EIP-8363: Tapered Issuance Burn

[pintail]

Discussion topic for EIP-8363: Tapered Issuance Burn

This EIP implements a modification to the ETH issuance curve by way of a partial burn of validator rewards.

References

This core principle is in large part based on prior work by pa7x1. A key refinement - the per-duty version of the burn, is due to Anders Elowsson (key insight contained in this post, see also his issuance FAQ).

Additional prior research on this topic over the last few years is indexed at issuance.wtf and has beenl

Update Log

• 2026-08-04: initial draft

[gregk]

After taking an initial look I have several comments, but before diving into specifics let me raise a point on the process.

This post comes 48 hours before the Hegota PFI deadline. Is the intention to propose it for inclusion with less than 48 hours available for feedback?

This clearly doesn’t leave adequate time for community review of a monetary policy change of this magnitude. Note also that according to the strawmap, the expectation was that an issuance update would be considered for I*, so several participants may be preparing according to that schedule. Moreover, legitimate arguments have been raised in various prior discussions about consequences of an issuance update that need to be considered but don’t appear to be taken into account in this proposal — more time for open public discussion is clearly needed before this enters consideration for any specific hard fork

[vshvsh]

Ethereum direct economic security (stake under slashing) is very strong for a very long time. Strong enough that any potentially successful attack on Ethereum will have to be indirect. It’s going to be through identity hijacking (e.g. stealing validator keys), custodial intermediaries compromise, government coercion, supply chain attacks etc. Threat model is not a malicious open market ETH buyer. A strong proposal to tweak Ethereum security has to quantify that in some way; otherwise, the change will about as arbitrary as original curve or mechanism design. The proposal doesn’t make an attempt to do that.

One reason I’m raising this question is that I can tell from the get go that practical security of Ethereum consensus against indirect attacks is strained at this moment. Ethereum first line of defense historically is diversity and decentralization of node operators. Many professional node operators (who run most of Ethereum stake) are barely breaking even. Cyber security weather is the worst ever, we’re in the slow crash era of LLM-driven cyberattacks. And ETH price dollars, which you need to spend to pay for expertise, is not feeling so good.

Making economic conditions worse will forcefully transform the security model from decentralization-driven to concentrated professionalism-driven, switching the market model to a much smaller consolidated set of operators. It is certainly a choice one can make. But I think that without understanding of first and second order effects on practical Ethereum consensus security and brand value it’s a bit of a yolo one. Tight timing on decision making and closed doors proposal development doesn’t help either.

For the most technical aspects of proposal:

• don’t get why it’s designed as “mint and burn” instead of “mint less”, especially that rationale for the change is partially driven by the tax law issues. Why not go for less tax ambiguous option?
• I like that it’s got a slow adjustment period. Gives an opportunity to roll back if it turns out that validator set we’re getting is not secure enough.

[jdetychey]

Thanks for the feedback and taking the time to read through it!
Note that PFI does not mean inclusion. Being proposed for inclusion is what opens the floor for feedback, not what closes it. But yes, this EIP does aim for Hegotá, for two reasons.

First, the topic is not new, and there is plenty of time to discuss it. Discussions and feedback will have several months to take place (starting now ). It’s worth mentioning that we discussed a similar proposal back in 2024, and the wider debate has been running since 2023 and much of the literature is collected at issuance.wtf.

Second, the clock is ticking. Waiting for I* or later effectively means abandoning the change. The primary goal of this EIP is security and capture-resistance, which is met by the burn fully cancelling issuance at 50%: issuance no longer incentivises staking beyond that ratio. The arithmetic argues strongly against delaying, even under conservative projections. Validator entry is rate-limited by the protocol, and the activation queue has been running at essentially that maximum for a while already. If entry stays saturated every epoch and few stakers exit, by January 1, 2028 more than 70M ETH will be staked (north of 55% of the supply).

Acting now means the market settles into an equilibrium below 50% but acting after the overshoot means correcting a much larger imbalance, with more stake forced to exit and more disruption for every participant. The gentle path is only available now.

It is also worth noting that this king of reform gets harder every month. A larger staked base means a larger constituency earning fees on the status quo. The previous issuance debates already showed how effectively that pressure can stall a proposal.

Proposing the change now means we have enough time to review it, and that the correction stays soft: the reduction phases in over 18 months, plus the usual lead time from scheduling, giving participants on the order of two years to adjust.

[CelticWarrior]

As written, this EIP damages Ethereum’s long-term staked economic security, hurts its defi ecosystem, potentially destroys its decentralized validation model, and leaves a whole host of questions unanalyzed and unanswered. Some of these important questions are:

1. What is the appropriate level of staked economic security to secure the anticipated multitrillion dollar onchain economy?

2. What happens to solo stakers and Ethereum’s decentralization model as yields tend towards zero?

3. What happens to LSTs (an important defi money lego) as yields tend towards zero?

4. What is the anticipated continued centralization of stake to the operators with the lowest marginal costs of operation as yields tend towards zero?

5. How does the narrative of ETH being a kind of “bond of the internet” change as yields tend towards zero? (BTC is already a proverbial “pet rock”)

Answers to the above are not much to ask for, but a well-researched attempt at addressing even #1 above would be a good start.

[Edit]

And, the claim that ETH is money is deeply flawed, wishful thinking (like the ultrasound meme). ETH is merely a highly volatile, digital commodity (and is taxed as such, I might add) with a limited history that only serves as “money” at the protocol level in three specific ways:

1. To pay transaction fees

2. As a bond (stake) to secure the network

3. To provide yield on that bond in order to attract #2

Above the protocol level (i.e. at the user level) and particularly in light of account abstraction (i.e. EIP 7702), “money” can be whatever the users decide.

If those users choose to use an LST that is collateralized 1:1 with ETH, staked or otherwise, demand for that LST results in demand for the underlying ETH in a 1:1 fashion. If the users choose to use USDC as money, then demand for ETH comes from the need to pay transaction fees.

In either case, whether the user holds ETH directly in their wallet to pay transaction fees or are availing of EIP 7702 to insta-swap their chosen money token for ETH, ETH still serves as the protocol money.

In some respects the analogy from the real world is M0 and M1. There needs to be some research into how demand for 1:1 backed LST’s and other staked ETH used case creates direct demand for the underlying ETH.

Note: This comment has been written by me in its entirety with no AI slop involved in any way.

[goodroot]

Thanks for this.

Long-time staker, never contributed to discussions.

This proposal:

a. has a mechanism to reduce staking incentive above 50% staked; cool.

b. claims to be in the benefit of solo stakers; ??

One section argues that the current issuance curve is hostile to solo stakers:

“Solo stakers are forced out. Dilution erodes everyone’s real return as the ratio climbs, but solo stakers… cross into negative dilution-adjusted returns well before large operators…”

Most would agree.

However, later the proposal analyzes operator incentives primarily in terms of consensus issuance revenue:

“An operator’s income from consensus issuance is its share of the stake multiplied by the total amount issued.”

That seems to reduce to:

Operator consensus revenue = market share × total issuance

My confusion is that this is a statement about revenue, whereas operators ultimately optimize for profit.

The protocol treats every validator the same, but the economics are not the same.

A solo staker may have materially higher effective costs due to hardware, operations, downtime risk, and (depending on jurisdiction) taxation. A large staking provider can spread many of those costs across thousands of validators and may have more favorable operational or tax structures.

If consensus issuance is reduced across the board, it seems plausible that the higher-cost participants become uneconomic before the lower-cost participants.

So the question I’m struggling with is:

What evidence or model supports the claim that lowering staking APR improves the composition of the validator set, rather than simply reducing the staking ratio while increasing concentration among the remaining validators?

I understand the argument that reducing issuance can reduce the equilibrium staking ratio. What I don’t yet understand is why that mechanism preferentially disadvantages large operators rather than solo stakers.

I’m asking this genuinely. It feels like there is either:

1. an assumption I’m missing,

2. a complementary mechanism elsewhere in the proposal, or

3. empirical evidence that institutional staking demand is more yield-sensitive than solo staking demand.

If it’s (3), I’d be very interested in seeing that evidence, because it’s the step in the argument that I’m currently having trouble following.

[JulianT]

There is a reasonable mid ground in these discussions that centers around the actual liquidity within the various DeFi protocols, and how it relates to staked ETH.

To put into a few bullets, I think the fears of stakers and wider ecosystem participants can be summarized by @CelticWarrior’s post above, with the core of it being:

• Will yield actually trend towards zero?
• How will that impact DeFi?

The reality is that all of this is impacted by the same question – who is the most yield sensitive staker, and what are the limiting factors of their participation? Out of the major participants of solo stakers, institutions, CEXs, and LSTs, the clear yield sensitive participant is LSTs and looping given the liquid nature of the instrument.

Next is then identifying the bound to LST and looper participation. That being said, if you want to retain these participants and keep the most major DeFi markets afloat, you need to ensure that the staking yield is always marginally higher than the lower bound of borrow costs. E.g. As a mid-large size LST looper, my target is roughly ~.3-.5% higher staking yield over borrow cost, giving me a 5-8% APY when levered ~12x at the current ~2.5% staking APY.

