EIP-8363: Tapered Issuance Burn

EIPs EIPs core
137

Every ETH staker is also an ETH holder. And don’t take this the wrong way, but ETH holders do have a vote by deciding to buy or sell their ETH. If you hold ETH since 2018 (like me), you are already benefitting from a large issuance reduction due to PoS.

Just that before the Merge, I also decided to use part of my ETH to support the network by staking and spinning up a validator node at home. That was risky, we didn’t even know if we’d ever be able to unstake. But this is actually the first time I feel that not everyone in the community sees my actions as crucial support, but rather unduly profiting off their ETH holdings on the “paid side”.

7 Likes
138

It’s not really true, first of all, this EIP doesn’t set yields to 0 but reduces them. So hoarding ETH and staking it can still be a business model. Less revenue in total but with millions of ETH you can still make a hundred million dollars staking even with 1% return.

Second, the sharplink Bitmine business model also works completely without returns, see micro stragegy. It is in essence a bet on ethereums future and the ETH price going up over the next years. It is rational to us a tiny fraction of these invested dollars to do good in the Ethereum space if that helps the asset appreciating.

Thrid, while I like Bitmine and Sharplink and am happy that their model would work under a lower issuance policy - I actually don’t think they should be considered in the debate around what’s best for the Ethereum network. We need to build a useful world computer, not be influenced by big institution to give them more free money than we’d need to…!

A lot less. Because then you also have normal ETH.. staked ETH ultimately takes away from normal ETH via inflation. Also you demonstrate that milking every little bit of yield is not your top priority but you believe in the future of the network.

139

Hi all. I’m Matthew Light, AKA “Hunting Island”. I wrote the first Ethereum issuance reduction EIP-186 in 2016, which was implemented and included as a part of EIP-649 which lowered issuance from 5 ETH to 3 ETH per block.

Looks like a lot of the community isn’t willing to consider any change to issuance in 2026 and wants to keep it exactly as is.

That’s really too bad, because the current issuance curve is far from ideal, but I understand the desire not to touch it.

But if that is the case, we absolutely do need an alternative proposal to prevent continued growth of stake. I would like to suggest a burned deposit fee that begins at 50,000,000 ETH staked, rises linearly to 10% of the deposit at 51,000,000 ETH staked, rises linearly to 90% of the deposit at 52,000,000 staked, and even higher beyond that.

We could say that it is it a progressively harder and harder cap to deposits.

Any comments on this?

1 Like
140

Here is a mockup of an EIP based on this idea that Grok threw together, including the changes to the python CL spec:

eip:

title: Staking Cap Deposit Burn
description: Cap the growth of staked ETH by burning an increasing portion of new deposits once total active stake exceeds 50 million ETH.
author: <Your Name (@yourhandle)>
discussions-to:
status: Draft
type: Standards Track
category: Core
created: 2026-08-08
requires: 6110, 7251

Abstract

This EIP introduces a hard economic cap on the growth of staked ETH. Once the total active balance on the beacon chain reaches or exceeds 50 million ETH, an increasing fraction of every subsequent deposit is permanently burned on the consensus layer. The burn fraction scales according to the following anchors:

  • 0 % at ≤ 50 000 000 ETH
  • 10 % at 51 000 000 ETH
  • 90 % at 52 000 000 ETH
  • 99 % at 53 000 000 ETH
  • 99.9999 % at ≥ 54 000 000 ETH

The burned portion is never credited to any validator balance and is therefore removed from the total ETH supply. The change is purely consensus-layer and is activated by a hard fork.

Motivation

Unconstrained growth of the staked supply creates several long-term risks:

  • Diminishing marginal security returns while issuance continues.
  • Increasing centralisation pressure on liquid-staking tokens and large operators.
  • Reduced circulating supply available for DeFi, payments and other economic activity.
  • Potential for a “too-big-to-fail” staking industry.

By imposing a smoothly increasing burn on new deposits above a clear threshold, the protocol creates a market-driven ceiling on stake growth without altering existing validator rewards, penalties or withdrawal mechanics. The chosen curve is intentionally steep so that additional staking becomes economically unattractive well before the absolute technical limits of the protocol are reached.

