Aave founder Stani Kulechov and ether.fi chief executive Mike Silagadze have publicly opposed a proposal to burn an increasing share of Ethereum validator rewards, joining DeFi founders, solo stakers and researchers who have spent the past two days arguing over the plan on X and the Ethereum Magicians forum. Core developers are set to take up the matter on Thursday.
The dispute has put Ethereum's largest DeFi protocols and staking businesses on one side and a group of researchers on the other. The researchers want to cap the issuance curve before the share of staked ETH climbs further. The argument has played out inside a narrow 48-hour window created by the fork deadline, and the related 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 increases with the staking ratio. The burn would reach 100% at a saturation balance of 60.25 million ETH. If fully applied 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 propose to phase it in over 18 months. The original draft was posted on Aug. 4, roughly 48 hours before the deadline to propose EIPs for Hegotá, the upgrade slated to follow Glamsterdam.
Current staking levels and liquid staking exposure
According to validatorqueue.com, Ethereum currently has 41.5 million ETH staked, equal to 34.07% of supply, spread across 895,293 active validators and earning a 2.65% APR. Another 2,488,005 ETH is waiting to enter the validator set, with a 43-day queue.
DefiLlama data shows liquid staking tokens now represent 15.04 million ETH worth $28.2 billion. Lido's stETH accounts for 62.7% of that total. Any change to staking rewards would therefore extend beyond validators and into LSTs, lending markets and the wider DeFi stack.
Kulechov's critique: "Save ETH staking"
The longest single critique in the debate was posted on Ethereum Magicians under the handle EthWarrior. On Aug. 4, Kulechov said the post was his, linking to it from his verified X account with the line "My thoughts on Ethereum staking yield axing" and the sign-off "tl;dr Save ETH staking."
In that post, Kulechov rebuilt the proposal's formulas and argued that the mechanism would produce the opposite of its stated goal. With staked ETH unchanged at 39 million, he calculated 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. In his view, near-zero yields would filter out those staking for economic return and leave the field to entities staking for structural, regulatory or product reasons.
Kulechov also pointed to a tax issue created by the transition itself. Under the taper, BASE_REWARD_FACTOR would double to 128 and then decay back to 64. That would double the gross reward credited to a validator while burning about half of it. In jurisdictions that tax staking rewards when they are received, he argued, a home validator's taxable receipts would double at the point the proposal says nothing has changed for them.
He asked the authors to provide written tax opinions from the U.S., U.K., 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 said: "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, Kulechov broadened the criticism to Ethereum's priorities. He wrote that Ethereum should not focus on "gaming staking issuance and cutting staking rewards," saying that privacy, scalability and security at the protocol layer, along with stablecoins, DeFi and RWAs at the application layer, should rank higher.
Silagadze: 48 hours for feedback, about four months before it could go live
Silagadze responded within hours of the proposal's release, posting a roughly dozen-paragraph critique that drew 90,000 views.
"This is so disappointing on every level," he wrote. He objected to a major network-economics change being released with 48 hours' notice for comments and, in his telling, roughly four months before it could go live, even though its implications would reach across DeFi. "Every builder on Ethereum opposes this. Why is this a focus?"
Silagadze said 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 claim that liquid staking tokens displace ETH as money, he wrote that the logic "betrays a cash-accounting level of understanding of the economy, as if only M1 counts as real money."
He also addressed the conflict-of-interest angle directly: "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."
He added: "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 went further, saying that "the case for increasing ETH issuance is much stronger than the case for decreasing it."
Broader criticism: issuance is not the main problem, and the process is under fire
Lefteris Karapetsas, founder of portfolio tracker rotki, put it more bluntly: "Ethereum has serious issues we need to handle. Both as a protocol and an ecosystem for users and developers. Issuance aint it." He later added that the design is an extra burn rather than a direct reduction in the reward itself, something he said could be interpreted badly depending on the tax jurisdiction.
DCinvestor, one of the more widely followed ETH holders on X, listed five objections. Among them: ETH issuance is already lower than Bitcoin's and lower than the annual supply of newly mined gold, and consistency and predictability in ETH issuance matter more for market confidence than trying to optimize issuance perfectly.