The market will roughly ensure this is the case (yield wont trend towards zero, and a margin between staking and borrow costs will keep DeFi alive), however it may be prudent to reduce the rate of this impact or to cap the lower end of the emission tapering, leaving most participants happy.

TL;DR: Fears of DeFi dying are overblown, but loopers will be impacted most. If the EF wants to keep native DeFi as a priority the suggestion would be to implement a much slower time factor to the tapering and/or a higher lower end cap of ~1-1.5% rather than a trend towards actual 0.

Edit: I would also suggest that lending markets can accommodate changes by adjusting their utilization curves for staked ETH

[bjp333]

I think no one is addressing the simple question. Why is 1.5% annualized staking yield considered too high? A 1.5% annual floor is not high in absolute terms. WIthout this, all stakers, including solo stakers, will not have the incentive to stake.

Additionally, the largest stakers today like BitMine are using the yield to re-invest back into the ecosystem. If you turn that off, there’s less value creation. The staking yield is funding and will continue to fund the value creation to Ethereum, especially since the EF is going to take a smaller role going forward.

[EthWarrior]

Saving ETH staking: the consequences we have not modelled

Ethereum’s staking ratio is rising because ETH finally became a productive asset with a forecastable cash flow, a regulated wrapper, and a working credit market on top of it. The tapered issuance burn treats that as a pathology to be corrected. I think it is the most consequential economic change proposed since the Merge, and that its second-order effects have not been modelled at all.

Every figure below is derived from the proposal’s own formulas: issuance of 64·√D Gwei per epoch, burn fraction b = (D/60,250,000)^1.5, and the stated upper bound of 78,300 ETH in annual execution-layer rewards. The modelling reproduces every number the proposal publishes (1,051,200 ETH annual issuance at 40M staked, 2.62% gross yield, 93% issuance share of income, the 19.84% issuance peak, ~1.2% net yield), so it should be straightforward to reconcile.

Staked	% supply	burn b	gross CL	net CL	MEV	all-in	yield sensitivity vs today	outage recovery vs today
39.0M	32.0%	0.521	2.661%	1.275%	0.201%	1.476%	4.3x	3.6x
42.0M	34.5%	0.582	2.565%	1.072%	0.186%	1.258%	5.2x	4.3x
48.0M	39.4%	0.711	2.399%	0.693%	0.163%	0.856%	8.4x	6.8x
54.0M	44.4%	0.849	2.262%	0.343%	0.145%	0.488%	17.8x	14.2x
60.25M	49.5%	1.000	2.141%	0.000%	0.130%	0.130%	infinite	infinite

At an unchanged 39M staked, all-in validator income falls from 2.862% to 1.476%, a 48% cut, delivered on a published 548-day schedule in 64 steps of 8.6 days each.

1. Zero-yield staking selects for institutional staking

This is the objection I would most like the authors to answer, because it inverts the entire logic of the proposal.

The stated purpose is to stop the ETH supply being captured by a handful of custodians, exchanges and ETF issuers. So consider who is still staking when net consensus yield is 0.7%, or 0.3%, or zero.

Not solo stakers. They stake because of the yield and because of conviction, and conviction does not pay a $500 annual electricity and hardware bill. Their costs are fixed rather than proportional, so they leave first.

Who stays? Everyone who stakes for reasons other than yield. An ETF issuer that has to show a distribution yield on the same screen as a Solana product will stake at 0.13% if the alternative is 0.00%. A corporate treasury stakes to book reported income. An exchange stakes because it is a product line, not an investment. A sophisticated operator stakes because MEV, which this proposal does not touch, still pays.

A zero-yield regime accelerates the capture it means to deter. It filters out everyone who stakes for economic return and leaves the field to entities that stake for structural, regulatory, or product reasons, which describes exactly the KYC’d, jurisdiction-bound, coercible operators the proposal fears. Revenue cuts favour whoever holds the lowest cost per validator and the best MEV capture, so cutting revenue cannot fix a composition problem.

2. What this does to a home validator

A 32 ETH home validator, ETH at $1,900, $500 a year in amortised hardware and European electricity, 30% marginal rate assessed on gross credited rewards:

-	gross credited (taxable)	net received	after tax and opex
Today	0.916 ETH ($1,740)	0.916 ETH ($1,740)	$718
At activation, BRF 128	1.768 ETH ($3,358)	0.881 ETH ($1,673)	$165
End of transition	0.916 ETH ($1,740)	0.472 ETH ($898)	-$125

Look at the middle row, because I do not think anyone has noticed it. The transition works by doubling BASE_REWARD_FACTOR to 128 and decaying it. That doubles the gross credited reward while burning 52% of it. Net yield is roughly unchanged, which is the stated intent, but taxable receipts double. The mechanism designed to cushion the impact is the mechanism that creates the exposure. A home staker in a jurisdiction that taxes rewards on receipt sees after-tax income fall 77% at the exact moment the proposal says nothing has happened to them.

This risk exists because the reduction is implemented as a post-credit burn rather than a smaller reward. The spec credits the full amount through the existing machinery, then applies a separate decrease_balance. If a revenue service assesses income on the credit and treats the burn as a capital loss, deductible only against gains and capped annually in many jurisdictions, a flawlessly performing validator runs at a loss. Build the reduction into the reward curve and the question never arises.

I do not know how any tax authority will treat this, and neither does anyone else. That is the problem. It is a several-hundred-dollar annual swing on the exact cohort the proposal claims to protect, and it cannot be settled by argument on this forum. It needs written opinions.

Note also that the proposal cites the nominal-yield tax asymmetry between solo stakers and shielded ETPs and wrapped LSTs as a reason to act. The chosen implementation is the one design that risks widening it.

Then add the proposal’s own downtime figure. Because penalties stay at full magnitude while net earnings collapse, recovery from an outage takes 3.6x longer at today’s stake, 6.8x at 48M, 14x at 54M. That is a transfer of advantage to operators with redundant power, failover and 24/7 monitoring. It is a tax on residential internet, and it compounds everything above.

3. If the premise is right, the mechanism does not work

The proposal argues the staking risk premium is trending toward zero: infrastructure has matured, LSTs and ETFs have stripped out friction, slashing credibility is degraded at high stake. It then argues equilibrium arrives where net yield meets that premium, comfortably below 50%.

Both claims cannot be load-bearing.

If the premium really is collapsing toward zero, equilibrium converges on the point where net yield is zero: 60.25M ETH for issuance, and above it once MEV is included, because MEV is not burned and accrues pro rata at any ratio. The proposal concedes this in one sentence and does not follow it through. The outcome is a ~50% staking ratio with zero issuance, zero net reward for honest validators, negative returns for anyone with imperfect operations, and every concentration risk it set out to prevent, now with no security budget attached.

If the premium is materially positive, stake growth was going to stall on its own and the intervention was unnecessary.

There is no configuration of the world in which this achieves its goal.

4. It removes the reason to hold ETH onchain

Staking yield is the reference rate for ETH-denominated yield. Almost everything onchain that pays a return on ETH is priced off it.

This proposal cuts most of that yield away. All-in income falls 48% immediately at today’s stake, to 0.86% at 48M, to 0.13% at saturation. Whatever is left is not enough to price a lending curve, a fixed-yield market, or a basis trade around. ETH stops being a productive asset onchain and becomes beta only.

That matters because of who was holding it. A large share of onchain capital was comfortable carrying ETH price risk specifically because the position also paid. Remove the yield and the trade no longer makes sense: the same allocator can hold stablecoins earning 4-5% and take beta somewhere cheaper, or not at all. We would be pushing capital out of ETH-denominated positions into dollar-denominated ones inside our own ecosystem, and handing the reference-rate role in DeFi to Circle and Tether.

And if ETH is beta only, it is not obviously the best beta. That is the part I find hardest to look past. ETH’s case against BTC for an allocator was never that it was a superior store of value; it was that it was a productive asset with a cash flow BTC structurally cannot offer. Take the yield away and ETH is left competing on BTC’s home ground, where it has to win on liquidity depth, ETF distribution, institutional acceptance and narrative simplicity. It does not win on any of those. What it does offer is higher volatility, more protocol risk and more governance risk, and the yield was the compensation for exactly that. Strip out the compensation and you have an asset that moves in the same direction as BTC, with more downside, and no income to hold you through it. Anyone who wants crypto beta rotates to BTC, and anyone who wants yield rotates to stablecoins. ETH gets squeezed from both sides at once.

Japan spent two decades demonstrating where that ends. A currency that pays nothing does not become the thing people hold; it becomes the thing people borrow. It turns into the funding leg of everyone else’s trade. If ETH yields near zero while dollars onchain yield 4-5%, the natural position is to borrow ETH and hold stablecoins, and the dominant reason to borrow ETH becomes to be short it. We would be volunteering ETH to be the funding currency of its own economy.

The proposal argues ETH becomes better money by paying nothing. Zero-rate assets are what you hold at the edges of a system, not what you build credit on. “ETH as money” is not served by deleting ETH’s term structure.