Specification

Constants

Add the following constants to the consensus-layer preset:

# Gwei values for the staking-cap burn curve
STAKING_CAP_START   = Gwei(50_000_000 * 109)   # 50 M ETH → 0 %
STAKING_CAP_10PCT   = Gwei(51_000_000 * 109)   # 51 M ETH → 10 %
STAKING_CAP_90PCT   = Gwei(52_000_000 * 109)   # 52 M ETH → 90 %
STAKING_CAP_99PCT   = Gwei(53_000_000 * 109)   # 53 M ETH → 99 %
STAKING_CAP_999999  = Gwei(54_000_000 * 10**9)   # 54 M ETH → 99.9999 %

# Maximum burn expressed in parts-per-million
MAX_DEPOSIT_BURN_PPM = uint64(999_999)           # 99.9999 %


#New helpers

def compute_deposit_burn_ppm(total_staked: Gwei) -> uint64:
    """
    Return the fraction of a deposit that must be burned, expressed in
    parts-per-million (0 … 1_000_000).

    The function implements a piecewise-linear curve that exactly matches
    the anchors defined in the EIP.
    """
    if total_staked <= STAKING_CAP_START:
        return uint64(0)

    if total_staked <= STAKING_CAP_10PCT:
        # 0 % → 10 %
        progress = (total_staked - STAKING_CAP_START) * 100_000 // (STAKING_CAP_10PCT - STAKING_CAP_START)
        return progress

    if total_staked <= STAKING_CAP_90PCT:
        # 10 % → 90 %
        progress = (total_staked - STAKING_CAP_10PCT) * 800_000 // (STAKING_CAP_90PCT - STAKING_CAP_10PCT)
        return uint64(100_000 + progress)

    if total_staked <= STAKING_CAP_99PCT:
        # 90 % → 99 %
        progress = (total_staked - STAKING_CAP_90PCT) * 90_000 // (STAKING_CAP_99PCT - STAKING_CAP_90PCT)
        return uint64(900_000 + progress)

    if total_staked <= STAKING_CAP_999999:
        # 99 % → 99.9999 %
        progress = (total_staked - STAKING_CAP_99PCT) * 9_999 // (STAKING_CAP_999999 - STAKING_CAP_99PCT)
        return uint64(990_000 + progress)

    return MAX_DEPOSIT_BURN_PPM


def apply_deposit_burn(state: BeaconState, amount: Gwei) -> Gwei:
    """
    Compute the portion of amount that may be credited after the
    staking-cap burn.  The remainder is permanently removed from supply.
    """
    total_staked = get_total_active_balance(state)
    burn_ppm = compute_deposit_burn_ppm(total_staked)
    burned = amount * burn_ppm // 1_000_000
    return amount - burned


#Modified apply_deposit

def apply_deposit(
    state: BeaconState,
    pubkey: BLSPubkey,
    withdrawal_credentials: Bytes32,
    amount: Gwei,
    signature: BLSSignature,
) -> None:
    # Signature verification continues to use the original deposit amount
    if not is_valid_deposit_signature(pubkey, withdrawal_credentials, amount, signature):
        return

    # Apply the staking-cap burn
    credited_amount = apply_deposit_burn(state, amount)

    validator_pubkeys = [v.pubkey for v in state.validators]
    if pubkey not in validator_pubkeys:
        # Existing Electra behaviour – create validator with zero balance
        add_validator_to_registry(state, pubkey, withdrawal_credentials, Gwei(0))

    # Queue only the credited amount
    state.pending_deposits.append(
        PendingDeposit(
            pubkey=pubkey,
            withdrawal_credentials=withdrawal_credentials,
            amount=credited_amount,
            signature=signature,
            slot=GENESIS_SLOT,          # or state.slot for deposit-request path
        )
    )

