The Future of Inter-Protocol Revenue Sharing

Traditional MEV capture creates adversarial relationships between searchers, validators, and users. Value is siphoned from the network without being redistributed to the protocols that generated it.\n- Billions in value extracted annually with minimal protocol benefit.\n- Creates systemic risks like frontrunning and chain congestion.\n- Undermines user trust and protocol sustainability.

Protocols like Ethereum and Solana are formalizing MEV flows via PBS, enabling revenue sharing agreements. Builders bid for block space, and proceeds can be directed to a shared treasury or burned.\n- Transparent, on-chain auctions replace opaque backroom deals.\n- Enables fee-splitting with dApps for the value they create.\n- Projects like CowSwap and UniswapX use it for better execution.

Rollups capture significant sequencer fees and MEV but rarely share this revenue with the underlying L1 or the core protocol whose state they're securing. This misaligns incentives for long-term security.\n- Arbitrum and Optimism generate millions in sequencer fees.\n- L1 security is treated as a commodity cost, not a shared asset.\n- Creates a free-rider problem for protocol-level security.

New models like EigenLayer restaking and Celestia's modular fee markets allow L2s to directly compensate security providers. Smart contract revenue splits can automatically divert a percentage of fees back to the host chain or DAO.\n- Restaking turns security into a revenue-generating asset.\n- Modular stacks enable clean fee abstraction and sharing.\n- Aligns L2 growth with the economic security of the base layer.

Applications built on general-purpose L1s/L2s generate massive fee revenue for the underlying chain (e.g., gas fees), but see none of it. The chain becomes a rent-extractor, not a partner.\n- Uniswap on Arbitrum pays millions in gas, enriching the sequencer.\n- No mechanism for the chain to rebate or reinvest in the dApp ecosystem.\n- Stifles innovation at the application layer.

Protocols like dYdX and Aave are moving to app-specific chains (e.g., on Cosmos, Polygon CDK) where they control the entire fee stack. They can implement custom fee tokens and direct revenue to treasury, stakers, or users.\n- Full sovereignty over fee market and MEV capture.\n- Enables token-utility integration (e.g., fee discounts, staking rewards).\n- Celestia and EigenDA make this economically viable.

Seigniorage, arbitrage, and liquidation profits are captured by validators and searchers, leaving the underlying protocols as passive infrastructure. This misalignment stifles innovation and security investment.

• $500M+ in MEV extracted annually from DeFi alone.
• Protocols like Aave and Uniswap see value leak to Flashbots and L1 validators.
• No direct mechanism for dApps to capture value from their own activity.

Frameworks like UniswapX and CowSwap abstract execution to specialized solvers, enabling explicit revenue sharing. The protocol can now sell its order flow and capture a fee.

• Solvers compete on execution quality, paying a fee for the right to fill.
• Enables Across and LayerZero to monetize cross-chain intent flow.
• Transforms protocol revenue from passive fees to active marketplace fees.

Rollups-as-a-Service and shared sequencers (e.g., EigenLayer, Espresso) create natural revenue-sharing junctions. The security layer captures value from all hosted chains and can redistribute it.

• EigenLayer restakers earn fees from AVS services.
• Celestia or EigenDA can share data availability revenue with rollup deployers.
• Creates a flywheel: more revenue → better security → more adoption.

Liquid Restaking Tokens (LRTs) like ether.fi and Renzo are not just yield tokens; they are the first primitive that automatically routes user capital to the highest-paying revenue-sharing opportunities across the modular stack.

• Aggregates yield from EigenLayer AVSs, sequencer fees, and protocol incentives.
• $10B+ TVL market proving demand for automated revenue routing.
• Precursor to generalized inter-protocol revenue routers.

DAOs will run their own intent mempools and auction blockspace directly to solvers, cutting out intermediary extractors. This turns the protocol into a mini-exchange for its own economic activity.

• dYdX v4 with its own chain is an early example.
• Enables direct sale of arbitrage, liquidation, and bridging rights.
• Ultimate alignment: protocol success directly funds its treasury and stakers.

Revenue-sharing networks can centralize power. The largest LRT or sequencer set could form a cartel, dictating terms to smaller protocols. This recreates the extractive financial intermediaries crypto aimed to dismantle.

• OFAC-compliance could become a revenue-sharing requirement.
• Lido on Ethereum demonstrates the sticky power of first-mover aggregation.
• The technical challenge is ensuring these systems remain credibly neutral and permissionless.

Revenue sharing creates a target for sophisticated MEV bots. A dominant searcher or builder could front-run or sandwich the revenue distribution transaction itself, siphoning value from the shared pool.

• Key Risk: Centralization of economic power in a few actors like Flashbots or Jito.
• Impact: Up to 30-50% of shared fees could be extracted, undermining the model's fairness.

Complex, multi-chain revenue routers become single points of failure. A bug in a shared contract like a LayerZero omnichain contract or Axelar GMP could drain funds from dozens of integrated protocols simultaneously.

• Key Risk: Systemic contagion across a $10B+ TVL ecosystem.
• Impact: A single exploit could invalidate the trust model for all participants, similar to the Polygon Plasma Bridge incident.

Protocols sharing revenue with anonymous, globally distributed stakers creates a regulatory minefield. A jurisdiction like the SEC or EU could deem the entire structure an unregistered securities offering, targeting the orchestrator (e.g., Across or CowSwap).

• Key Risk: Retroactive enforcement and 100% of shared revenue clawed back as fines.
• Impact: Forces protocols to implement strict KYC, destroying the permissionless ethos and fragmenting liquidity.

Revenue is often denominated in volatile assets (ETH, stablecoins, protocol tokens). Attackers can manipulate the price feed used to calculate shares (e.g., via a Chainlink oracle attack on a low-liquidity pool) to claim a disproportionate payout.

• Key Risk: >50% depeg in the valuation asset can drain the treasury.
• Impact: Makes the system reliant on oracle security, adding a critical external dependency.

The entity controlling the revenue-sharing parameters (often a DAO) can be captured. A malicious actor could propose and pass a vote to redirect 100% of fees to themselves, as seen in early Curve gauge bribery.

• Key Risk: Low voter turnout and whale dominance make governance a facade.
• Impact: Transforms a cooperative model into a rent-seeking monopoly, killing innovation.

If shared revenue is paid in a protocol's native token (e.g., UNI or AAVE), recipients immediately sell for ETH, creating constant sell pressure. This devalues the token, reducing the USD value of future revenue, accelerating the sell-off.

• Key Risk: Negative feedback loop that can crater token price by 90%+.
• Impact: Makes the revenue-sharing model economically unsustainable, as seen in many DeFi 1.0 incentive schemes.