5. What this does to the cash flow institutions finally underwrote

US spot ETH ETFs have taken roughly $11.2 billion in cumulative net inflows, and BlackRock’s product now passes staking rewards through to holders. That demand exists because ETH became the first major crypto asset with a regulated, distributable, forecastable yield.

This proposal does two things to it.

It sets the terminal value to zero. Not lower, zero, reached by a mechanism no holder controls. No income desk underwrites an instrument whose coupon is designed to be extinguishable by other people’s behaviour.

It multiplies the yield’s sensitivity to the staking ratio by 4.3x immediately and 8.4x at 48M staked. Today yield scales as D^(-1/2), so elasticity to the staked base is exactly -0.5: a 10% forecast error on the ratio costs 5% of your yield estimate. Under the taper it is -2.13 today and -4.19 at 48M, so the same error becomes a 21% or 42% error in your income projection. The staked base has moved from roughly 25% to 32% of supply in eighteen months. Nobody forecasts it within 10%.

Meanwhile Solana staking products advertise net rewards above 7%. Yes, that is nominal and Solana’s real yield after dilution is a different number. Institutional screens are run on distribution yield, and the answer to “why hold ETH for income” becomes “you shouldn’t.”

6. MEV share, censorship, and MEV burn

At today’s stake this takes MEV from 7.0% to 13.6% of validator income. At 48M it is 19.1%; at 54M, 29.7%.

Issuance is smooth and scale-neutral. MEV is lumpy, rewards sophistication, and rewards variance-smoothing across large validator sets. Roughly doubling its weight in validator income is a centralising act, treated here as a footnote.

It also carries a neutrality cost. Only a minority of major MEV-Boost relays are non-censoring. When issuance is 93% of revenue, choosing a neutral relay set or building locally is an affordable principle. When it is 70%, it is a business decision you have to justify. This proposal makes credibly neutral block production more expensive relative to compliant block production, which is the opposite of its purpose.

And the roadmap composition should be stated plainly, since the proposal invites it: this EIP plus MEV burn leaves validators with 1.275% at today’s stake and 0.693% at 48M, with no execution-layer income at all. If both ship we have removed essentially the entire validator revenue stream. That endpoint should be argued for explicitly, not arrived at by two separately reasonable increments.

7. The size of the bet

The supply-side benefit is calculable. At today’s stake the burn destroys 540,566 ETH a year, 0.44% of supply, about $1.03 billion at $1,900.

Against that we are wagering the demand channel that produced roughly $11.2 billion of ETF inflows and an entry queue above 3 million ETH. One year of burn is on the order of 18% of one year of that inflow. If removing the yield costs us even a fifth of that demand, the trade is a wash. If it costs more, we have reduced the dollar value of the stake securing the chain, which is the quantity the ETH-as-money argument says it wants to protect.

The security case runs: less issuance, higher monetary premium, higher ETH price, more real value at slashing risk. That channel is speculative and reflexive. The demand-destruction channel is observable and already priced. We would be betting the security budget on the untested one.

There is also no off-ramp. No feedback control, no floor, no stabiliser. If the staking ratio overshoots down to 20% of supply we find out after the fork, and reversal needs another contentious hard fork negotiated in whatever conditions made reversal necessary.

What I am asking for

Dilution is not costless and stake concentration is a real problem. My argument is that issuance is the wrong instrument, that the consequences are unmodelled, and that the burden of proof for a change this large sits with the proposal. Before this goes anywhere we need:

1. A solo-staker impact assessment, with after-tax, after-opex numbers, published by the authors rather than reconstructed by critics.

2. Written tax opinions from at least the US, UK, Germany and Portugal on whether a post-credit burn reduces assessable income or creates a capital loss. If the answer is unfavourable anywhere material, implement the reduction in the reward curve instead.

3. A cascade model for the LST and lending stack, built with Aave, Lido, Etherfi and other DeFi risk teams, covering the window between SFI and activation rather than the steady state.

4. A published demand elasticity, a projected equilibrium with confidence intervals, and a stated response to overshoot. The whole case rests on an unobservable risk premium. Name it, defend the estimate, say what we do if it is wrong.

5. A hard, non-zero floor on net yield. This is the change that would move me furthest. Most of the claimed benefit, removing the marginal incentive to grow the ratio, survives a floor. What does not survive is a terminal value of zero, and that is what breaks institutional pricing, ETH’s onchain yield, and the composition of the validator set.

Targeting concentration directly is available and unexplored here: penalties scaled to correlated failure, which prices the externality large operators impose without touching the yield of being small, and inclusion lists and proposer-set reform, which address the scale advantage that actually exists.

If you run a validator, post your own numbers in this thread: gross rewards, net under the taper, opex, and how your jurisdiction treats staking income. The strongest argument this proposal has right now is that nobody has quantified who pays for it. Let’s fix that.

Ethereum’s staking ratio is rising because staking works. That is what growth looks like, and we should not be engineering a mechanism that punishes it.

I have been building on Ethereum for ten years, and I am writing this because I am concerned about the direction we are taking. It took most of that decade to arrive where we are: staking that attracts serious commitment from every category of participant, from home validators to funds to regulated issuers; a DeFi ecosystem deep enough that ETH is treated as real collateral rather than a speculative chip; and now RWA issuers choosing Ethereum specifically because they can rely on its safety and its settlement guarantees to carry assets that have to exist for decades. Those three things reinforce each other, and each one of them rests on ETH being a productive asset with a dependable yield. None of it happened by accident, none of it is guaranteed to survive a change of this magnitude, and this proposal puts all three at risk simultaneously on the strength of an equilibrium nobody has measured.

Save ETH staking.

[alphaleaked]

This EIP is looking at validators, but not at DeFi.

The staking rate is not something that stays inside the validator system. It is one of the main rates used across DeFi.

It affects ETH borrowing, leveraged staking, LST and LRT collateral, stablecoin loans and any yield products.

If the staking rate is reduced, all these markets will reprice.

Borrowing ETH to leverage staking becomes less attractive, so borrow demand falls. ETH suppliers earn less.

Users who borrow stablecoins against staked ETH also lose part of the yield that was offsetting their borrowing cost. Their position becomes more expensive.

The same applies to stablecoin lenders. If borrowing activity goes down, their yield goes down too.

This is not only an Aave problem, or a problem for one specific protocol. The point is that the proposal changes one of the main economic inputs of DeFi without really discussing the effects on DeFi. Where is this analysis?

How much ETH borrow demand is expected to disappear?

What happens to stablecoin borrowing against LST collateral?

What happens to yield markets?

Were lending protocols, LST issuers or other DeFi teams asked for input before the proposal was written?

The timing also matters.

Institutions are moving on-chain because yields are becoming competitive with traditional markets. This is one of the reasons why tokenized treasuries, private credit and other on-chain products are finally growing.

Reducing one of Ethereum’s core rates makes that comparison less attractive exactly when it is starting to work.

The EIP models validators but it does not model the economy built on top of them.

[jdetychey]

Over the years and across multiple discussion channels, we have gathered feedback and encountered several strong concerns about a change of this kind. This post addresses the most common ones up front, so that readers can also understand the reasoning behind our design choices.
Disclaimer: It is split in several parts due to char. limitation per post and has been AI formatted and spelling proofed so please excuse its form which can be off putting. This is meant to signal where this EIP stands on recurring questions and comments.
Individual responses to everyone chiming in the thread are deserved and will come asap.

By all means, I concure with @pintail regarding Anders FAQ as an excellent read.

The post is organised in two parts: objections about the consequences of the change (questions 1–5, as previously asked by @CelticWarrior), and objections about whether we have enough evidence to make it (questions 6–13 collected by hanniabu notably and appearing in some of the early replies here). Bracketed references [1]–[14] point to the bibliography at the end. The topic is issuance is dense and we encourage everyone to give it a deep dive.

---

Part 1: Objections about consequences

An often shared premise worth challenging: 0 yield at 50%

Four of the five questions in this part assume that under this proposal “yields tend towards zero.” … They don’t. Under the taper, net yield reaches zero only at the 50% saturation ratio and that point is the off-switch, not the destination [1]. The staking market equilibrates where net yield equals the marginal staker’s risk premium, which is strictly positive, and therefore at a staking ratio strictly below 50%. Yields tend towards the market price of staking risk. This will be the the first time this yield is set by supply and demand rather than by a curve’s floor.

An important piece of shared machinery: the EIP’s per-duty burn belongs to the issuance-offset family that Elowsson’s June 2026 offsets post analyses as a safe way to implement low issuance [3]. It preserves the relative reward/penalty balance between validator roles (the offset cancels from any comparison between two actions), which is what protects against minority discouragement attacks (the failure mode that makes naive low-issuance designs dangerous). The mechanism behind the taper is not a new idea; it builds on where the low-issuance research has converged.

The counterfactual to keep in frame throughout: “do nothing” is not a neutral baseline. With the entry queue saturated at maximum churn, stake grows ~1.75M ETH per month toward >70M ETH (>55% of supply) by January 1, 2028 [7]. Elowsson’s FAQ names the threshold at which “do nothing” stops being tenable — around 33.6M ETH staked (2^25) [2]. We passed it.
Each answer below therefore ends with the status-quo comparison, because the honest question is never “taper vs. today” but it is rather “taper vs. that trajectory.”