#Modified apply_pending_deposit


def apply_pending_deposit(state: BeaconState, deposit: PendingDeposit) -> None:
    """
    Apply a pending deposit.  deposit.amount has already been reduced
    by the staking-cap burn when the PendingDeposit was created.
    """
    validator_pubkeys = [v.pubkey for v in state.validators]
    if deposit.pubkey not in validator_pubkeys:
        if is_valid_deposit_signature(
            deposit.pubkey,
            deposit.withdrawal_credentials,
            deposit.amount,
            deposit.signature,
        ):
            add_validator_to_registry(
                state,
                deposit.pubkey,
                deposit.withdrawal_credentials,
                deposit.amount,
            )
    else:
        index = ValidatorIndex(validator_pubkeys.index(deposit.pubkey))
        increase_balance(state, index, deposit.amount)


Unchanged functionsprocess_deposit, process_deposit_request and process_pending_deposits continue to call the modified apply_deposit / apply_pending_deposit helpers and require no further changes.RationaleMetric: get_total_active_balance is already the canonical measure of economic security used for rewards, penalties and finality. Using it keeps the burn aligned with the quantity that actually secures the chain.
Burn location: Performing the burn when a deposit is first accepted (inside apply_deposit) guarantees that the pending-deposit queue never contains amounts that will later be partially burned, simplifying accounting.
Signature: The BLS proof-of-possession remains over the original amount supplied by the depositor, preserving the security properties of the deposit contract and EIP-6110 requests.
Curve shape: The piecewise-linear interpolation is simple, fully deterministic and exactly matches the four publicly stated anchors. A future hard fork may replace it with a smoother closed-form function if desired.
No changes to rewards or withdrawals: Existing validators continue to earn and withdraw exactly as before; only the marginal cost of adding new stake is increased.

Backwards Compatibility

This EIP requires a hard fork. After activation:Clients that have not upgraded will reject blocks containing the new deposit-processing logic (or will credit the full amount, causing a consensus split).
All existing validator balances, pending deposits created before the fork, and withdrawal credentials remain valid.
The deposit contract on the execution layer is untouched.

Test CasesReference tests should cover at least the following scenarios (all amounts in ETH for readability):Total active balance
Deposit size
Expected credited
Expected burned
49 999 999
32
32
0
50 500 000
32
28.8
3.2
51 500 000
32
16
16
52 500 000
32
3.2
28.8
53 500 000
32
0.032
31.968
55 000 000
32
0.000032
31.999968
52 000 000
2048
204.8
1843.2

Additional tests must verify:Sequential deposits inside the same block/epoch update the total correctly.
Top-ups to existing validators are burned according to the same curve.
Signature verification still succeeds when the original amount is used.
Genesis and pre-fork pending deposits are unaffected.

Security ConsiderationsConsensus safety: The burn is a pure function of already-finalised state (get_total_active_balance). No new trust assumptions are introduced.
DoS / griefing: Because the burn only reduces the credited amount, an attacker cannot force other depositors to lose more than the curve already mandates. The minimum deposit size remains 1 ETH.
Supply reduction: The burned ETH is permanently removed. This is intentional and strengthens ETH’s monetary properties.
Client diversity: All consensus clients must implement identical integer arithmetic; the piecewise-linear formula is deliberately simple to minimise implementation divergence.
Activation timing: The 50 M ETH threshold is high enough that the burn will not activate immediately after the fork under current staking growth rates, giving the ecosystem time to adapt.

CopyrightCopyright and related rights waived via CC0.
141

One more strategic take on this debate. Let’s think this through carefully.
12 Points Dumbing Down the ETH Issuance Reduction Debate: A Strategic (and Realistic) Review

1. Wrong lever. If the goal is capping staking levels, crushing yield to near-zero is a blunt instrument. You’re fixing centralization by accelerating it. A double-edged sword cuts both ways.

2. The inflation is already tame. Net of burns, ETH sits below 0.5% annual inflation. Compared to the 2% economists consider healthy, Ethereum’s monetary policy is already conservative. The emergency isn’t there.

