Optimising the Squad Staking Model to Fund the Regen Movement

The recent Regenerative Stack series by the Greenpill Dev Guild (GPDG) provides us with insights on ways, means, and technologies to help fund public goods. Of all the technologies discussed, squad staking stands out to me as the most promising because it offers a practical way to reallocate capital earned from staking toward funding impact initiatives. It also helps decentralise Ethereum by making validation accessible to all, which is arguably one of Ethereum's greatest public goods.

Simply put, Squad staking enables a group of people to collectively and trustlessly run a yield-generating Ethereum validator cluster. This involves two steps: coordinating the nodes of the group members to operate as a validator cluster and providing the necessary staking collateral. However, due to a lack of stable electricity, internet or time, some prospective participants may not be able to set up their own node.

What if we could modify the current squad staking model so that anyone could participate, whether technically OR financially? Technical participants would be responsible for the uptime of the validator cluster , while financial participants would be responsible for the staking collateral. Instead of equality, we would have equity. Expanding this proposed model further, how can we then leverage it to drive large-scale funding for impact-profit initiatives?

Note: All ETH/USD conversions in this article are made at a rate of 1 ETH/$3,500.

Squad staking in a nutshell

A squad is a group of people that coordinate together to set up and run a single validator cluster with the aim of confirming transactions and ensuring consensus on the blockchain to earn rewards. Squads use decentralised validator technologies (DVTs) to split the responsibilities amongst themselves. Depending on a few different factors, a node could generate more yield by participating in up to five squads.

While the solution is technically feasible, the 32 ETH collateral requirement and node costs remain a formidable barrier. GPDG is currently working on two partnerships to that end: a hardware partnership to allow node operators in potential squads get nodes at a subsidised price, and a funding partnership where squads would literally have to stake nothing to become validators on the Ethereum network through the Lido CSM. With a bond deposit between 1.8 - 2.5 ETH ($6300 - $8750), Lido provides the entire collateral for the validator. Squads then earn two forms of rewards: base rewards and bond rewards. Bond rewards are rewards from the bond deposit used to activate the validator with Lido. Base rewards are rewards squads will get for running their validator above at a certain performance threshold. The initial model proposes that beneficiary squads will dedicate 16% of their yield to funding public goods initiatives. In GPDG's own words:

Refining the model

The regen movement has remained heavily dependent on grant funding and needs sustainable funding models to ensure impact continuity. This is where squad staking shines as a scalable and sustainable funding source for impact. The key challenge is unlocking enough capital to get the flywheel turning. More capital means more squads, more squads generate more revenue, and more revenue means more impact. Accepting financial participants is how we get there. By allowing ETH holders to contribute without needing to run nodes, squads can collectively provide the staking bonds/collateral themselves.

Regen communities would be natural candidates, both as financial contributors and as recipients of the yield set aside for impact funding. Over time, the broader squad staking community could decide where to direct that funding to based on demonstrated impact. In short, a PGF Investment Instrument (PII).

It would work like this:

• Squad creation: GPDG maintains a list of technical participants interested in joining or forming a new squad but who don’t yet have the 32 ETH collateral to stake.
• Capital commitment: Regen communities and their members can delegate their ETH to the squad. Once the 32 ETH minimum is reached, the squad will use it to set up their validator cluster.
• Conditional payout: 20% of the reward is allocated to a regen squad treasury, 30% to technical participants, and 50% to financial participants. Financial participants can only withdraw their ETH one year from the date the validator commences operations.

With 32 ETH staked in a squad, at the current average APR of 2.91%, the squad will earn 0.93 ETH annually:

• Financial participants take ~0.46 ETH
• Technical participants take ~0.27 ETH
• ~0.18 ETH goes to the regen squad treasury

If things go well, the treasury could accumulate a meaningful pool of capital over time. For instance, 100 active squads contributing 0.18 ETH per year would amount to 18 ETH annually. In ten years, that is 180 ETH (~$630,000), without compounding. With compounding and protocol growth, that number could grow significantly higher. With more squads joining and APRs optimised across multiple staking protocols, the regen squad treasury could grow into a multi-million-dollar resource for impact. This is exactly what the regen movement needs right now because it offers a regenerative funding alternative to the current reliance on one-off grants or charity.

Furthermore, it enables the creation of additional revenue streams through financial relationships with profitable regen projects. For example, imagine the treasury invests 3 ETH into a new on-chain energy project aiming to bring solar microgrids to off-grid communities, in exchange for a 10 per cent revenue share over three years. If the project succeeds and generates 30 ETH in revenue, the treasury gets back the 3 ETH principal plus an additional 3 ETH in yield. And given the investment risk involved, this model brings more discipline to funding decisions and creates an incentive to carefully evaluate the business models, teams, and roadmaps behind each project.

Over time, successful projects could return to the treasury for additional rounds of support, creating a flywheel where capital, coordination, and community values reinforce one another. In this way, the regen squad treasury functions not only as a funding mechanism but also as a regenerative investment cooperative and a signaler for people looking to invest in regen initiatives.

Making the transition

To really kickstart the sustainable funding flywheel, the number one priority is generating enough revenue to accumulate staking collateral internally. For 1.8-2.5 ETH ($6,300-$8,750), Lido would delegate 32 ETH to a squad for validator activation. Activating five squads would require 9-12.5 ETH ($31,500-$43,750). That is the gap we need to close. The more revenue we can generate, the more capital becomes available to reinvest into the flywheel. In cases where individual or community financial contributions fall short, sufficient revenue also ensures that the regen squad treasury can step in to cover the shortfall.