1. What is the appropriate level of staked economic security for a multitrillion-dollar onchain economy?

The steelman: if Ethereum secures trillions in value, surely security should scale with the value secured. Cutting issuance cuts the stake that provides it (For reference, this was the core framing of Maximum Viable Security [6]).

The answer: security does not scale with TVL, and it is not what stake-weighted intuition suggests.

• Validity is not at stake. A coalition controlling any amount of stake cannot forge signatures, mint ETH, steal from contracts, or push an invalid block past full nodes. What stake controls is ordering, liveness, and finality [1]. The multitrillion-dollar economy is protected first by validity rules that stake cannot break, and only second by consensus honesty. The relevant question is not “how much stake per dollar of TVL?” but “what does an ordering attack earn, and what does it cost?”

• The cost side is already vast and researchers have named numbers. An attacker needs to acquire and then forfeit a large fraction of slashable stake (≥1/3 to disturb finality). Justin Drake has suggested 1/4 of supply (30M ETH) is appropriate; Vitalik has concurred while noting even 1/8 (15M ETH) would be fine [2]. At any equilibrium in the tens of percent of supply, the slashable stock is tens of millions of ETH — and acquiring it moves the price against the attacker long before they get there [1].

• Security is stake × value, not stake alone. Elowsson’s 2016 comparison makes it vivid: doubling participation from 30% to 60% back then would have raised the finality-delay threshold from ~$70M to ~$140M which is trivial either way, because the price was the binding term, at a market cap ~500× smaller than today’s [2]. Long-term economic security is inherently linked to ETH retaining its value; a policy that protects the monetary premium (by bounding dilution) protects the value term [1, 2]. Ever-growing issuance erodes it.

• The marginal unit of stake buys almost nothing and costs real welfare. Moving from 33% to 80% staked does not meaningfully change the cost of an attack that was already prohibitively expensive but it does concentrate custody, weaken the social-layer backstop, and force out independent validators [1, 8]. Elowsson quantifies the other side of the ledger: maintaining the current curve compels users to incur unnecessary costs notably in terms of hardware, risk, illiquidity, taxes, plausibly more than a billion dollars per year of welfare loss for security nobody needs [2].

• Whose principal is at risk matters, not just how much is staked. A solo staker’s own 32 ETH (or whatever multiple of it they run) is what gets slashed if they misbehave or go offline. They are principal and agent at once, and the capital securing the chain is their own. A delegated validator is operated by a firm whose exposure is fee revenue and reputation, while the ETH that would be slashed belongs to somebody else. That gap is precisely the moral hazard the EIP’s Motivation describes [1], and it is a property of who the validator set is made of, not how large it is. Stake acquired by shifting the set from principals to agents does not buy the alignment that a headline staking ratio implies.

• The floor is adjustable; the ratchet is not. If evidence ever showed the equilibrium stake to be genuinely insufficient, issuance can be raised by a future fork (an easy case to make when security demonstrably needs it). The reverse move, clawing back an overshoot after most of the supply is staked through intermediaries who profit from the status quo, is the politically hard one.

And is the status quo acceptable?

Not on this question’s own terms. Do nothing, and by early 2028 the worst-case trajectory puts >70M ETH at stake [7]: security expenditure keeps rising (≈1.4M ETH issued per year at 70M staked, versus a peak of ~0.5% of supply under the taper [1]) while buying nothing because an attack was already unaffordable. In the mean time, Ethereum which actually underwrites a multitrillion-dollar economy (a neutral, credibly scarce reserve asset and a social layer capable of intervening) is precisely what the overshoot degrades. Elowsson’s FAQ puts it directly: beyond certain limits even short-term security degrades, because the social layer loses its neutrality and credibility as the ultimate arbitrator against dominant SSPs [2].

[jdetychey]

2. What happens to solo stakers as yields tend towards zero?

The steelman: solo stakers have fixed costs and no fee revenue; compress yields and they exit first, leaving only professionals (the scale-economies concern raised in Maximum Viable Security [6]).

The answer: the exit ordering runs the other way, and the counterfactual is worse for solo stakers than the proposal is.

• Yields don’t tend to zero, they tend to the marginal wedge. The question is who survives at the equilibrium yield, and that is whoever needs the least gross yield to stay: the cohort with the smallest sum of costs + risk premium.

• Solo stakers have the smallest wedge. EIP-7251 consolidation (2048-ETH validators [11]) collapses per-ETH opex for any solo staker running more than 32 ETH; a single-validator staker’s opex (~30–60 bps) is unchanged by consolidation, but still sits inside the fee band a delegator pays before counting counterparty risk. A solo staker pays no fee, bears no counterparty/smart-contract/governance risk, and trusts themselves. This is arguably the lowest risk premium of any cohort among the validator set. A delegator must clear a fee (20–80 bps) plus an issuer-risk premium. Elowsson’s reservation-yield analysis reaches the same conclusion from the other direction: “risks could very well price out delegating stakers earlier than solo stakers as the yield falls,” and self-custody is a factor that “should not be overlooked when evaluating the staking supply side” [2].

• The micro-incentive machinery protects them by construction. The burn is sized from rewards idealised with respect to the validator’s own conduct but scaled to the issuance the network actually paid (participation-scaled attestation and proposer bases, per-block sync base), see the penalty-equivalent per-duty offset design from Elowsson’s offsets post [3]. A validator that attests correctly is never pushed into a negative balance change: it nets exactly (1−b)× what it earned, at any level of network participation [1]. Every per-duty incentive is exactly as strong as today, and the attestation burn is suspended during inactivity leaks alongside the attestation rewards it offsets, so it never compounds the penalties of a non-finalising chain [1]. Nevertheless: under a per-duty design, a missed proposal leaves the proposer-specific deduction in place [3]; and while the ETH cost of downtime is unchanged, recovering an outage takes longer measured in days of net earnings (roughly 2.3× at a 25% ratio [1]). Those are real but bounded costs.

• Real yield is what pays the bills, and it goes up. A solo staker’s return net of dilution improves under reduced issuance. The Subsequent Soliloquy result: long-run real issuance yield can be higher under a reduced policy [4] and since most jurisdictions tax nominal yield, a lower nominal / higher real mix shrinks the solo staker’s tax wedge. The latter is the exact mechanism that forces them out under the current curve [1].

• Execution-layer income is untouched. The burn applies to consensus issuance only; priority fees and MEV flow to proposers exactly as today, and a solo staker keeps 100% of theirs [1]. One fair caveat, flagged by Elowsson and which we recognize: at low issuance, MEV makes up a larger share of rewards, which raises reward variability for non-pooled stakers. This is an argument for pairing issuance reform with MEV burn over time, not against the taper [2]. The EIP’s “Issuance and MEV” section deals with this concern. The equilibrium is set by the issuance curve and the risk premium, not by MEV [1].

And is the status quo acceptable?

For solo stakers it is the worst option on the table. Keep the current curve while the ratio grows through 50% and here is their trajectory: nominal yield falls anyway (as 1/√f , roughly 2% issuance yield at 70M staked [2]), their MEV share thins as extraction revenue spreads over ever more stake (~72k ETH/yr via MEV-Boost as of mid-2026 [1]; ~300k ETH/yr including priority fees in Elowsson’s 2024 accounting [2]), dilution climbs toward ~1.2% a year taxing what remains, and income tax still bites the nominal number. The dilution-adjusted, after-tax return of the 32-ETH home staker crosses zero before any large operator’s or LST holder’s does [1], and it is already in motion. Meanwhile Elowsson’s FAQ notes the forces that compound with quantity staked: dominant SSPs’ economies of scale improve, the LST money-function externality grows, and delegation becomes relatively more attractive the higher Deposit size goes [2]. The network descends into the same low-yield band regardless (the “valley” in Elowsson’s Figure 13, where the solo-staker share is said to dip because economies of scale favour professional operators in that range). Under do-nothing, the exclusion of Solo Stakers arrives anyway but with extra dilution on top and no equilibrium to stop it.

3. What happens to LSTs, a paramount DeFi money lego, as yields tend towards zero?

The steelman: LSTs are load-bearing collateral across DeFi; compress their yield and you break a money lego the ecosystem depends on.

The answer: LSTs keep existing; what disappears is the subsidy that was making them close to mandatory.

• LSTs remain viable at the market yield. At equilibrium, n LST nets its holder (market yield minus fee minus issuer risk). That is a real product for people who want staking exposure without operations. LSTs just compete on their own merits instead of being the rational default for every ETH holder. The proposal doesn’t target LSTs; it removes the artificial incentive (dilution avoidance) that made not holding one irrational [1].

• “Money lego” cuts the other way. The concern assumes DeFi is better built on yield-bearing intermediated claims than on raw ETH. The EIP’s Motivation argues the opposite, and we think it should be argued openly: every application that settles in an LST inherits its issuer’s smart-contract, counterparty, and governance risk; collateral that can depeg or be slashed introduces contagion channels that raw ETH does not have [1]. Rehypothecating the consensus layer’s security deposit as DeFi’s base collateral is a systemic-risk choice, not a neutral engineering one.