3. You’re defunding the ecosystem. Staking yields have quietly replaced EF grants as a funding engine for Ethereum development. Cutting them mid-cycle, while the EF is already pulling back, removes a pillar nobody has publicly accounted for.

4. LSTs aren’t the enemy. Liquid staking tokens drive DeFi innovation, deepen onchain liquidity, and generate fee burn. The narrative that LST dominance is an existential risk ignores what LSTs actually produce for the network.

5. Security is insurance, not overhead. You don’t cut insurance because the house hasn’t burned down. A well-compensated, broadly distributed validator set is exactly what Ethereum’s credibility as global settlement infrastructure requires.

6. Wrong conversation entirely. This debate obsesses over the bottom line. Ethereum’s future is won by growing the top line: more apps, more users, more usage, more fee burn. Nail that, and this whole discussion becomes a footnote.

7. The Fed doesn’t move 150bps in one meeting for a reason: it’s foolish. Concurrently, jumping from .8% to 0.5% based on theoretical curves is a foolish move. Hypothetically, a step from 0.8% to 0.7% with a pre-committed trigger tied to the staking ratio is more sound monetary policy.

8. It won’t dent Lido. Lido adapts faster than Ethereum’s twice-yearly upgrade cycle. Every yield adjustment re-equilibrates at the same rate for all players. The dominant one wins that race every time.

9. The room is too small. Decisions of this magnitude are being driven by cryptography engineers in All Core Devs forums, deliberately insulated from the market practitioners, economists, and institutional voices who understand what these changes do in the real world.

10. Touch EIP-1559 before touching staking. If issuance needs adjusting, the fee and burn architecture has some room for innovation. The sacred staking yield should be the last lever pulled, not the first.

11. Worst possible timing. At ~$1,900 per ETH, compressing staking yield is asking validators to absorb pain while already underwater. At $6–8K (closer to ETH’s intrinsic value), the same change might be a minor inconvenience against a backdrop of 20–30% annual appreciation.

12. Theory meets market: it loses. The unspoken risk: if the issuance cut lands while macro conditions deteriorate, rates stay high, sentiment turns risk-off, the institutional absorption bid collapses exactly when exit sell pressure peaks. The medium-term benefits evaporate. That scenario isn’t modeled anywhere in this proposal. That’s the real cost of inaction on intellectual honesty.

12 Likes
142

excellent points. I concur

2 Likes
143

it is biased though, just in favor of raw ETH rather than staked ETH. that’s also a bias!

3 Likes
144

I think the issue is it’s not clear the problem you’re stating is a problem. Acknowledging we have a problem would be the first step to convincing anyone that something needs to change.
Why is stake rising to x% bad in the first place? Will it even get there, how do you know, and how sure are you that it will happen? What other blockchains have higher stake % and what issues did it cause for them?

1 Like
145

Who Pays for Ethereum’s Security?

A response to EIP-8363: Tapered Issuance Burn

Dilution of ETH holders is suddenly the problem we must solve.

It was not the problem when Ethereum collapsed its own fee revenue. Fees are how users pay for the security they consume — that is what a working blockchain economy looks like, and it is what Ethereum looked like until we decided that the way to compete was to give blockspace away. Having given away the revenue that would have paid validators, we now discover that validators are being paid by diluting everyone else, and propose to fix it by taking the payment away.

The bill for a decision to stop charging users is being presented to the long-term ETH investor. That is the choice actually on the table, and it should be named before we argue about curves.

Issuance does not buy security

Consider 30% of supply staked by a single provider in one cloud region, against 30% staked by a million people on hardware in their homes. A metric that counts capital says these are equally secure. Only one of them is a network.

The authors would not dispute this — the proposal itself argues that whose principal is at risk matters, not merely how much is staked. But that concession cuts through the instrument, not just the opposing case. If staked capital does not measure what we want, then it does not measure it in either direction: EIP-8363 accounts for the benefit of the current curve in ETH staked and its cost in ETH issued, and both are the wrong quantity.

