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.