SSV Network has put forward a significant proposal aimed at overhauling its protocol economics by transitioning fee payments from SSV tokens to an ETH-based framework. This proposal is currently under review by the decentralized autonomous organization (DAO) and also introduces a new staking token called cSSV, along with an updated accounting system that aligns with Ethereum”s post-Pectra validator structure.
The initiative is part of SSV Network”s ongoing efforts to align its protocol incentives with Ethereum-native economics, while also addressing challenges faced by node operators. As one of the largest staking infrastructure providers on Ethereum, SSV Network has experienced considerable growth. Despite this, the token economics have not kept pace, leading to complexities from price volatility between SSV and ETH, which has hindered operators” ability to forecast costs effectively.
Transitioning to ETH-Denominated Fees
According to the proposed framework, both operators and the protocol would receive fees directly in ETH, rather than in SSV tokens. Validator clusters would be assigned a fee denomination of either SSV or ETH, with a trend expected to favor ETH-based clusters over time. This change is designed to simplify accounting practices, minimize exposure to the fluctuations of token prices, and create a more stable cost environment for infrastructure providers.
The proposal also introduces a new staking mechanism for SSV holders, allowing them to stake their SSV into a dedicated contract and receive cSSV tokens on a one-to-one basis. These cSSV tokens will represent the staked positions and grant holders a proportional share of the protocol fees generated in ETH. Rewards will automatically accumulate in wallets holding cSSV, and users can claim these rewards at any time without needing to unstake their original SSV.
Governance and Oracle Delegation Structure
Incorporated into the staking model is a governance component linked to the selection of oracles. Holders of cSSV will need to delegate their voting power, which influences the composition of the Effective Balance Oracle set. Initially, this delegation will be evenly distributed among oracles elected by the DAO. In the long term, the system plans to transition towards a more permissionless oracle selection process, thereby reducing reliance on centralized governance decisions.
This governance structure is crafted to strike a balance between decentralization and reliability as the new accounting system takes shape. By connecting staking participation with oracle management, the proposal aims to align the interests of token holders with the integrity of the protocol.
Adapting to Ethereum”s Pectra Upgrade
A primary motivation behind the proposed changes is the recent Pectra upgrade on Ethereum, which raised the maximum effective balance per validator from 32 ETH to 2,048 ETH. This adjustment enables a greater consolidation of stake under a single validator key. The existing fee model from SSV, which was based on the number of validators, would undercharge larger validators under these new regulations.
To address this, SSV Network is set to introduce new accounting variables, such as cluster effective balance and operator effective balance. These metrics will track the total effective balance across validators, ensuring that fees reflect the actual stake rather than merely the number of validator keys employed.
The proposal is currently open for discussion within the SSV governance forum, and a decision has yet to be finalized. For participants in the Incentivized Mainnet program, these changes would lead to a split model where ETH-denominated clusters would not incur network fee deductions from incentives, while legacy SSV clusters would remain under the existing fee structure.
As Ethereum continues to advance and interest in distributed validator technology grows, the proposed shift toward ETH-based fees and effective balance accounting could enhance SSV”s scalability, pending community approval.
Stay tuned for updates as SSV”s staking powered by cSSV approaches its testnet phase, paving the way for mainnet launch and new decentralized finance opportunities.