The diagnosis underneath is right. The curve pays the same rate to someone running a validator on a machine he owns and to a business staking someone else’s ETH at scale, and since the second group is far larger, most of the subsidy lands where it buys nothing. The prescription does not follow. The answer to a badly aimed subsidy is to aim it — regressivity per validator rather than per ETH, incentives conditional on independent operation, stronger correlated-penalty design. This proposal answers a targeting problem with abolition.

Why the rate ends at the operator’s marginal cost

This is the part I think is being missed, and it is simple.

Under the current curve, yield declines as staking grows but never reaches zero. There is no point at which staking stops being worth doing, so everyone stays and everyone keeps growing. Under the taper there is such a point. The question the proposal never answers is: who reaches it first?

Two very different participants are in this market.

An investor stakes his own ETH. He has a cost of capital — the ETH could sit unstaked, or be somewhere else entirely. On top of that he carries operating cost that does not scale, illiquidity, slashing exposure on his own principal, and tax on rewards as they accrue. His hurdle rate is high, and for a home staker with 32 ETH the fixed cost alone is one to two and a half percent of nominal per year.

A staking business stakes other people’s ETH. It has no cost of capital, because none of the capital is its own. It is not investing; it is collecting a fee on assets under management. Its only real cost is running servers, which across thousands of validators rounds to nothing. Its hurdle rate is approximately zero.

So as the yield falls, the investor exits first and the business exits last — and the business, having no hurdle, keeps taking deposits all the way down. Worse, most of the ETH it stakes was never anyone’s marginal decision: exchange balances are staked by default, ETP mandates stake by contract, liquid staking tokens stake by construction. The beneficial owner is never asked what rate he requires, so he never expresses one.

The proposal assumes the market clears where the marginal staker’s risk premium is met, and concludes the ratio settles safely below the threshold. But the marginal staker is not an investor with a premium. He is an intermediary with none. The rate therefore does not stop where an investor would stop. It stops at the marginal cost of the cheapest operator, which is close to zero.

The taper does not create an off-switch. It chooses whom it switches off — and it switches off the principal while leaving the agent, which is the exact inverse of its stated purpose.

Why that hits demand for ETH

The staking yield is not a fee for a service. It is the policy rate of the Ethereum economy — the return on its safest asset, the floor under every ETH-denominated credit market, and the reason a long-term holder is a holder rather than a trader. Interest paid on central bank reserves is also a pure transfer created from nothing, and nobody argues it should therefore be zero, or calls setting it to zero “letting the market decide.”

Set that rate to zero and two things follow.

The marginal dollar buying ETH today arrives through vehicles that require a contractual, auditable yield: staking ETPs, corporate treasuries, institutional mandates. Avoided dilution is nobody’s line item; staking revenue is. The taper does not change what ETH is worth — it dismantles the channel through which capital currently reaches it.

And ETH-denominated credit would clear near zero while dollar-denominated credit onchain clears at four to six percent. The savings of the Ethereum economy then denominate in dollars, and ETH is left as a gas token with a scarcity story. That is precisely the loss of moneyness this proposal claims to prevent. Bagehot’s observation has not aged: John Bull can stand many things, but he cannot stand two per cent. Capital does not sit still at a suppressed rate.

Scarcity without monetary function is not a premium. It is a collectible.

What would prove me wrong

Less issuance is less supply growth, and that pushes the other way. Against roughly 0.85% annual supply growth today, the taper eventually saves something under a percentage point a year of dilution, and whether the demand it destroys exceeds that is an arithmetic question I intend to publish rather than assert.

I would rather be judged on what my mechanism predicts than on price. Within twelve months of activation: the staking ratio proceeds toward the threshold rather than stabilising below it; the solo-staker share of the validator set falls while the exchange, liquid-staking and treasury share rises; and ETH-denominated lending rates compress toward zero while stablecoin rates do not. If those move the other way, I am wrong and will say so.

The question we are avoiding

An economy that refuses to collect revenue cannot expect its base rate to be anything other than zero, whatever the issuance curve says. EIP-8363 is a way of not having the conversation about fees by having a conversation about staking instead.

146

A smaller validator set is not a better one.

