“It Could Cause Significant Damage”

Aave founder and CEO Stani Kulechov has spoken out against the EIP proposal, which has surfaced within the Ethereum community and aims to limit staking returns. Kulechov argued that the regulation would not deliver the intended results and could instead harm the Ethereum ecosystem and $ETH’s attractiveness as an investment asset.

The proposal envisages reducing the staking return to 0% if the staked $ETH ratio exceeds 50% of the total supply. According to Kulechov, this structure could make staking revenues unpredictable, rendering the activity uneconomical for many participants.

Aave CEO Kulechov stated that institutional investors, in particular, value predictable cash flows when building $ETH positions. He noted that if returns become uncertain, these investors might turn to alternative blockchain networks offering more stable income, which could create a significant adoption cost for Ethereum.

Kulechov also argued that reducing staking yields to zero would render lending and yield strategies conducted via $ETH largely ineffective. In such a scenario, he stated, the primary use case for $ETH borrowing might be limited to short selling.

Kulechov stated that investors using $ETH-linked yield products might turn to stablecoins or other interest-bearing assets, suggesting that the proposal could significantly shrink Ethereum-based lending and yield markets.

In his personal assessment, Kulechov stated that the proposal would weaken $ETH’s viability as an asset and limit its long-term potential. Expressing his hope that the proposal would not proceed, the Aave CEO said that otherwise, many market participants might shift their interest to other blockchain networks.

Kulechov argued that Ethereum should not be penalized for its growth, noting that any changes to the network’s economic incentive structure should be carefully considered in terms of their impact on DeFi, staking, and institutional adoption.

*This is not investment advice.