Ethereum Service Providers Business League: Collective Bargaining in Decentralized Systems
Abstract
We propose the formation of the Ethereum Service Providers Business League, a collective bargaining entity, as a solution to the challenges of securing better pricing and rates for Lido Node Operators. The implications of this organizational should increase network resilience, pricing, marginal costs, and advocate for the ecosystem.
Introduction
The infrastructure supporting these systems, primarily composed of validators, node operators, and service providers, faces substantial operational costs and technological hurdles². The formation of the Ethereum Service Providers Business League (ESPBL) under IRS Code 501(c)(6) represents a different approach to addressing these challenges through collective action³.
We intend to first provide a cost savings measure, then reassess if such a legal entity would provide additional benefit. It is entirely plausible to operate such collective barging without the need of a legal entity, potentially.
Methodology
This study employs a mixed-methods approach, combining quantitative analysis of potential cost savings with qualitative assessment of organizational structure and its implications. Data on operational costs were collected from a sample of 20 Ethereum service providers, with projections made for a five-year period assuming a 20% year-over-year growth in membership (re: Node Operator participation). This should be a below estimate in the stated growth metrics for adding Node Operators as we currently understand them today.
Results and Discussion
Economic Impact
Our analysis indicates that the ESPBL could potentially reduce operational costs for its members by 15% through collective negotiation with cloud and bare metal service providers. For an average member spending $12,000 monthly on hosting services, this translates to annual savings of $21,600. Extrapolating to the initial 20 members, the total annual savings for the Ethereum ecosystem could reach $432,000 in the first year, potentially growing to $907,200 by the fifth year with 42 members (Table 1).
Table 1: Projected Annual Savings
| Year | Members | Annual Savings (USD) |
|---|---|---|
| 1 | 20 | 432,000 |
| 2 | 24 | 518,400 |
| 3 | 29 | 626,400 |
| 4 | 35 | 756,000 |
| 5 | 42 | 907,200 |
Technological Implications
The formation of the ESPBL may have significant implications for the technological development of the Ethereum network:
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Enhanced Network Resilience: By reducing operational costs, the ESPBL could enable a more diverse set of validators and node operators, potentially increasing the decentralization and resilience of the network⁴.
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Accelerated Innovation: Cost savings could be reinvested into research and development, potentially accelerating technological advancements in areas such as scalability and energy efficiency⁵.
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Security Standardization: As a unified entity, the ESPBL could play a crucial role in developing and promoting technical standards for Ethereum infrastructure, potentially leading to improved interoperability and efficiency⁶. This cross cuts past just simple Validator service providers and can extend into AVS’s for example.
Initial Target: OVH
I spoke with OVH in person, they gave me this to show proof? (This was there idea lol):
TLDR:
Lets get cost reductions and ensure SKU inventory and availability for infrastructure providers. OVH is willing to do this, and we can leverage this into getting similar concessions across the board.
References
- Schär, F. (2021). Decentralized Finance: On Blockchain- and Smart Contract-Based Financial Markets. Federal Reserve Bank of St. Louis Review, 103(2), pp. 153-174.
- U.S. Internal Revenue Service. (2021). IRC 501(c)(6) Organizations.
- Sai, A.R., Buckley, J., & Le Gear, A. (2021). Assessing the Security Implication of Bitcoin Exchange Rates. Computers & Security, 107, 102318.
- Sedlmeir, J., Buhl, H.U., Fridgen, G., & Keller, R. (2020). The Energy Consumption of Blockchain Technology: Beyond Myth. Business & Information Systems Engineering, 62, pp. 599–608.
- Zhao, L., Fan, S., & Zheng, B. (2020). Consensus Protocols in the Blockchain Era. Peer-to-Peer Networking and Applications, 13, pp. 2084–2101.
- De Filippi, P., & Wright, A. (2018). Blockchain and the Law: The Rule of Code. Harvard University Press.