Marc Zeller of the Aave Chan Initiative, the primary delegate of the Aave DAO, went further and urged 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. He added: "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, objections split broadly between process and economics. Greg Koumoutsos opened the thread's second post by asking whether the intent was really to seek inclusion with less than 48 hours available for feedback, then argued that urgency around a 50% staking ratio does not justify a full redesign of the issuance curve 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 that excessive staking can harm the system but rejected the tool being proposed. "I can agree with the proposition that excessive staking is harmful to the system but I disagree with the symptomatic treatment of it," the developer wrote, arguing that reducing the minimum activation balance to 16 ETH would do more for home staking than cutting yield.
Jesús Pérez Sánchez of Crypto Plaza Research, posting as 0xChainValue, published a three-part economic analysis arguing that the mechanism would hit the smallest operators hardest because LST fees are 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. Another poster, mrt, who described himself as a solo staker of more than four years, said the change would likely push him to unstake and make him consider selling.
Supporters say the loudest critics have the most at stake
The proposal also has defenders. Several said the intensity of the criticism reflects whose revenue is exposed.
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 as well. "I see lots of hate directed at this EIP but I haven't read any real strong arguments so far," he wrote. In his view, Ethereum's monetary policy should not subsidize unbounded stake growth forever, and he said he preferred the proposal to the current curve. When asked to justify that 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 taking action now while acknowledging the conflict ahead. He wrote that, just as traditional businesses lobby to preserve the status quo on taxes and regulation, strong and loud pushback should be expected for any proposal touching the issuance curve because it directly hurts Lido, Rocketpool, Aave, ETFs and others.
At least one critic shifted somewhat. Goodroot, a long-time staker who initially asked what evidence supported the claim that lower APR improves validator-set composition, wrote after de Tychey's reply that his view had moved from "where the bridge at" to "there is a reasonable theoretical bridge, but the impact to validator comp remains uncertain." He also asked the authors to stop framing solo-staker protection as an expected outcome and said: "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.
Authors' response: "Nobody gets rugged"
Jérôme de Tychey, one of the six authors and the most active public defender of the proposal, has answered most of the thread himself. He wrote on the forum that two of the six authors are from the Ethereum Foundation, but said he cannot speak for the foundation's plans.
On the solo-staker issue, de Tychey wrote: "Nobody needs to protect solo stakers from this EIP. They need protecting from the current curve: ever-rising dilution, tax on nominal yield, and no off-switch pushing yields down anyway."
He also defended the phase-in: "Nobody gets rugged." The yield reduction, he said, would phase in over 18 months as the effective base reward factor moves from 128 back to 64 on a linear decay, plus about six months of fork lead time, giving the market about two years to adjust. "But from day one: no more incentive for stake growth beyond 50%."
Asked why a 1.5% yield should still be considered too high, de Tychey argued that after correcting for 1.5% dilution, "nothing remains," and said supply growth running at 0.9% annually is heading toward 1%. Reducing that 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 a key point. The EIP leaves execution-layer rewards untouched, where large operators have a measured advantage. In the authors' own forum rebuttal, that asymmetry was described as "the strongest open objection in this section," with MEV burn cited as the step that would address it.
From EIP-8361 to EIP-8363
The proposal's number changed in the middle of the debate. The authors had self-assigned EIP-8361 in the pull request, and that is still the number used in much of the commentary. EIP editor Pooja Ranjan pointed out that 8361 had already been allocated to another proposal and asked the authors to stop using it. Editor abcoathup then assigned EIP-8363 and updated the title of the Ethereum Magicians thread.
LDO and ETHFI fell while ETH stayed roughly flat
Liquid staking-related tokens reacted first. CoinGecko data shows LDO fell 14.8% between the Aug. 4 and Aug. 5 daily marks, dropping from $0.329 to $0.280. ETHFI fell 11.6% over the same window, from $0.403 to $0.356. ETH was roughly flat across that period.
Both tokens have since recovered part of the decline. LDO is trading at $0.2975, up 6% on the day, while ETHFI is at $0.3677. ETH is at $1,917, up 2.3%, and AAVE is at $90.26, little changed.
Even after that rebound, Lido's LDO remains 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 stretch.
Thursday's core developers 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 lead author pintail.
"Proposed for Inclusion" is the weakest stage in Ethereum's upgrade process and does not commit client teams to anything. Thursday is also the deadline for pull requests 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.