EIP-8363 conflates stake quantity with stake composition. Stake composition matters more.

One of the commonly cited measures of decentralization of a network is its Nakamoto coefficient (NC) - the smallest number of parties that would need to collude or be coerced to break a system.

Today, with 34% of ETH staked, Ethereum’s NC is between three and four depending if Lido is counted as a single entity, or perhaps in the twenties if Lido is counted as the 400+ entities (including many independent and solo operators) that make up its validator set.

Given that the NC is an integer, how it changes is neither smooth nor gradual. A coefficient of three is not “slightly worse” than four, it is one less independent party that has to be compromised, coerced, or served with a legal order before finality is in question. Anything that negatively affects Ethereum’s NC can do so quickly and dramatically in a step-wise manner. And, as this community knows well, Ethereum’s staking composition is vital to maintaining its decentralization.

In the case of this EIP, it uses a single sledgehammer to drive the proverbial nail. That sledgehammer affects the 32 ETH solo validator and the 2 million ETH exchange identically but not equally. Indeed, as Jerome’s reply above acknowledges - marginal operators are the first to go with a 32 ETH validator having an annual operating cost of 0.82% of stake (0.21% at 128 ETH, 0.013% at a consolidated 2,048 ETH, etc). This EIP’s sledgehammer is not staking composition-neutral. It is composition-negative, by a large degree. And at the stated 1.5% equilibrium which corresponds to a substantially lower stake than we have today, it is composition-negative from the minute it is implemented - a bottom up size filter for stakers.

MEV works the same way in that large, sophisticated operators capture it more reliably than small ones.

Being a primary effect of this EIP with its negative impact on staking composition, the proposal cannot deliver the cap (which actually is far less than 50% of ETH staked at the suggested equilibrium point of 1.5%) without producing staking concentration, because removing marginal stakers is how the cap is delivered.

Rather than merely offering another criticism of EIP-8363, I would like to propose an alternative solution of two separate EIP’s that ship together that would ameliorate and enhance Ethereum’s staking composition:

  1. Native delegation built into the protocol (optionally as a native LST), a version of which has already been proposed in a post above
  2. Correlation penalties and rewards that target staking composition directly and is independent of the staking ratio (e.g. EIP-7716)

Now, native delegation would most likely raise the staking ratio, not lower it because as staking becomes easier and safer, more people do it. And correlation rewards and penalties would encourage an increasing Nakamoto coefficient rather than shrinking it as EIP-8363 will do from the outset.

Ethereum’s decentralized validator set is its killer feature. It is what makes it different from all the other pretenders to the throne. Rather than weaken decentralization in the pursuit of unclear goals as under EIP-8363, we should be strengthening and defending decentralization.

Show me the evidence that EIP-8363 produces a better validator set, rather than merely a smaller one.

5 Likes
147

I wish I had gotten in earlier, but I was spending additional time reviewing research to try to ensure I had a well-reasoned take. I’ve read the EIP, the issuance reduction FAQ (Anders - May 2024), “The Shape of Issuance Curves to Come” (Patxi - September 2024), Ethereum AMA (Drake, Buterin et al, January 2024), watched last week’s Consensus ACDC, watched the recent “The Defiant” webcast, and this thread through reply 145. I’ve also been to four presentations on issuance at Devcon 2024 (one at the Bankless Summit actually). I’ve thought about it independently a decent amount as well. I’m not an expert researcher, but I think I’ve given the topic considerable time and effort to understand.

For context, I’ve been an at-home staker since January 2022 (miner 2018-2022), not genesis, but before the merge and before withdrawals. I’ve run nodes for LSPs in the past, but now run a single consolidating validator from home with my own ETH. I also ran / run genesis validators for Holesky and Hoodi, starting in September 2023. Further, I hold ETH in ETFs in my IRA, more than my at-home stake.