• Raw ETH regaining collateral share is the goal, not collateral damage. A DeFi stack denominated in the most neutral, trustless, permissionless asset available is stronger with deeper unified liquidity, no issuer governance in the base layer of the stack [1, 8].

• For LST protocols themselves: the addressable market becomes “people who genuinely want delegated staking at the market price of risk” instead of “everyone.” Smaller, and far less likely to end in one dominant LST holding a consensus-threatening share [8] because the proposal bounds the ratio the whole system tends to reach.

And is the status quo acceptable?

Not if you value either DeFi or LSTs. On the do-nothing trajectory the LST money-function externality compounds with quantity staked — the more ETH is staked through the dominant token, the more liquid and integrated it becomes, and the more irrational holding raw ETH looks (Elowsson: network externalities are “a stratum for cartelization extending outside of the consensus mechanism” [2]). Past 50% staked, the base collateral of the Ethereum economy is, by arithmetic, majority intermediated claims. Elowsson’s FAQ describes both terminal risks: an LST grown “too big to fail” in the eyes of the social layer (overloading the community’s ability to intervene in a 51% attack) and excessive staking yield hardening into a perverse subsidy, an application layer built around a yield that exists only because the protocol overpays for security [2]. The taper is what makes a plural LST market more likely, not less.

[jdetychey]

4. Won’t stake keep centralizing toward the operators with the lowest marginal costs as yields tend towards zero?

The steelman: yield compression is a cost war, and cost wars are won by scale. Squeeze margins and only the industrial operators remain (Maximum Viable Security’s centralization argument [6]).

The answer: the cost war is largely already over. It ended within single basis points and the real competition is elsewhere.

• Operating cost differences between professionals are small. At scale, node opex is single-digit bps per staked ETH and the scale curve saturates after a few thousand validators; EIP-7251 extends near-flat per-ETH costs down to solo size [11]. There is little marginal-cost gradient left for yield compression to select on. What actually differentiates staking providers is distribution, brand, liquidity, and integrations which are demand-side moats (cohort cost structures are modelled formally in [9, 10]). Elowsson’s FAQ agrees on the market structure: competition for delegated stake unfolds across segmented markets (CEXes hold “somewhat of a local monopoly on their customers-as-delegators”), so perfect cost competition is not even the right model and the scale concern “is only valid with a yield that goes close to 0 or negative at a low quantity of stake. No SSP can reasonably outcompete all others at an equilibrium staking yield of, e.g., 2% at 30M ETH staked” [2].

• The taper lands in exactly that safe zone. Because it removes the yield floor without capping economically (yield reaches zero only at the never-reached 50% saturation point), the equilibrium sits at a positive market yield and not the near-zero or negative regime where scale economies would actually bite [1]. This is where a targeting mechanism would hand stakers an incentive to cartelize or discouragement-attack the network to drive their own yield up (a flaw Elowsson dissects at length [2]), a fixed tapered curve offers no such lever: the burn fraction is a deterministic function of total balance that no coalition can shift onto others [1].

• Yield compression attacks the demand-side moat, not the small operator. Those moats monetize as fees of 20–80 bps. Compress gross yield toward the marginal wedge and the fee stops fitting: the delegator’s all-in requirement (fee + issuer premium) is the largest wedge in the market.

• The mechanism is size-progressive by construction. Under the current curve an operator’s issuance income rises with every validator it adds, at every size and ratio; under the taper, every operator has a staking ratio beyond which growth reduces its income, arriving soonest for the largest (an operator with half the stake stops profiting from growth at a ~31% ratio) [1]. The concern is that the taper favours the big; the arithmetic says it disfavours them first. Execution-layer income still rewards growth, the honest residual, which MEV burn would address later.

• The real risk, conceded and bounded. Sticky delegators (ETF holders who never rebalance) blunt the exit ordering at the margin, and distribution moats survive the taper. Our claim is not that the taper reverses concentration, it is that it (a) stops rewarding it, (b) bounds the ratio the system can drift to, and (c) makes the most independent cohort structurally advantaged rather than the first casualty.

And is the status quo acceptable?

The status quo is a centralization scenario. Its ~1.5% yield floor means fee-charging delegation stays profitable at any staking ratio, a perpetual margin underwriting intermediated growth all the way to saturation. The forces Elowsson lists all compound with quantity staked: dominant SSPs’ economies of scale improve as the deposit size grows, the LST network externality strengthens, and the principal–agent risk of delegation feels smaller the more universal it becomes [2]. Marginal inflows already arrive overwhelmingly via ETFs, exchanges, and LSTs; run the queue-saturated trajectory to >55% staked by 2028 [7] and the intermediated share of supply is locked in, along with the constituency that would veto any future reform.

5. What happens to the “internet bond” narrative as yields tend towards zero?

The steelman: ETH’s institutional story is “productive asset with a native yield.” Reduce the yield and ETH loses its distinguishing feature.

The answer: a coupon paid by diluting the bondholder was never really a bond and the taper is what makes the instrument real.

• Price the bond honestly. A bond’s return is its real return. Today’s staking “coupon” is substantially manufactured by issuance, i.e., paid by taxing every holder who doesn’t stake, including the future buyers the narrative is supposed to attract [1, 2]. Nominal yield minus dilution is the number an institution should underwrite, and the taper improves it: issuance peaks at ~0.5% of supply per year and falls, so more of the yield that remains is real [1]. “Lower coupon, sounder currency” is a trade every bond investor understands and it is now an institutional position too: Pandl (Grayscale’s head of research) argues declining burn and near-zero staking costs call for capping staking rewards, framing issuance reform as positive for ETH holders [5].

• The coupon becomes a market price instead of an emissions schedule. At equilibrium, staking yield equals the risk premium stakers demand: a genuine price of risk, like every real fixed-income instrument [1]. An “internet bond” whose yield is set by market clearing is a more credible institutional story than one whose yield is an arbitrary curve parameter.

• ETH’s productive properties are untouched: execution-layer fees and MEV still flow to stakers [1], EIP-1559 still ties supply reduction to real economic usage, and ETH remains the pristine collateral of the onchain economy. What ETH gains from the taper is a credibly bounded supply trajectory.

• The narrative that actually scales is moneyness. Gold commands trillions at zero yield; no asset commands a monetary premium because of a dilution-funded coupon. If the anticipated onchain economy is worth trillions, its reserve asset’s monetary premium is worth more than its coupon and the current curve spends the premium to pay the coupon [1, 2].

And is the status quo acceptable?

The internet-bond narrative weakens under the current curve too, it just weakens less visibly. Do nothing, and the coupon compresses anyway: at 70M ETH staked the issuance yield is roughly 2% [2], trending toward the ~1.5% floor, while issuance of ~1.4M ETH per year debases the principal the coupon is denominated in. By 2028 the pitch to an allocator is “a sub-2% nominal coupon, roughly half of it cancelled by dilution, on an asset whose float is majority-locked inside custodians and staking wrappers” [7]. The taper trades a percentage point of manufactured nominal yield for the two things fixed-income allocators actually price: a sound principal and a market-cleared coupon [5].

---

[jdetychey]

Part 2: Objections about evidence

These questions, several of which come from hanniabu’s list [13] compiled from discussions with SSPs, stakers and DeFi protocols. Those questions share a structure: we lack evidence on X, therefore wait. Two things are worth saying about that structure up front, with all due respect because the questions themselves are good ones. Several have answers in the literature and the rest shaped the EIP’s design.

1. “Do nothing” is not the null hypothesis. It is a policy choice like any other, and it happens to be the only policy whose consequences we have direct evidence about: the entry queue is saturated at maximum churn, the ratio passed 1/3 in April 2026, and the worst-case trajectory reaches >70M ETH (>55% of supply) by January 1, 2028 [7].

Demanding proof before changing the curve while demanding none for keeping it places the entire burden of uncertainty on one side.

2. Several of these unknowns are unknowable which is an argument for the taper’s design, not against acting. The supply curve (the distribution of stakers’ reservation yields) cannot be observed by the protocol, only revealed by the market over time. That is precisely why the EIP does not tune a parameter to a point estimate: it removes the yield floor and lets the market find the equilibrium, wherever the unobservable supply curve puts it [1]. Elowsson’s framing: because “the future level of the supply curve will always be unknown,” a reward curve must be designed to produce acceptable outcomes under any reasonable scenario [2].

A mechanism robust to ignorance is the correct response to ignorance.

6. Where will the staking equilibrium settle under the current curve and the proposed curve?

The steelman: without knowing the likely equilibrium ratios and yields under both curves, we can’t even establish that the current approach is a problem.

The answer: the precise location is unknowable in advance under either curve but the two curves differ in the one property that matters: whether an equilibrium is guaranteed to exist at all.

• Under the taper, an equilibrium below 50% exists for any positive risk premium. Net yield declines to zero at the 50% saturation ratio, so it crosses whatever premium the marginal staker demands at some ratio strictly below 50% [1]. We don’t need to know the supply curve to know the market has a stable resting point.

