SSV Network has announced a significant overhaul of its fee structure and staking mechanics, moving from an SSV-denominated payment system to an ETH-centric model. This change is designed to allow token holders to earn protocol fees directly in ETH. Currently under review by the Decentralized Autonomous Organization (DAO), this proposal introduces a new ERC-20 token known as cSSV, which will represent staked SSV positions.
The timing of this proposal is critical. As reported by Rated Network, SSV has established itself as the second-largest staking infrastructure on Ethereum, but its existing token economics have failed to reflect this growth adequately. The volatility in the SSV/ETH price ratio has necessitated multiple parameter adjustments, causing complications for operators managing their financial strategies.
Under the new model, both operators and the protocol will receive fees denominated in ETH instead of SSV. Validator clusters will be classified with accounting denominations of either SSV or ETH, with an expectation that the network will increasingly favor ETH-denominated clusters. SSV holders will be able to stake their tokens in a new contract and receive cSSV on a 1:1 basis. These stakers will earn proportional shares of ETH fees based on their stake in total staked SSV. Importantly, rewards will accumulate in wallets holding cSSV, which can be claimed at any time without the need to unstake.
The proposal also includes a governance aspect, requiring stakers to delegate their voting power. This delegation will influence the composition of the Effective Balance Oracle set. Initially, the voting power will be evenly distributed among oracles elected by the DAO, with plans for a transition towards permissionless oracle selection in the future.
The introduction of the Effective Balance model marks a significant shift. Following Ethereum”s Pectra upgrade, the maximum effective balance per validator was increased from 32 ETH to 2,048 ETH, representing a 64-fold growth in potential stake per validator key. Previously, SSV”s accounting method charged fees based on the number of validators rather than their actual stake, which meant larger consolidated validators were often undercharged. The new model introduces variables called clusterEB and operatorEB that track the cumulative effective balance across validators, ensuring that fees are now correlated with actual stake rather than just validator count.
With all fees, collateral, and liquidation processes denominated in ETH, the risk profile for validator clusters is expected to improve significantly. The proposal anticipates that liquidation parameters can become more capital-efficient while still ensuring safety, although specific metrics have yet to be disclosed. For participants in the incentivized mainnet, these changes will create a distinction: ETH-denominated clusters will not incur network fees deducted from their incentivized rewards, while legacy SSV clusters will maintain the existing deduction model.
As this proposal is still under discussion within the DAO, it is essential for the SSV community to engage in ongoing conversations regarding the implementation details. Notably, Vitalik Buterin recently proposed native Distributed Validator Technology (DVT) integration for Ethereum, which could indicate broader support for distributed validator technology at the protocol level.
SSV Network launched its mainnet on Ethereum in December 2023 and has rapidly captured a significant share of the staking market. With ETH trading at approximately $2,917 on January 27, the transition to ETH-denominated fees has the potential to streamline accounting for the increasing number of operators utilizing the protocol. The timeline for the DAO vote has not yet been announced, but stakeholders should keep a close watch on forum discussions, as this proposal could radically transform the flow of value within SSV”s infrastructure.