To realise this increase in revenue, we need to do three things: spin up more squads, accumulate ETH to support operations in the early stages, and maintain a competitive APR to attract participants beyond the regen space.

More staking squads

The first way to generate more revenue is to increase the number of squads. There are a few different ways to do that:

• Hardware support: GPDG is working on hardware partnerships to allow potential node operators to get their nodes at subsidised prices. This lowers the barrier to entry and enables quicker breakeven for participants.
• Financial backing from regen partners: Support can be sourced from larger regen aligned organisations such as Celo, Glo Dollar and Allo Capital. Their involvement would provide credibility and catalyse broader individual participation.
• Nouns projects as financial participants: Many Nouns DAO funded projects are actively seeking ways to generate revenue beyond the sale of Nouns NFTs, making them strong candidates for financial participation in squad staking.
• Regen Coordination relationships: The Regen Coordination Network has established relationships with several ecosystem projects, which can be used to secure organisational support, a stepping stone to mobilising individual contributors.

Let’s assume 50 people are able to acquire nodes with the support of Greenpill Network, and each squad consists of a maximum of six nodes. We can form a maximum of 41 squads. Assuming they all meet the performance threshold, the total annual yield would be approximately 38.13 ETH. Over a 10-year period, this would amount to 381.3 ETH ($1,334,550) in cumulative revenue, of which 45.75 ETH (~$160,000) will go to funding new squads.

Compounding

Most squads are not immediately profitable, especially in the early stages because the initial costs often outweigh the early rewards. Yield generated can be pooled to:

• Cover hardware and internet costs
• Subsidise downtime risks or slashing penalties = Create a treasury for reinvesting into new squads

As mentioned, squads using Lido CSM support are expected to allocate at least 16% of their yield over an agreed period to funding public good projects. Over the first ten years, this yield could be strategically allocated as follows:

• 60% reinvested into funding new squads (which are themselves regen initiatives)
• 20% directed into existing regen investment instruments
• 20% invested in emerging for-profit regen intiatives

Each squad allocates a total of 0.14 ETH to impact funding. Over ten years with annual compounding, approximately 0.08 ETH is allocated to launching new squads and compounds at a conservative rate of 1.5%, resulting in a future value of 0.85 ETH. Another 0.028 ETH is invested in regen investment instruments at a 10% annual return, resulting in a growth of 0.44 ETH. The remaining 0.028 ETH is channelled into early-stage regenerative startups, compounding at 5% to reach 0.35 ETH.

Altogether, this diversified approach yields a projected future value of 1.64 ETH per squad over the ten-year period. Without compounding, a single squad would generate 1.4 ETH for the regen squad treasury in 10 years. With compounding, this increases to 1.64 ETH. Across 50 squads, that’s 70 ETH not compounded compared to 82 ETH compounded, a difference of 12 ETH.

Competitive APR

To make the proposed model work, we need more financial participants, especially those outside core regen circles. For that to happen, the model has to remain attractive when placed side by side with more established staking protocols. The challenge is to offer a yield that is competitive enough to draw in non-regens, while still redirecting a portion of that yield for impact funding. We can do this by maximising protocol exposure. Lido is just one option. Squads can also tap into protocols like Obol, Diva, SSV, and Rocketpool, all of which offer competitive APRs. By running across multiple protocols, squads can maximise yield and reduce reliance on any single platform.

In 10 years, a network of 50 independent squads could unlock over 80 ETH in additional capital, all of which could be directed toward funding impact initiatives. With that amount, we could reduce our dependence on external staking protocols by 4% within the same period.

Critique

One major angle of criticism I foresee is the time it takes to generate a substantial yield. And that is a valid concern. But maybe it is time we started viewing the regen movement less like a typical Web3 space and more like a Web2-style ecosystem. Here is why: first, unlike other corners of Web3, it does not have venture capital pouring in at scale. There are no oversized rounds or token launches designed to attract hype-driven liquidity. Second, we are not offering the kind of rapid, high-return opportunities that appeal to profit-seeking crypto natives.

In that light, it makes more sense to adopt a longer-term, Web2-style investment mindset. Just like traditional businesses that take years to become profitable but are built on solid fundamentals, the regen movement needs slow capital, patient capital that values impact and infrastructure over immediate returns. The squad-based funding model aligns with this kind of thinking, making it more appropriate for our context.

Some community members from a popular regen project were discussing their depletion of funds. When one member suggested investing the remaining funds in DeFi protocols to generate yield, another dismissed the idea, arguing that the yield wasn’t worth the time. It was amusing because the APR in question was actually a widely accepted benchmark for established Web2 businesses.

This is exactly the shift we need to embrace. If regen communities continue to dismiss steady, reliable returns simply because they do not meet crypto-native expectations, we will keep missing opportunities to build long-term sustainability. A 3 to 5 percent APR may seem small in DeFi terms, but in the Web2 world, it is perfectly respectable, especially when paired with low risk and long-term impact. If we want to build lasting infrastructure, we have to start valuing slow, compounding capital as a legitimate and even necessary path forward.

Conclusion

Squad staking can offer a sustainable pathway to funding impact initiatives. While the road to scale may take time, each squad launched, each validator activated, and each ETH earned brings us closer to a self-sustaining ecosystem. Such a transition will not happen overnight. Regeneration is, by nature, a patient process that rewards consistency and coordination. If we can stay committed to the vision and expand participation, then squad staking has the potential to increase funding for what matters.