As a pre-merge at-home staker, and ETH holder, I align with the goals of this EIP, and support it, or something like it. The sooner the better. I’ve been expecting an issuance reduction for some time, and fully believe “the window is closing”. I think some of the reaction so far is kind of proving the point that waiting will make the change even harder and more disruptive. I think those that say ‘change sometime is ok, but not now’, whether they realize it or not, are saying let’s never change it (maybe Lean Ethereum in 2029/30, which is much too late in my view).

70, 80, or 100% stake is not the issue, as I’ve seen argued. The issue starts at 50%, if not before. It’s been very long held belief that we cannot give up the social consensus layer. When taking into account the saturated entry queue (where 2 of my ETH are 9 days into the the 43 day queue), we’re already at north of 36%. I haven’t seen credible reasoning that it’ll magically stop at 36, 45, or 50%. I think changes in market dynamics are putting in a somewhat structural demand for staked ETH.

This is a modest proposal in my view. It gives stakeholders plenty of time for feedback, time to prepare, and 18 months to adjust to the eventual change. I think the motivations are totally valid, so I would hope that any suggestions for improvement would address them, rather than try to deny them (i.e. ‘don’t worry, we won’t get to 50%’, etc.)

Thanks to the authors for this important work. I hope people spend some real time engaging with the issues raised.

4 Likes
148

There are a bunch of problems with allowing staked ETH to grow beyond 50% of ETH. Some of these do not apply to other blockchains which lack Ethereum’s locked staking contracts, hardware validation etc and share liquidity between staked and unstaked native token.

  1. All versions of staked ETH tokens are simply claims on ETH. The staking provider can steal the ETH, the token can be hacked, or the validator can fail (sometimes catastrophically).

  2. If the tokens reprice radically, this can blow up DeFi (example: the failure of AAVE this year which required a baillout from the community).

  3. Liquidity gets pulled from ETH paired and distributed in a bunch of varieagated staking tokens and different USD pairs.

  4. At high staking ratios, staking creates taxable events from simple dilution instead of actual increases in value of the network

  5. Staking tokens are complex and carry a lot of smart contract risk, versus safe de minimus contracts like WETH or native ETH.

  6. Stake becomes “too big to fail / too big to slash” when the vast majority of ETH is staked.

149

The sting in your last line was never the intent, and if my post read that way to a pre-Merge home staker, that part is on me. You spun up a validator when withdrawals were a promise without a date. “Legitimate” was my word, I would happily add “crucial”.

“Paid side” was accounting, not a verdict. The reward the protocol pays stakers is newly issued ETH, funded through dilution by everyone who does not stake. My post was about who shows up in threads like this one, never about who deserves what.

Every staker is a holder, sure. The inverse was my point. Two thirds of the supply has no validator attached, and on security and neutrality it wants what you want. Where interests split is who funds the reward. You hold both positions, so it partly cancels for you. A pure holder only has the paying leg. That leg is what EIP-8363 tapers, gradually, and it only reaches zero net issuance if half of all ETH ever stakes.

That is also why I don’t think we are on opposite sides here. Anders Elowsson worked through who bears what in “Foundations of minimum viable issuance” (Foundations of minimum viable issuance - HackMD): staking your own ETH from home is the least exposed seat on the collecting side, what you lose in reward largely comes back as lower dilution on what you hold, and after taxes the trade tends to improve. The business that actually shrinks is the one charging a percentage of other people’s staking rewards. You charge nobody anything.

On voting by selling, that is an exit rather than a voice. By that standard stakers would not need this thread either, they could just unstake. We are all here because arguing beats exiting as a way to be heard.

And fair, holders already got a big cut at the Merge, issuance dropped about 90 percent when mining ended. That cut also reduced the income of the side collecting at the time, it was resisted for years, and the network came out stronger. Kind of the pattern I would bet on again.

1 Like
150

I feel like one avenue that this whole issuance debate isn’t really addressing is the effect that a proposal like eip-8363, which will greatly reduce issuance, will have on the Lean Ethereum roadmap.

