The Future of ZK-Rollup Treasuries: Managing Billions in Sequencer Fees

Rollup treasuries are single points of failure. A $1B+ treasury managed by a 5/9 multisig is a systemic risk. The solution is on-chain governance with progressive decentralization, moving from optimistic governance to zk-verified DAOs.

• Key Benefit 1: Mitigates catastrophic key management risk.
• Key Benefit 2: Enables transparent, programmable treasury policies.

Idle sequencer fees are a massive opportunity cost. Treasuries must generate yield to fund development and secure the chain. The model is restaking via EigenLayer or native LST issuance, turning fees into productive capital.

• Key Benefit 1: Creates sustainable, protocol-owned revenue streams.
• Key Benefit 2: Bootstraps economic security for the rollup's own validation.

Treasuries denominated solely in the native L1 token (e.g., ETH) are volatile and misaligned. The future is multi-asset fee acceptance (like Starknet's STRK, Arbitrum's ARB) and automated swapping via CowSwap or UniswapX for stablecoin reserves.

• Key Benefit 1: Reduces treasury volatility and improves balance sheet stability.
• Key Benefit 2: Aligns tokenomics by recycling protocol-native fees.

Sequencers capture $100M+ annually in MEV. Keeping it all is extractive; redistributing it is regenerative. Implement a proposer-builder separation (PBS) model at the rollup level, with fees funneled back to users and stakers via mechanisms like CowSwap's surplus or Flashbots SUAVE.

• Key Benefit 1: Transforms a negative externality into a protocol subsidy.
• Key Benefit 2: Improves user experience with better execution and rebates.

Manual governance for treasury management is too slow. The end-state is automated, rule-based policies executed by smart contracts: e.g., "if ETH > $4k, swap 20% to USDC." This draws from MakerDAO's PSM and Olympus DAO bond mechanics.

• Key Benefit 1: Enables precise, transparent, and rapid treasury operations.
• Key Benefit 2: Removes political friction from routine financial management.

A rollup's treasury is its ultimate liquidity guarantee. In a crisis, it must be deployable across chains instantly. This requires native bridging infrastructure (like zkBridge, LayerZero) and pre-approved liquidity pools on Aave or Compound to act as a lender of last resort.

• Key Benefit 1: Provides existential security and deep liquidity assurance.
• Key Benefit 2: Turns the treasury into an active market stability tool.

Most rollups like Arbitrum and Optimism funnel all sequencer fees to a single, multi-sig controlled treasury. This creates a massive honeypot vulnerable to governance capture and political infighting. The DAO's only tool is a blunt, politically-charged grants program.

• Single Point of Failure: A 7-of-12 multi-sig controls the entire revenue stream.
• Misaligned Incentives: Treasury growth doesn't directly benefit protocol security or user experience.

Copy-pasting Ethereum's burn mechanism or creating a native staking token ignores rollup economics. Sequencer fees are for execution, not consensus security. Forcing them into a staking pool creates dead capital and fails to solve the core problem: funding decentralized sequencing.

• Dead Yield: Staked assets don't secure the chain, they just accrue fees.
• No Sequencer Incentive: Stakers are passive; they don't run hardware or guarantee liveness.

Sequencer revenue is dominated by MEV (Maximal Extractable Value), not base fees. Current treasury models treat this opaque income stream as generic profit, missing the chance to align it with user welfare. Projects like Flashbots SUAVE aim to democratize MEV, making rollup treasuries obsolete if they don't adapt.

• Opaque Cash Flow: DAOs cannot audit or optimize MEV capture.
• User Alienation: Profiting from user transaction reordering breeds distrust.

The only sustainable model is to burn a majority of fees via a verifiable on-chain auction. This directly accrues value to the rollup's native token (like EIP-1559) while using a small, transparent portion to fund public goods via retroactive funding models like Optimism's RPGF. This aligns token holders, users, and builders without a centralized treasury.

• Value Accrual: Burns create deflationary pressure, benefiting all token holders.
• Eliminates Governance Risk: No large treasury to capture or mismanage.

Future fees must directly pay and slash a permissionless set of sequencers, similar to EigenLayer's restaking model. Sequencers post bond in the rollup token and earn fees for liveness. Slashing for censorship or downtime turns treasury management into a self-sustaining security mechanism.

• Skin in the Game: Sequencers are economically bonded to the chain's health.
• Auto-Compounding Security: Revenue directly funds the decentralized operator set.

Instead of capturing MEV for the treasury, rollups should enforce fair ordering and run a transparent MEV redistribution pool. Captured value is either burned or distributed back to users in that block via CowSwap-style batch auctions or Gas rebates. This turns a reputational liability into a user acquisition tool.

• Trust Minimization: Transparent, on-chain redistribution.
• Pro-User Alignment: Converts extractive MEV into a protocol-owned subsidy.

Starknet is pioneering a model where treasury funds are directly deployed to subsidize and secure core network services. This is a bet on protocol-owned infrastructure over pure tokenholder yield.

• Directs fees to subsidize prover costs and decentralized sequencer incentives, reducing user transaction costs.
• Funds public goods like the Starknet Asset Network (SAN) for native liquidity, competing with external bridges.
• Governance token (STRK) is used for staking and fee payment, creating a circular economy within the ecosystem.

zkSync's strategy focuses on maximizing fee revenue through hyper-efficient proof aggregation and a lean operational model, prioritizing profitability and decentralization of its prover network.

• Sequencer fees are split between provers (for proof generation) and the treasury, with a clear path to decentralized sequencers.
• Booster rewards from the treasury incentivize provers to keep costs low, creating a competitive L1 data posting market.
• Avoids direct liquidity wars, instead relying on superior UX and native account abstraction to drive volume.

Scroll's "Ethereum-equivalent" ethos extends to its treasury strategy: a significant portion of fees are committed to credibly neutral, Ethereum-aligned public goods and security.

• Fee sink model directs revenue to Ethereum consensus-layer validators and ecosystem funds (e.g., Gitcoin), strengthening the base layer.
• Minimal extractable value (MEV) is mitigated through encrypted mempools, with potential revenue recycled back to users.
• Strategic positioning as the "ethical rollup," attracting developers and users aligned with Ethereum's values over maximal extractable revenue.

Pure fee redistribution to tokenholders is a short-term game that fails to build sustainable competitive moats. It invites mercenary capital and does nothing to improve core protocol utility.

• Vampire attacks from new chains with higher yields can rapidly drain TVL and activity.
• Neglects R&D funding for critical long-term work on proof systems, decentralized sequencing, and interoperability.
• Misaligns incentives by rewarding speculation over genuine network usage and contribution.

The winning model will treat the treasury not as a piggy bank but as a strategic arm to fund R&D, bootstrap critical infrastructure, and create unbreakable network effects.

• Subsidize key primitives: Native stablecoins, intents-based bridges (like Across), and decentralized sequencer networks.
• Fund applied ZK research: Accelerate progress in recursion, GPU proving, and formal verification to maintain a technical edge.
• Create flywheels: Use fees to reduce user costs, driving more volume, which further decentralizes and secures the network.

The leading Optimistic Rollups have already defined the treasury governance playbook, creating pressure for ZK-rollups to differentiate. Their massive treasuries set the benchmark.

• Arbitrum's $3B+ treasury is governed by a DAO funding everything from gaming guilds to security councils, establishing a de facto standard.
• Optimism's RetroPGF cycles direct fees back to ecosystem builders, creating a powerful developer loyalty loop.
• The challenge for ZK-rollups: They must justify their technical superiority with an equally superior economic model to capture mindshare.