Original | Odaily Planet Daily (@OdailyChina)
Author | jk
In early August, the Ethereum community was thrown into chaos by a proposal numbered EIP-8363, titled "Tapered Issuance Burn."
The proposal argues that as the proportion of staked ETH approaches half of the supply, the new issuance rewards that validators can receive should be gradually burned until they are completely reduced to zero. In other words, the returns from staking ETH will become increasingly smaller, which is equivalent to taking away the livelihood of treasury companies and staking pools.
The controversy ignited by EIP-8363 among Ethereum researchers, DeFi protocol founders, and publicly listed ETH treasury companies has been described by Aave founder Stani Kulechov as one of the most strongly resisted proposals in Ethereum's history. The core developers meeting (ACDC #184) on August 6 dedicated half an hour to discussing it.
What problem does this proposal aim to solve? Where do supporters and opponents diverge? If it is implemented, what impact will it have on listed companies that bet on ETH staking yields? Odaily Planet Daily will provide a detailed interpretation in this article.
What is EIP-8363?
Let's set aside technical jargon and understand what EIP-8363 does in plain terms.
Ethereum's current issuance mechanism can be compared to a money printer that pays out per person: the more people stake ETH, the larger the total issuance, but because it is spread across more people, the yield (APR) each person receives decreases. This design has a characteristic: no matter how many people stake, the money printer never completely stops. Even if 100% of ETH is staked in the future, validators will still earn a floor yield of about 1.5%.
The authors of EIP-8363 believe this never-stopping design has hidden dangers. As long as staking yields are higher than what other crypto assets can offer, rational capital will keep flowing into staking, causing the staking ratio to continuously rise. An excessively high staking ratio often means that ETH is increasingly held by centralized entities such as exchanges, custodians, and ETF issuers, rather than by individuals who genuinely want to participate in network security.
Therefore, the proposal designs a gradual shutdown mechanism. As the total staked amount approaches 60.25 million ETH (about half of the current supply), the system will, according to an increasing ratio, directly burn the issuance rewards that validators would otherwise receive, giving them to no one and completely destroying them. When the staked amount truly reaches this line, validators' net income from issuance becomes zero.
Original forum for EIP-8363. Source: Ethereum Magicians forum
This mechanism has two patches: First, it only burns issuance rewards and does not touch execution layer income, i.e., the fees and MEV (Miner Extractable Value) that validators earn from packaging transactions, which are completely unaffected. Therefore, even if issuance income goes to zero, validators will not truly receive nothing. Second, penalty mechanisms, such as slashing for downtime or misbehavior, remain completely unchanged; validators will still lose when performing poorly, but the time needed to earn back losses will be longer.
This proposal is co-authored by six authors, including Ethereum Foundation researcher Justin Drake and EthCC co-founder Jérôme de Tychey. It is still in the earliest Draft stage and has a long way to go before being written into a hard fork upgrade, but it has already caused an uproar in the community.
Why propose this plan?
Supporters: Rewards are enough; more is a burden
There has long been a view in the Ethereum research community that network security does not increase linearly with the amount of staked ETH, but rather has a point of diminishing marginal returns. Beyond this point, additional staked ETH hardly increases the cost of attacking the chain, but instead exacerbates the concentration of wealth and power in a few large institutions. Those who hold this view believe that rather than letting the staking ratio rise uncontrollably, it is better to proactively set a cap.
Supporters argue that if the issuance curve remains as is, the net supply growth of ETH could approach 1% per year, which is equivalent to a hidden inflation for all ordinary holders who do not stake. Closing this loophole is theoretically beneficial to ETH's long-term scarcity narrative. A report by Grayscale's research team earlier this year took a similar stance, believing that controlling inflation and strengthening ETH's positioning as a store of value is positive for the price in the long run.
Another view is that this mechanism actually protects independent stakers, because institutional stakers often charge management fees and bear compliance costs, while ordinary individuals running nodes at home have almost no such additional burdens. When overall yields are compressed and market yields approach zero risk premium, independent stakers with light burdens are more likely to survive, while intermediaries that rely on high yields to cover operating costs will be eliminated.
Opponents: The centralization risk the proposal aims to prevent will actually be accelerated by this mechanism
Aave's Stani Kulechov calculated that based on the current staking ratio, including both issuance rewards and MEV income, validators' total returns would drop from about 2.86% to 1.48%, a reduction of nearly half. He believes that once yields approach zero, the only entities willing to stay and stake are those staking for structural, compliance, or product needs, i.e., exchanges, custodians, and institutional ETFs, which are exactly the targets the proposal originally wanted to drive away. What will truly be screened out are ordinary individuals and small independent operators who stake purely for economic returns.
At the same time, the proposal designs a transition period during which the nominal reward amount validators receive will first be temporarily increased, then gradually reduced while burning about half simultaneously. This means that in countries with pay-as-you-go tax rules, such as the United States, the taxable income of independent stakers could double on paper, which is a huge blow to the cash flow of ordinary stakers.