• Under the current curve, an equilibrium is not guaranteed. Yield never falls below ~1.5% even at full staking, so growth stops only if the marginal staker’s premium stays above that floor. This is a premium the protocol neither observes nor controls, and which keeps falling as staking matures [1]. If it falls below the floor, there is no equilibrium short of near-total staking.

• What can be estimated has been estimated (including by people who reach the opposite conclusion). On the location of the equilibrium, Elowsson’s supply-curve scenarios put the yield difference between the current curve and a tempered curve at roughly half a percentage point, with equilibria near ~30–36M ETH under moderate assumptions [2]. On the related question of composition, three cyber·Fund-supported studies reach a conclusion adverse to this proposal, and we would rather point at them than around them: Eloranta & Helminen measure a 12% mean-return advantage for large pools today, widening to 13–15% under the reductions they model absent MEV burn [9]; Arnold et al.'s calibrated game-theoretic model predicts that “a reduction in issuance is likely to crowd out solo stakers,” with preliminary empirical support [10]; and Zhu, Korinek & Duckworth’s interviews across eight staking cohorts find solo stakers “most vulnerable to changes in the issuance curve,” while institutional and retail delegators are comparatively inelastic [12]. Two observations that we present as disagreement rather than dismissal.

First, the mechanism all three identify is the same: as consensus issuance shrinks, execution-layer rewards (where large operators have a measurable edge) become a larger share of staker income. [9] puts that edge at 12% today and 13–15% under the reductions it models. This EIP leaves execution-layer income untouched, so it neither creates nor closes that gap, but it does make it relatively more important. [9] separately warns that economically capped curves could leave large pools profitable while smaller ones run at a loss; this proposal is not an economic cap ie. net yield reaches zero only at a 50% ratio the market is not expected to reach, but that is a distinction about regime, not a refutation of the trend. Second, the competitive channel [9] and [10] identify (delegated staking’s access to MEV and stacked DeFi yield) is real, and this EIP does not address it; that is precisely why [9] recommends MEV burn alongside gradual issuance adjustment. Our proposal anticipates the sequencing rather than contradicts it. Overall, the supply curve is unobservable and only revealed as the market moves.

And is the status quo acceptable?

The demand for equilibrium evidence is difficult to sustain as a defence of the current curve, because the current curve is the one generating the evidence: a saturated entry queue adding ~1.75M ETH per month, with no crossing point in sight [7]. Waiting for the current curve’s equilibrium to reveal itself is the experiment and this experiment runs at ~1.5 extra percentage points of supply per month.

7. Don’t reservation yields and operating costs differ across cohorts (solo stakers, LSTs, exchanges, custodians, ETFs) in ways that must be analysed separately?

The steelman: aggregate analysis hides the distributional story; each cohort has distinct costs and incentives. Two sharpening demands come with it: differentiate the operator’s costs and reservation yield from the beneficial ETH owner’s, and use an average developed-country tax rate rather than dismissing tax.

The answer: agreed on all three counts and the analysis exists.

• The cohort literature (accurately) is split. Elowsson’s reservation-yield distributions model solo and delegating stakers separately and conclude that “risks could very well price out delegating stakers earlier than solo stakers as the yield falls” [2]. Three cyber·Fund-supported studies conclude the reverse: Eloranta & Helminen measure a 12% mean-return advantage for large pools today, widening to 13–15% under the reductions they model absent MEV burn [9]; Arnold et al.'s calibrated model predicts that “a reduction in issuance is likely to crowd out solo stakers” [10]; and Zhu, Korinek & Duckworth’s interviews across eight cohorts find solo stakers “most vulnerable to changes in the issuance curve” [12]. Julian Ma’s stake-distribution model ties issuance level to who stakes, not just how much [14]. So, to put it bluntly: has separate cohort analysis been done? Yes and it is genuinely contested.

• Where we stand, and on what. Our reading rests on the wedge structure. A delegator must clear a fee (20–80 bps) plus an issuer-risk premium; a solo staker post-EIP-7251 has low per-ETH opex, no fee, and arguably the lowest risk premium of any cohort [11]. In delegated staking two different people each have a minimum they need cleared: the operator, who is paid through the fee, and the owner, who pays that fee and carries the counterparty, smart-contract and governance risk. Both of them come out of the same yield. A solo staker is both people at once, so there is only one minimum to clear.

• Where the adverse studies bite, and where we think they don’t. [9] and [10] model curves that drive yield toward zero or impose an economic cap, and identify delegated staking’s access to MEV and stacked DeFi yield as the channel that squeezes solo stakers. Both observations are fair. Our answer is that this proposal’s equilibrium sits at a positive market yield rather than in the regime they model, and that [9]'s own recommendation, ie. MEV burn alongside gradual issuance adjustment, is (again) the sequencing this EIP anticipates. What we do not claim is that the MEV and DeFi-stacking asymmetry is solved here; it is untouched by this proposal, and it remains the strongest open objection in this section.

• On tax, accepting the methodology lands the same way. Take an average developed-economy treatment: staking rewards are typically taxed as income on the nominal amount at receipt (with capital gains on later disposal). Applied across cohorts, this taxes the dilution component of yield as if it were real income which is a burden that scales with issuance and falls hardest on the non-pooled staker who can’t structure around it. A lower-nominal/higher-real policy shrinks precisely that taxable phantom component [1, 4].

• Where genuine uncertainty remains, the EIP absorbs it. The dispersion of delegator risk premia versus solo cost floors (the “valley” hypothesis [2]) is real open territory. This is why the taper lands at a positive market yield rather than the near-zero regime where that valley would bite, and why the 18-month transition plus fork lead time gives every cohort ~2 years to reveal its reservation yield gradually rather than at a cliff [1].

And is the status quo acceptable?

Cohort dynamics don’t pause while we study them. Under the current curve, the differences compound in one direction: dominant SSPs’ scale advantages grow with quantity staked, the LST money-function externality strengthens, and delegation becomes relatively more attractive the higher the ratio climbs [2].

8. Don’t decentralization effects depend on who exits, who remains, who switches to delegation and not on total staked ETH?

The steelman: an issuance cut could leave total stake looking healthy while gutting exactly the validators that matter.

The answer: his is the correct frame and the frame the EIP was designed in.

• Exit ordering is the design criterion, not an afterthought. The burn is sized from idealised per-duty rewards precisely so that no correctly-attesting validator is pushed into negative epochs while waiting for rare duties, ie the failure mode that would push small validators out first [1, 3]. The wedge analysis then predicts the ordering at the macro level: highest-wedge cohorts (fee-charging delegation) hit their exit point before lowest-wedge cohorts (consolidated solo) [2].

• Switching to delegation is a yield-chasing behaviour and the taper reduces the pressure that drives it. Under the current curve, dilution-avoidance pressure pushes holders into whichever wrapper is most convenient (usually an LST or ETF). At a market-clearing yield, the “stake or be diluted” coercion weakens because issuance is bounded [1], so the marginal holder’s rational choice can again be not staking (the only outcome that adds no delegation at all).

• What’s uncertain: sticky delegators (ETF flows that never rebalance) blunt the ordering, and solo-staker behaviour at low yields has real dispersion [2].

And is the status quo acceptable?

By the objection’s own metric (who exits, who remains, who delegates) the current curve is not performing well at all: solo stakers are a single-digit share and falling; marginal inflows arrive through ETFs, exchanges, and LSTs; and the dilution-plus-nominal-tax mechanism pressures the most independent validators first, with no mechanism to bring them back [1].

9. What level of staked economic security is actually viable or sufficient? There’s no definition or evidence.

Note: compared to 1. we are looking at what is the minimum viable here.

The steelman: we’re re-engineering the security budget without ever defining what security requires.

The answer: the absence of a derived optimum is real and it cuts against the status quo at least as hard as against the taper. The EIP does now defend the 50% demarcation on principle: past majority-staked, any rescue fork depends on the stakers themselves and derivatives drawn from the majority pool dominate collateral; half the supply is “the only value in the range defensible without appeal to preference”; and it is bounded below by today’s ~33%, where a lower saturation point would zero net yield at activation [1].

• The status quo picks a security level too. The current curve’s implicit target is “as much as the market will stake at ≥1.5% yield” therefore a priori trending toward everything that can go at stake. That number was never derived from a security requirement either. Choosing no bound is also choosing a level: ~100%, without evidence it buys anything.

• What we do know bounds the problem. The cost of attack is set by the slashable stock an attacker must acquire and forfeit; at any ratio in the tens of percent that stock is vast relative to plausible attack rewards [1]. Named reference points exist (Drake’s ~1/4 of supply, Vitalik’s note that ~1/8 would be fine [2]) and Elowsson’s 2016 comparison shows the binding term is ETH’s value, not the staked fraction [2].

• Under uncertainty, choose the recoverable error. If the equilibrium under the taper ever proved genuinely too low, raising issuance by fork is straightforward. The reverse correction, clawing stake back from an entrenched, custodial, fee-earning majority, is the politically hard one.

And is the status quo acceptable?

