They Wanted to Fix Ethereum, but Created a Huge Threat. The Collapse of Trust in the Network is Near

The proposal for a fundamental reform of the staking mechanism in the Ethereum network has sparked one of the hottest economic debates since the memorable transformation known as The Merge.

Let’s recall -- the Ethereum Improvement Proposal EIP-8363, also known as Tapered Issuance Burn, aims to gradually reduce staking rewards as an increasing portion of the supply is locked to secure the network. In an extreme scenario, when 50% of the total supply is staked, the new issuance of the protocol is to be completely reduced to zero.

The authors of the proposal, including Justin Drake from the Ethereum Foundation and Jérôme de Tychey, co-founder of the Ethereum Community Conference, argue that the network has already reached a point where additional staking brings negligible security benefits. They believe the current system dilutes holders who choose not to stake their assets, and therefore the network should stop paying for protection it simply does not need.

However, this idea has met with significant resistance from the community. Critics, coming from the world of decentralized finance, staking service providers, and institutional investors, warn that the reform could weaken decentralization, disrupt lending markets, and destroy trust in Ethereum's monetary policy.

Ether.fi founder Mike Silagadze does not hide his disappointment, writing that it is disappointing at every level, harmful to decentralization, adoption, and the credibility of the entire network. Meanwhile, Dr. Steve Berryman representing Bitwise emphasizes that institutional investors primarily need certainty, and tinkering with issuance on the margins introduces uncertainty that institutions genuinely hate.

Thus, a key question arises: is the network actually overpaying for its security, or is the EIP-8363 proposal merely searching for a problem where none exists?

Dispute Over the Security Level of the Ethereum Network

Currently, approximately 41.5 million Ethereum is locked in the network, generating a yield of 2.67% and accounting for about 34.07% of the total supply of this cryptocurrency. From a theoretical standpoint, the more funds that are locked, the harder it is to successfully attack the network. However, the authors of EIP-8363 argue that the security gains are becoming increasingly marginal, while the network continues to issue new rewards for validators. One of the proponents is Jérôme de Tychey, who, presenting the proposal on X, defined it as a market fix eliminating incentives for staking growth above the 50% supply threshold. According to the creators, this policy should stop subsidizing additional staking once the network reaches a sufficient level of protection.

Not everyone, however, is convinced that the problem even exists. While the amount of locked funds has clearly increased in 2026, recording a 15% increase since the beginning of the year, many experts consider this process to be natural. Steve Berryman suggests that market forces will set an upper limit on participation without the need for top-down changes to Ethereum's issuance policy. He believes that a drop in yield to around 2% will not attract significant amounts of new capital, as investors need liquidity. The recent increase in staking has been primarily driven by the entry of large institutional players such as Bitmine or BlackRock, but once their allocations are finalized, the dynamics will likely slow down. Meanwhile, market commentator Leo Lanza questions the assumption that issuance constitutes an invisible tax on non-stakers. He reminds that Ethereum's annual inflation remains below 1%, which is favorable even compared to gold, whose supply grows by 1% to 2% annually, thus the best solution is to leave the regulation issue to the free market.

Threats to the Decentralized Finance Ecosystem

Supporters of the reform believe that limiting unnecessary emissions will prevent excessive concentration of staking in the hands of large custodians and liquid staking providers. However, critics point out that these proposals could cause much more serious damage. Greg Koumoutsos from Lido Labs Foundation notes that the current staking rate of one-third of the supply does not look unhealthy. He argues that the EIP-8363 project oversimplifies the role of emissions, as Ethereum pays not only for the mere act of locking assets but also for decentralization, diversity of operators, resistance to censorship, and the stability of the entire infrastructure. Reducing emissions without considering these aspects could prove to be a mistake.

An additional problem is that liquid staking has become a key pillar of the decentralized finance ecosystem. Staking derivatives are widely used as collateral in lending protocols and yield-generating strategies. Reducing rewards will directly impact these mechanisms. Stani Kulechov, founder of the largest lending protocol Aave, expresses concern that investors seeking profitability may start selling Ethereum in favor of other income-generating assets, and the network should not be punished for its own growth. However, it will be the small, independent validators who suffer the most, as they do not benefit from economies of scale like exchanges and large entities. For them, a decrease in rewards could make self-staking completely unprofitable, leading to a re-centralization of the network around large institutions.

Trust Issues with Monetary Policy

While supporters of EIP-8363 argue that a decrease in emissions will strengthen the long-term monetary profile of the asset, critics argue that constant changes in the rules undermine the predictability of the network. For institutional investors, stable and clear rules are more important than marginal changes in the emission balance. Frequent modifications to the reward curve introduce management risks that institutions will factor into their risk assessments. Mike Silagadze points out that any institution or state observing these changes could drastically lose trust in the stability and management of the project. The manner in which the proposal was introduced also sparked outrage, as it was published just two days before the deadline for submitting amendments to the upcoming update. A change with such far-reaching effects for the entire financial sector should not be processed in such a sudden manner. The industry's sharp reaction shows how difficult it has become to implement changes in Ethereum's economy, as every adjustment creates winners and losers.

This content is provided for general informational purposes only and doesn't constitute financial, investment, legal, or tax advice. Any events, rewards, online promotions, or related information mentioned herein should not be considered a recommendation, solicitation, or invitation to purchase, sell, trade, or otherwise deal in any crypto assets. Crypto assets are highly volatile and may result in loss. The availability of WEEX services, products, and related events may vary by region. You are responsible for ensuring that your participation is in accordance with applicable local laws and regulations.