Aave founder Stani Kulechov and ether.fi chief executive Mike Silagadze have come out against the proposal to burn a rising share of Ethereum validator rewards, joining a list of DeFi founders, solo stakers and researchers who have spent two days arguing against it on X and on the Ethereum Magicians forum. Core developers take it up on Thursday.
The fight puts Ethereum’s largest DeFi protocols and staking businesses against a group of researchers who want the issuance curve capped before the staked share of $ETH goes any higher, and it is being conducted in a 48-hour window created by a fork deadline. The Ethereum Magicians thread has drawn about 40 posts in two days.
The proposal would remove the incentive to stake beyond half of all $ETH by burning a fraction of validator rewards that climbs with the staking ratio, reaching 100% at a saturation balance of 60.25 million $ETH. Applied in full at the fork, it would cut net consensus yield from about 2.6% to 1.2% at today’s staking level, which is why the authors phase it in over 18 months. The original proposal was posted on Aug. 4, roughly 48 hours before the deadline to propose EIPs for Hegotá, the upgrade after Glamsterdam.
Ethereum has 41.5 million $ETH staked, or 34.07% of supply, across 895,293 active validators, earning a 2.65% $APR, according to validatorqueue.com. Another 2,488,005 $ETH is waiting to get in, a 43-day queue. Liquid staking tokens hold 15.04 million $ETH worth $28.2 billion, with Lido’s stETH accounting for 62.7% of that, DefiLlama shows.
Save $ETH Staking
The longest single critique in the debate is an Ethereum Magicians post filed under the handle EthWarrior. Kulechov claimed it as his own on Aug. 4, linking to it from his verified X account with the words “My thoughts on Ethereum staking yield axing” and the sign-off “tl;dr Save $ETH staking.”
The post reconstructs the proposal’s own formulas and argues the mechanism produces the opposite of its stated goal. At an unchanged 39 million $ETH staked, Kulechov calculates all-in validator income falling from 2.862% to 1.476%, a 48% cut.
“A zero-yield regime accelerates the capture it means to deter,” he wrote. “It filters out everyone who stakes for economic return and leaves the field to entities that stake for structural, regulatory, or product reasons.”
He also flagged a tax exposure created by the transition itself. The taper works by doubling BASE_REWARD_FACTOR to 128 and decaying it back to 64, which doubles the gross reward credited to a validator while burning about half of it. In jurisdictions that tax staking rewards on receipt, Kulechov argues, a home validator’s taxable receipts double at the moment the proposal says nothing has changed for them.
He asked the authors for written tax opinions from the US, UK, Germany and Portugal, a solo-staker impact assessment, a hard floor on net yield, and a cascade model for the lending and liquid staking stack “built with Aave, Lido, Etherfi and other DeFi risk teams.”
His closing line: “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.”
On Aug. 5 he broadened the argument to Ethereum’s priorities. “Ethereum should not focus on gaming staking issuance and cutting staking rewards. That is not the problem Ethereum needs to solve,” he wrote, naming privacy, scalability and security at the protocol level and stablecoins, DeFi and RWAs at the application layer.
Disappointing On Every Level
Silagadze’s response, posted within hours of the announcement, ran to a dozen paragraphs and drew 90,000 views.
“This is so disappointing on every level,” he wrote. “EIP released with 48 hours notice for comments. Realistically 4 months before it goes live. For a major network economics change with far reaching implications for all of DeFi. Every builder on Ethereum opposes this. Why is this a focus?”
He argued the change would push out solo stakers who are not subsidized by the Ethereum Foundation, leave staking to large centralized entities with zero cost of capital, and force a capital exodus at seven of the top 10 DeFi protocols. On the proposal’s argument that liquid staking tokens displace $ETH as money, he wrote that the reasoning “betrays a cash-accounting level of understanding of the economy, as if only M1 counts as real money.”
Silagadze pre-empted the conflict-of-interest reading: “I say this as a builder on Ethereum, not as someone who stands to benefit from staking issuance. I don’t have much at risk here. Almost all of @ether_fi revenue is now coming from vaults and payments, staking is a small (and shrinking) part of our business.”
“Any nation state or large institution looking at this will justifiably have a dramatic loss of confidence in the governance and stability of Ethereum.” On Aug. 5 he added that “the case for increasing $ETH issuance is much stronger than the case for decreasing it.”
Issuance Ain’t It
Lefteris Karapetsas, founder of portfolio tracker rotki, put it more briefly: “Ethereum has serious issues we need to handle. Both as a protocol and an ecosystem for users and developers. Issuance aint it.” He later noted that the design is an added burn rather than a reduction in the reward itself, which he said could be read badly depending on tax jurisdiction.
DCinvestor, one of the more widely followed $ETH holders on X, listed five objections, including that $ETH issuance is already lower than Bitcoin’s and than the annual supply of newly mined gold, and that “consistency and predictability in $ETH‘s issuance policy is more important to creating market confidence around $ETH… than perfectly optimizing issuance.”
Marc Zeller of the Aave Chan Initiative, the primary delegate of the Aave DAO, went further and called on the affected protocols to refuse the upgrade outright. “It would be interesting to see @LidoFinance @ether_fi & @aave grow a spine and straight-up refuse EIP-8361,” he wrote. “Realistically, we won’t end up with a new Ethereum Classic as they will be forced to fold. This will take down the ivory tower and rebalance the power dynamics within Ethereum for the better with a forced reality check.”