It answers the undefined-security question with the most expensive available guess: pay for all of it. On the do-nothing trajectory, ~1.4M ETH per year is issued at 70M staked [2], ie. more than a billion dollars a year in unnecessary costs by Elowsson’s welfare accounting [2] to purchase security increments no one has shown to be needed, while degrading the social-layer backstop [1, 2].

[jdetychey]

10. Don’t LST entry/exit pools change staking dynamics compared to the protocol’s queues?

The steelman: long protocol entry/exit queues make it infeasible to start and stop staking at profitability thresholds, but LST pools offer a liquid buffer around them. Therefore, profitability-driven flows behave differently than queue-based models assume, and the convenience asymmetry itself favours LSTs over direct staking.

The answer: true, and worth continued study but it changes the speed of equilibration, not the destination, and the taper is the design least exposed to it.

• The mechanism makes no assumptions about how stake enters or exits. The burn fraction is a deterministic function of total active balance only [1]. Whether stake arrives through a queue, an LST mint, or a secondary-market rotation, the incentive gradient it faces is the same. Designs that would be sensitive to flow dynamics, notably dynamic targeting mechanisms that adjust yield against a participation setpoint, are exactly the designs the EIP rejected, partly for their manipulability [1, 2].

• Faster arbitrage helps a market-clearing design. LST pools transmitting profitability signals quickly means the market finds the taper’s equilibrium sooner and more smoothly. Friction-free exit also softens the transition: stake that stops being economical leaves gradually at market speed rather than piling against exit queues.

• The same pools accelerate the status-quo problem. Low-friction entry is symmetric: it is also how dilution-avoidance flows pour in at maximum speed today. The protocol churn limit still bounds actual validator-set turnover; pools shuffle claims on stake, not the stake itself.

• The convenience asymmetry matters most at a cliff and… there isn’t one. LST exit liquidity beats a queue when a staker must react to a sudden profitability change. The taper’s yield path is fully specified from scheduling, moving over ~2 years [1]. Against thresholds that move by basis points per month, queue latency of days-to-weeks is second-order.

And is the status quo acceptable?

If LST pool dynamics matter, they matter most under the curve that makes LSTs the rational default wrapper for the entire supply. On the do-nothing path, an ever-larger share of “staking decisions” becomes secondary-market trades in one or two dominant LSTs [2, 8].

11. Won’t Lean Ethereum, proving, and future validator duties change hardware requirements and reward structures thus making an issuance change premature?

The steelman: the protocol is about to change under the validators’ feet; recalibrating issuance now means recalibrating twice.

The answer: “wait for the next upgrade” is an argument with no terminal condition because there is always a next upgrade. The taper is the issuance change least entangled with protocol evolution and the maximum issuance of 0.5% per year is consistent with Lean.

• The taper is composable with whatever comes. It adds one constant and one epoch-processing step on top of the existing rewards machinery; it does not redesign the reward curve, reweight duties, or touch the execution layer [1]. If future forks change validator duties or rewards, the per-duty offset structure adapts with them. It is defined relative to idealised duty rewards, whatever those are [1, 3]. Elowsson’s endgame options (ratio-based curves, supply-awareness, MEV burn) all remain open on top of it [2]; the EIP itself notes a future fork can make the protocol supply-aware, and its “Issuance and MEV” section states explicitly that MEV burn composes with the mechanism to lower the equilibrium further [1].

• Protocol evolution strengthens the case rather than weakening it. Cheaper proving and lighter validator duties lower staking costs across the board which lowers reservation yields, pushes the supply curve down, and makes the current curve’s missing off-switch more consequential, not less [2].

• The sequencing question has an answer in the literature. Elowsson’s path: a moderate issuance reduction first, MEV burn later, endgame policy after that. Each step is buying time for the next debate without the quantity of stake growing “debilitatingly high” in the interim [2]. The taper is that first step, with the added property that its shape already guarantees an equilibrium.

And is the status quo acceptable?

Prematurity is a clock argument, so look at the clock: Lean Ethereum-scale changes ship on multi-year horizons, and the ratio grows ~1.5 points of supply per month [7]. “Wait for the future protocol” means arriving at that future with >55% staked and a majority-intermediated supply.

12. Won’t large stakeholders maintain economically irrational positions to suppress competition or gain strategic advantage?

The steelman: equilibrium logic assumes rational exit; a deep-pocketed staker can run at a loss to squeeze others out or hold consensus power.

The answer: adversarial staking is real, Elowsson documents SSPs “ostensibly foregoing profits in the pursuit of monopolization” today [2] — and it is the status quo that subsidizes it.

• Under the current curve, strategic squatting is cheap. The ~1.5% yield floor means even a monopolization-motivated staker collects meaningful revenue while suppressing competitors. Loss-leading costs little when the protocol pays you to do it.

• Under the taper, it carries a cost. Holding a dominant stake position at high ratios means operating at a yield tapering toward zero while opportunity cost accrues. The burn fraction depends on total balance, so a large holder pushes the ratio up by existing and absorbs the largest share of the burn. And the burn is unmanipulable: a deterministic, publicly computable function of total balance that applies identically to every validator; no coalition can shift its share onto others or lower its own [1].

• Quantified: under the current curve, an operator’s issuance income rises with every validator it adds at every size and every staking ratio. Under the taper, every operator has a ratio beyond which adding stake reduces its income, arriving soonest for the largest: an operator holding half the stake stops profiting from growth once ~31% of supply is staked [1].

• The adversarial lens is why this mechanism family was chosen. Targeting mechanisms hand stakers a cartelization lever: coordinate to reduce stake, drive your own yield up [2]. Reward/penalty rebalancing opens minority discouragement attacks [3]. The per-duty offset on a fixed curve is the design that survives this analysis; it is set out in the EIP’s Security Considerations and in Elowsson’s offsets post [1, 3].

• The residual, which we concede: a truly price-insensitive strategic actor (a state, or a platform treating this as a cost of doing business) is not fully deterred by any issuance policy. But under the taper the ETH it forgoes is burned and accrues pro rata to all other holders; under the current curve, the other holders pay it.

And is the status quo acceptable?

The question describes the present. Concentration-motivated staking at foregone profit is observable now, funded by a curve that guarantees the squatter revenue at any ratio, with network externalities compounding its advantage as the ratio grows [2, 8]. Past 50% staked, such a position becomes very hard to challenge, because the social layer can no longer credibly fork against the custodian of most of the supply [1, 2].

13. Aren’t dilution-adjusted, after-tax, after-cost, and fiat-adjusted yields constantly conflated, making comparisons misleading?

The steelman: the debate’s numbers are mush; nominal, real, net and fiat yields get swapped mid-argument by both sides.

The answer: fully agreed and the proposal’s case strengthens at every step of disaggregation, which is why we would welcome the decomposition being applied consistently.

• Nominal → dilution-adjusted: the current curve’s headline yield is substantially a transfer funded by diluting non-stakers; the real (proportional) yield is what remains after netting issuance out. Neuder’s Subsequent Soliloquy is the canonical walk-through: long-run real issuance yield can be higher under a reduced policy [4]. The taper cuts the dilution term to a bounded ~0.5%/yr peak [1].

• → after-tax: most jurisdictions tax nominal staking income; high-issuance policies therefore tax stakers on inflation. The lower-nominal/higher-real mix under the taper shrinks that wedge (the same term that pressures solo stakers first under the status quo [1]).

• → after-cost: subtracting each cohort’s costs is the wedge analysis above; formal treatments in [9, 10, 12].

• → fiat-adjusted: yield denominated in a debasing asset is the money illusion the “internet bond” framing trades on; Elowsson’s welfare framing [2] and Grayscale’s institutional take [5] both reprice in sound terms and land on the same side. What matters is the proportion of supply held, not the count of tokens [2].

• A standing commitment: every claim in this post specifies which yield it means, and we’re happy to be held to that standard throughout the thread.

And is the status quo acceptable?

A 2.6% nominal coupon at today’s ratio, decomposed — minus ~0.9%/yr dilution, taxed on the nominal, minus costs — is a thin and shrinking real return that the saturated queue compresses further every month [7]. The current curve is rarely defended in dilution-adjusted, after-tax terms.

Bibliography

[1] pintail, Jérôme de Tychey, dapplion, pa7x1, Ladislaus von Daniels & Justin Drake — EIP-8361: Tapered Issuance Burn. Pull request · Annotated version.

Cited for: the mechanism (per-duty burn from idealised rewards, 50% saturation, market equilibrium), the two-goal motivation (security/capture-resistance, ETH as money), the transition design, the participation-scaled burn bases with the (1−b)× net-earnings guarantee, the attestation-pass leak suspension, the cost-of-downtime analysis, the operator growth-stops-paying result (~31% ratio for a half-the-stake operator), and the “Why a 50% saturation ratio” and “Issuance and MEV” rationales.

[2] Anders Elowsson — FAQ: Ethereum issuance reduction (29 May 2024). ethresear.ch.

Cited for: expansion-path design under unknown supply curves; equilibrium scenarios; reservation-yield distributions; the ~33.6M ETH do-nothing threshold; Drake/Vitalik security reference points; welfare cost (>$1B/yr); the monopolization-at-foregone-profit observation; cartelization and discouragement flaws of targeting; the sequencing path (reduction → MEV burn → endgame).

