Ethereum Proposal That Could Cut Staking Yield by More Than Half Is Pulled
EIP-8363, which proposed reducing staking yields by burning some staking rewards, was withdrawn from consideration for the Hegota upgrade following objections.
Proposal co-author and Ethereum France President Jérôme de Tychey said in a statement on October 1 that feedback from industry representatives and protocol and client developers influenced the decision. At the center of the objections was the view that a decision changing Ethereum’s issuance of new ETH and validator rewards should not be made through the process that determines which features are added to an upgrade.
Rather than abandoning the proposal entirely, the authors plan to move it into a separate discussion and review process. Liquid staking protocol Lido also offered to help guide the process.
Staking Yield Could Have Fallen From 2.6% to 1.2%
EIP-8363 proposes burning a larger share of validator rewards as the amount of ETH staked on the network increases. Under the design, when the amount staked reached approximately 60.25 million ETH, or roughly half of the supply, all of these rewards would be burned; the change would be phased in over approximately 18 months.
In a calculation for conditions in mid-August, The Block reported that approximately 34% of the ETH supply was staked. If the proposal had been implemented at this level, the annual yield from consensus rewards would have fallen from 2.6% to 1.2%. This would amount to a reduction of more than half in that yield component.
De Tychey grouped the objections received since August into five areas: security, impact on the industry, the design of the burn mechanism, validator distribution, and the effects on individual users running their own validators.
Discussion to Continue Until EthCC in April
The planned schedule will begin with a forum at Devcon in November. After Devcon, workshops are expected to be held, along with a forum at a crypto economics workshop at Columbia University in January that has not yet been confirmed, with discussions continuing through further workshops in February and March.
The authors aim to discuss a proposal with core developers at the EthCC forum in April and move it into the review or planning stage for inclusion in an upgrade.
Joseph Chalom, CEO of SharpLink, who opposed the proposal in August, argued that the change would harm DeFi. Aave founder Stani Kulechov also said he considered the proposal harmful to Ethereum, but welcomed the decision to withdraw it from Hegota.