Opponents also worry that this could disrupt an implicit benchmark interest rate in DeFi. ETH staking yield has always been a reference anchor for on-chain lending and derivatives pricing. If it approaches zero, strategies like borrowing ETH to short ETH would become illogical, potentially impacting lending protocols and the business models of liquid staking tokens (LSTs). The founder of ether.fi bluntly stated that this proposal is disappointing on all levels, while the Lido team pointed out that issuance rewards buy not only slashable staked amounts but also node operator diversity and network censorship resistance, which will be harder to maintain once yields go to zero.
This may sound somewhat biased, after all, Aave, Lido, and ether.fi, the institutions with the loudest opposition, are themselves protocol parties that rely on staking and DeFi yields for a living. Ethereum founder Vitalik Buterin has not publicly commented on this proposal so far, and one of the co-authors, Ethereum Foundation researcher Justin Drake, has also not spoken on it for some time.
What will the yield be? What about ETH treasury companies?
According to the formula set in the proposal, at the current staking ratio of about 34%, validators' net income from issuance would drop from about 2.6% to about 1.2%. If the staking ratio further climbs to 50%, this portion of income would be completely zero. It should be emphasized that this is only the income from issuance; fees and MEV income are completely unaffected, so the actual total return reduction will be slightly smaller than the theoretical halving, roughly around 40%.
Affected by this news, Lido and Ether.fi generally fell more than 10%.
Lido showed a noticeable decline at the beginning of the month. Source: Coingecko
Ether.fi price trend. Source: Coingecko
What impact will those listed companies that bet on ETH staking yields suffer? Will their stock prices plummet?
Over the past year or so, a batch of ETH treasury companies have successively listed on the US stock market. Their business models are relatively straightforward: they raise funds to buy large amounts of ETH, then stake those ETH to earn interest, relying on stable staking income to support their financial reports, while telling shareholders a story of continuously increasing ETH content per share. Industry data shows that among the several treasury companies that separately disclose staking income, staking yields on average account for about 60% of disclosed revenue, and for many companies, this is almost their entire source of income.
These companies have different risk exposures.
- BitMine (BMNR) is currently the largest ETH treasury by holdings, holding approximately 5.8 million ETH, of which about 87% is staked, with current annualized staking income in the range of over $200 million. If the net consensus yield roughly halves, its annualized staking income would drop from about $257 million to the $120–130 million range;
- SharpLink (SBET) is the second-largest ETH treasury, backed by Consensys/Ethereum co-founder Joe Lubin. Almost all of its holdings are staked, and staking income accounts for as much as 97% of its quarterly total revenue, meaning the company's revenue could potentially decrease by more than 35%. Its CEO, Joseph Chalom, former head of digital assets at BlackRock, has publicly opposed the proposal, arguing that native staking yield is precisely ETH's biggest differentiating advantage over Bitcoin. If weakened, the holding cost for institutional funds would rise, potentially prompting some capital to shift elsewhere in the long term.
- Bit Digital (BTBT) is relatively special. It transitioned into an ETH staking/treasury company in June 2025, but its staking dependence is relatively low and actively decreasing: as of May 31, only about 74,163 ETH (approximately 46%) was staked (previously around 89%), and the company explicitly stated it reduced the staking ratio to "retain flexibility and pursue higher-yield opportunities"; it also holds about 27 million shares of WhiteFiber (WYFI) stock (approximately $755.6 million in May), making it less dependent on staking than BitMine/SharpLink/Ether Machine.
It should be noted that the current market reaction is mainly reflected in the tokens of liquid staking protocols such as Lido (LDO) and ether.fi (ETHFI). Within a day or two after the proposal news broke, both fell by more than 10%. However, the spot price of ETH and the stock prices of the several treasury companies have not yet shown significant movements directly linked to this proposal; they are still largely dominated by ETH's own price fluctuations. This turmoil has not yet truly transmitted to the stock prices of treasury companies.
What is the current progress? Can it pass?
Currently, this proposal is still far from actual implementation.
It is still in the initial draft stage and has not entered the formal process of being confirmed for inclusion in a specific upgrade. At the core developers meeting on August 6, the team dedicated half an hour to discuss it, but the meeting records show that participants generally raised concerns about small validators and centralization. After the meeting, the recommendation was to consider withdrawing this proposal from the currently progressing Hegotá upgrade. Moreover, in the list of proposals that were actually confirmed for inclusion in this upgrade after the meeting, EIP-8363 was not on it.
Can we judge whether it will pass in the future? Currently, community consensus is severely divided, with considerable support and opposition, making it difficult to see one side convincing the other in the short term.
A more pragmatic judgment is that even if this proposal ultimately does not land in its current version, the issue of whether to set a cap on Ethereum's staking ratio will likely not disappear. In the future, it may reappear in a modified version or as a completely different proposal, such as adding a minimum yield floor, extending the transition period, or redesigning the trigger threshold to address the most concentrated objections.