[3] Anders Elowsson — Properties of Issuance Offsets and Increased Penalties under low/zero/negative issuance policies (24 Jun 2026). ethresear.ch.

Cited for: per-duty offset design; preservation of role power dynamics; minority discouragement attack analysis.

[4] Mike Neuder — Issuance Issues — Subsequent Soliloquy (11 May 2024). notes.ethereum.org.

Cited for: the real-yield decomposition — long-run dilution-adjusted yield can rise under reduced issuance.

[5] Zach Pandl (Grayscale) — Ethereum’s Staking Model Needs an Update (12 May 2026). grayscale.com.

Cited for: institutional repricing of staking yield in real terms.

[6] Artem Kotelskiy, damcnuta, Sonya Sun Kim & adcv — Maximum Viable Security: A New Framing for Ethereum Issuance (6 Jul 2024). ethresear.ch.

Cited for: the principal counter-framing engaged with in this post — maximizing security rather than minimizing issuance, the scale-economies argument on solo stakers, and the case that issuance cuts concentrate stake with centralized exchanges.

[7] pintail — Ethereum’s Staking Ratio: The Tipping Point (20 Apr 2026). pintail.xyz.

Cited for: the measured do-nothing trajectory: 1/3 crossed, saturated queue, >70M ETH (>55%) worst case by January 2028.

[8] Ansgar Dietrichs & Caspar Schwarz-Schilling — Endgame Staking Economics: A Case for Targeting (22 Feb 2024). notes.ethereum.org.

Cited for: high-stake environment externalities and winner-take-most LST dynamics.

[9] Antero Eloranta & Santeri Helminen — Impact of Consensus Issuance Yield Curve Changes on Competitive Dynamics in the Ethereum Validator Ecosystem (28 Jan 2025). ethresear.ch.

Cited for: formal cohort competitive-dynamics modelling.

[10] Noé Arnold, Juan Beccuti, Thunj Chantramonklasri, Matthias Hafner & Nicolas Oderbolz — Towards a Formal Framework of the Ethereum Staking Market (18 Mar 2025). arXiv.

Cited for: per-cohort cost structures and issuance-response modelling.

[11] EIP-7251: Increase the MAX_EFFECTIVE_BALANCE (included in Pectra). eips.ethereum.org.

Cited for: validator consolidation reducing solo per-ETH operating costs.

[12] Vivian Zhu, Otakar Korinek & Alex Duckworth — ETH Issuance Discovery Research: Issuance Debate & Case Studies By Staking Cohort (4 Feb 2025). ethresear.ch.

Cited for: cohort case studies on profitability and behaviour under varying issuance policies.

[13] hanniabu — Ethereum issuance: questions to answer. gist.

Cited for: several of the evidence objections addressed in Part 2, including the operator-vs-beneficial-owner and average-tax-rate refinements (question 7) and the LST-buffer framing (question 10).

[14] Julian Ma — Initial Analysis of Stake Distribution (15 Mar 2024). ethresear.ch.

Cited for: the formal link between issuance level and the distribution (not just quantity) of stake. Over the years and across multiple discussion channels, we have gathered feedback and encountered several strong concerns about a change of this kind. This post addresses the most common ones up front, so that readers can also understand the reasoning behind our design choices. I concure with @pintail regarding Anders FAQ as an excellent read.

[goodroot]

Thanks, this is a deep response and addresses many of the broader arguments. But I still do not see a bridge between the proposal’s macro objective and its microeconomic effects on different classes of stakers.

The proposal repeatedly argues that excessive staking increases reliance on intermediaries and eventually forces out solo stakers. Yet the mechanism reduces consensus issuance proportionally for every validator.

Given the acknowledged differences in taxation, operating costs, access to reward smoothing, and economies of scale, what analysis gives confidence that institutional stake will contract at least as much as solo stake? Is there empirical evidence, modelling, or a theoretical argument concerning heterogeneous reservation yields that supports this conclusion?

The cited Elowsson FAQ states:

Whether one issuance policy is better for the proportion of solo stakers cannot be ascertained.

My reading of that FAQ is that it reaches four relevant conclusions:

• Lower issuance might preserve or increase the solo-staker share.

• It might instead reach a low-yield region in which economies of scale favour delegation.

• There is no guarantee that materially lower yield retains a larger proportion of solo stakers.

• The result depends on presently unknown reservation-yield distributions across participant classes.

That seems like a clear acknowledgement that the effect on solo staking remains uncertain.

Likewise, the offsets paper establishes that a per-duty offset is a comparatively safe implementation technique for low issuance. That is important, but it is not equivalent to establishing that low issuance is economically safe for solo operators or that it improves validator composition.

The foundational sources therefore appear to support two narrower claims:

1. Excessive stake may create systemic risks.

2. A per-duty offset can preserve consensus-level reward and penalty relationships under low issuance.

I have no disagreement with either claim. But neither source appears to establish that lowering issuance improves the composition of the validator set.

So, after the tunnel of words, my original question remains:

What subsequent evidence closes that gap for EIP-8361?

The per-duty mechanism may make low issuance technically safer, but it does not by itself demonstrate that low issuance is economically safer for solo operators.

The proposal could establish a lower and technically stable staking equilibrium without establishing a more decentralized one. Its anti-scale property can discourage further expansion by very large operators, but the same reduction in yield may also threaten the continued participation of the smaller operators contributing most directly to validator diversity.

My response is negative because the proposal presents the change partly as protective of solo staking, while the cited research appears to treat that outcome as unresolved.

It may ultimately be defensible to conclude that Ethereum is currently overpaying for consensus security and that some existing solo validators will no longer find participation economically worthwhile. But that would be a materially different argument from claiming that the proposal protects solo staking. The distinction should be made explicit.

[concernedcitizen]

Would this conversation exist if -

a) burn was not so low (if issuance is considered an important topic right now, maybe demand for the chain should be discussed in paralell?)
b) price was not so low

Can we please devote our energy to getting people to build on and use ethereum and tell compelling stories about it that make people inspired to build the future?

I don’t disagree that this is a conversation worth having. I disagree with the timing. Pushing this right now seems like it may disenfranchise many that are building working every day to make Ethereum the global adopted standard - can we not do that please?

AFAIK zero serious investors or ETH holders think that the curent inflation is problemmatic - the brain drain and political contention of analyzing this, IMO, is just not worth it right now when efforts could instead be placed on growing Ethereum.

[mr-plum]

This proposal is super contentious, but I actually think something needs to be done.

I’m not sure this is the correct proposal or issuance curve, but changes to the issuance curve will become harder to implement over time as more businesses are built around staking yield and the amount of staked ETH continues to increase.

Staking is not risk-free yield, and we should never advertise it as such.

If implementing a proposal like this can stop new businesses from being built specifically around extracting staking yield, maybe that’s not a bad thing.

Just as traditional businesses lobby to preserve the status quo on taxes and regulations, we should expect strong and loud pushback against any proposal concerning the issuance curve. Because this does directly hurt Lido, Rocketpool, Aave, ETFs, etc.

I also think that, if this or a similar proposal is implemented, solo stakers will continue to stake after the dust settles, and that’s the most important thing imo.

[zexoverz]

The over-staking concern is real, and mr-plum is right that waiting makes it harder to do later. Before we settle on the aggregate staking ratio as the control variable though, two things are worth pushing on.

First is incidence. The burn hits every validator the same way, but the stake we actually want to discourage is yield extraction and custody concentration, not the solo staker. A flat burn keyed to the global ratio taxes the home staker exactly as hard as a staking ETF. If the goal is decentralization, the lever is pointing at the wrong quantity. We end up deterring the participants we say we want to keep.

Second is reflexivity. Once yield becomes a function of a measured, laggy, global ratio, it stops being stationary. Everything built on staking as collateral now prices a moving policy target, and a moving target invites games. Wrapping, timing around the curve, off-chain staking substitutes. I am not convinced the burn removes the incentive so much as relocates it.

There is also the tax point raised above. Burning nominal reward does not remove the taxable event in most jurisdictions, so the solo staker eats tax on gross and keeps less real yield than the headline number suggests.

None of this is a reason not to act. It is a reason to separate two questions the current draft fuses together. What are we trying to deter, and who ends up bearing it. If the answer is concentration and marginal institutional capital, I would rather see a mechanism that discriminates on that directly than one that leans on the aggregate ratio and hopes the incidence lands on the right people.

Honest question for the authors. Did you model solo-staker incidence separately from the aggregate, and is there a version that tapers on concentration or custody rather than total staked supply?

[awma]

Not an opinion on the proposed change itself, but on the argument given. The claim that this change would combat concentration by imposing a diseconomy of scale on larger stakers is based on an unrealistic world model.

Larger stakers overwhelmingly stake on behalf of other entities (depositors). They do not make decisions about whether or not to add to the stock of staked ETH. That stock is instead governed by the global demand for staked ETH exposure.

No large stake services provider will choose to limit their size to avoid moving down the emissions curve. Doing so would simply leak deposits to their competitors, whereupon they suffer the yield hit anyway, but with less market share.