of overcollateralisation this proposal predicts and the size of the buffer. It could be argued that recently we have had the biggest basket rebalance in the history of ETHplus and we only incurred a 15% loss to the backing buffer. This risk will also be further mitigated when ETHplus is upgraded to protocol version 4.2.0 and rebalances can implement the use of CowSwap Fillers.

I think its hard to truly quantify how basket optimisations will affect the price impact of basket rebalances going forward given the volatility in the market, for example rETH dropping almost all of their liquidity over the holidays just to build but a far superior profile shortly after. That being said though I think the optimisations in flight through governance at the minute are only going to have a positive impact to future rebalances. I think the basket will be in a good place after step 2 completes and in lieu of adding other assets will now only need minor tweaks going forward. :crossed_fingers:

1 Like
6

Gotcha! Sorry I didn’t catch that in the first place. The way to think about that is in terms of ROI.

The ROI of a governance attack is the extractable amount minus the cost of lending, purchasing or otherwise obtaining sufficient governance tokens to overcome opposition.

In the ETH+ example this would be let’s say ~$3m to drain $67m. Easy, right?

Well not quite: There’s a two day execution delay and a two day delay before a proposal goes to vote. So ETH+ defenders can use two days upfront to look at the drainer proposal and then purchase voting power to oppose it, and even if it passes there are two days for the Guardians to halt its execution.

In pure economic theory you would need total governance security to be higher than TVL. That isn’t the case for most DeFi protocols.

Having a tight security council and watchful delegates and governance facilitators is the best security here.

In that regard I don’t think it’ll make a big difference if staked RSR goes from 1,3M to 800k.

2 Likes
7

No problem at all. Thank you for the additional colour @Raphael_Anode.

Reminds me of the Swiss Cheese Model which helps visualise how errors in complex systems can occur; it’s only when the holes line up in multiple layers can a hazard pass through and lead to a accident or failure.

I think you’re right. While this proposal shrinks one layer, the rest remain intact and robust enough to repel future governance attacks.

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This proposal has been moved onchain. The Request for Comments period has ended.

The platform fee approved in the IP vote is directed to the community-run multisig (0xcbca96091f43c024730a020e57515a18b5dc633b), which also receives all Index DTF platform fees. Currently, all funds sent to this address are used to buy and burn RSR.

Link to onchain proposal: Reserve app | DTFs

1 Like