On the forum, the objections split between process and economics. Greg Koumoutsos opened the thread’s second post by asking whether the intention was “to propose it for inclusion with less than 48 hours available for feedback,” and later argued that urgency about a 50% staking ratio does not justify a full issuance-curve redesign in Hegotá. Andrew Macpherson challenged the anti-concentration case directly: “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.”
A developer posting as QEDK accepted the premise and rejected the instrument: “I can agree with the proposition that excessive staking is harmful to the system but I disagree with the symptomatic treatment of it.” He argued that cutting the minimum activation balance to 16 $ETH would do more for home staking than a yield cut.
Jesús Pérez Sánchez of Crypto Plaza Research, posting as 0xChainValue, published a three-part economic analysis arguing the mechanism hits the smallest operators hardest because an LST fee is proportional while a solo staker’s costs are fixed. “The taper doubles the solo staker’s effective fee and leaves the LST’s exactly where it was,” he wrote. A solo staker of more than four years, posting as mrt, said the change would likely push him to unstake and would make him consider selling.
Opponents Are Louder
The proposal has defenders. Several of them argued that the volume of the criticism tracks who has revenue at stake.
Dankrad Feist, the researcher behind Danksharding and a former Ethereum Foundation researcher now at Tempo, replied in the same thread: “I know plenty of people who support it. But opponents are louder and have more to lose.”
Thibauld Favre, co-founder and chief technology officer of onchain equity platform Fairmint, backed the design. “I see lots of hate directed at this EIP but I haven’t read any real strong arguments so far,” he wrote. “Ethereum’s monetary policy should not subsidize unbounded stake growth forever… I really think it is preferable to the status quo curve.” Asked to justify the position, he gave five reasons, starting with: “Beyond a certain point extra stake adds very little real security while increasing centralization risk.”
On the forum, a poster using the name Mister Plum supported acting while conceding the fight ahead. “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.”
At least one critic moved. Goodroot, a long-time staker who opened by asking what evidence supports the claim that lower $APR improves validator-set composition, wrote after de Tychey’s reply that his view “went from ‘where the bridge at’ to ‘there is a reasonable theoretical bridge, but the impact to validator comp remains uncertain,'” and asked the authors to stop framing solo-staker protection as an expected outcome. “I will not stop staking based on this proposal.”
Vitalik Buterin has not posted on X since July 29 and has not commented on the proposal. Justin Drake, the sixth listed author, has not posted since June.
Nobody Gets Rugged
Jérôme de Tychey, one of the six authors and the most active defender in public, has answered most of the thread himself. Two of the six authors are from the Ethereum Foundation, he wrote on the forum, and he cannot speak for the EF’s plans.
“Nobody needs to protect solo stakers from this EIP,” he posted. “They need protecting from the current curve: ever-rising dilution, tax on nominal yield, and no off-switch pushing yields down anyway.”
On the phase-in he wrote: “Nobody gets rugged. The yield reduction phases in over 18 months (effective base reward factor 128 → 64, decaying linearly), plus ~6 months of fork lead time — about 2 years to adjust. But from day one: no more incentive for stake growth beyond 50%.”
Asked on the forum why 1.5% yield is considered too high, de Tychey argued that after correcting for 1.5% dilution “nothing remains,” and that supply growth at 0.9% a year is heading toward 1%. Cutting it to the proposal’s maximum of 0.5% would save close to $1 billion a year at $2,000 $ETH, he wrote, adding that “more valuable $ETH, even at the cost of a few basis points on the staking yield, is a far better outcome than the status quo.”
He has also conceded ground. The EIP leaves execution-layer rewards untouched, where large operators have a measured edge, and the authors’ own forum rebuttal calls that asymmetry “the strongest open objection in this section,” pointing to MEV burn as the step that would address it.
From 8361 To 8363
The proposal’s number changed mid-argument. The authors self-assigned EIP-8361 in the pull request, and that number is still what most of the coverage and commentary uses. EIP editor Pooja Ranjan pointed out that 8361 was already allocated to a different proposal and asked the authors to stop referring to it that way. Editor abcoathup assigned EIP-8363 and updated the Ethereum Magicians thread title.
$LDO And $ETHFI Slide
Liquid staking tokens took the hit. $LDO fell 14.8% between the Aug. 4 and Aug. 5 daily marks, from $0.329 to $0.280, and $ETHFI fell 11.6%, from $0.403 to $0.356, according to CoinGecko. $ETH was roughly flat across the same window.
Both have since recovered part of the drop. $LDO trades at $0.2975, up 6% on the day, and $ETHFI at $0.3677. $ETH is at $1,917, up 2.3%. AAVE is at $90.26, little changed. Lido’s $LDO is still down about 9% from where it traded before the proposal was posted, and its market capitalization has fallen from $275 million to $249 million over that period.
Thursday’s Call
De Tychey has opened a pull request to add the proposal to EIP-8081, the Hegotá meta EIP, and has asked for three minutes on All Core Devs — Consensus call #184 at 14:00 UTC on Thursday, Aug. 6, to present it alongside pintail, the lead author.
Proposed for Inclusion is the weakest of Ethereum’s upgrade stages and does not commit client teams to anything. Thursday is the deadline for PRs proposing EIPs for Hegotá. Other proposals queued for the same call include Barnabé Monnot’s quick slots EIP-8198, hanniabu’s EIP-8359 and EIP-8333.