In my opinion, the only credibly neutral way to compensate ZK provers to avoid a highly centralized prover set will be to pay them with some amount of issuance. I always figured when that time came, we would take some percentage of issuance away from validators and give it to the ZK provers. At that time, if we felt that there was excess issuance left over, that would be a good moment to debate that adjusting the curve would make some sense. Especially if we had some mitigatjng EIPs in place by that time to help attenuate the centralizing forces of lower issuance (eg. correlation penalties, mev-burn, encrypted menpool, rainbow staking, etc).

What are we going to do if an EIP like this goes through that drastically lowers issuanc and then there’s not enough issuance left to give to the ZK provers? Are we going to then increase issuance?! I honestly can’t think of anything that would be more destructive to the store of value narrative of ETH the asset than if something like that were to occur.

4 Likes
152

Good point. Lean Ethereum has not featured in the EIP-8363 discussion at all. It will be a significant architectural shift for the entire network. Probably warrants some consideration.

2 Likes
153

I’ve noticed that, during these discussions, some people are trying to label the individuals behind certain feedback — for example, arguing that feedback from stakeholders should be considered less trustworthy, while feedback from people without a direct interest in the issue should be given more weight.

I think this is fundamentally the wrong way to approach the discussion.

We should judge the feedback on its own merits: Does this actually help Ethereum become more secure, decentralized, and sustainable?

Who provides the feedback is relevant context, but it should not be used as a substitute for evaluating the argument itself. Dismissing an idea simply because it comes from a stakeholder, or giving an idea more credibility simply because it comes from someone with no direct interest, is essentially just another form of labeling.

The right question should always be:

Is the feedback itself good for Ethereum?

4 Likes
156

I support this EIP. I’ve been a home solo staker since January 2021. I’m also an active ethstaker community member under the same handle on discord and on Reddit. I’m not on twitter or any other platform.

Without listing them all, I’m convinced by the arguments put forth in this EIP.

Also, I think the arguments that solo stakers will be pushed out if the EIP is implemented are wrong. Solo stakers have plenty of other ways to put their ETH to good use, often with higher yields, but they choose to continue solo staking. Even higher yields offered by pooled staking protocols have not convinced me to stop solo staking, for many reasons. That is the case for most if not all solo stakers. If this EIP is implemented, and I hope it is, I will continue to solo stake at almost any yield that is not 0%, and as others have pointed out, the natural market will likely tend to something higher than that. As a solo staker, that’s fine with me.

If as a longtime solo staker I can be of help to the further development of this EIP, just let me know.

5 Likes
158

It’s hard to grasp what outcome this proposal is trying to achieve.
LST share is down from 35% to 20% in last 2 years meanwhile CEX+ETF share is up only.
With Lido size the protocol is still unprofitable meaning issuance redaction will kill LSTs and solo stakers making Coinbase+Binance+Blackrock the only validators.

5 Likes
165

yes, exactly. this is one of the core concerns I and others have been raising for at least months.

1 Like
168

You raise a real question on provers, and I think it lands the other way. If Lean Ethereum will one day need issuance to pay provers, the worst place to negotiate that from is a curve already fully committed to validators. This thread is a running demonstration of how hard it is to walk back a payment once it is flowing.

But your comment already concedes something: “that would be a good moment to debate that adjusting the curve would make some sense.” Then the disagreement is about timing, not about whether a brake can make sense. And the timing has a problem. None of the preconditions on your list exist on mainnet today. Meanwhile staked ETH sits above 30 percent of supply, 36.6 once the entry queue clears, and the buyers pushing it higher, ETFs and treasury companies, accumulate for reasons a lower yield does not touch. The ratio is not waiting.

So here is a genuine question for you and for anyone who shares this concern: is crossing 50 percent staked acceptable to you? If it is not, our disagreement is narrow, it is about sequencing, and waiting has a cost of its own: every year of waiting, more income depends on nothing changing. If it is acceptable, then say it plainly, because that is the actual disagreement in this thread, and provers are downstream of it.

One reason 50 is not just a round number: past it, any future correction to the reward curve needs social approval from a majority the curve itself is paying. Whatever you think of this EIP, that is the point where fixing it stops being a parameter change and becomes a confrontation.

2 Likes