Key Highlights
- ARK Invest’s Lorenzo Valente said EIP-8361 does not address Ethereum’s revenue problem, arguing the proposal only modifies staking issuance rather than network monetization.
- He said Ethereum’s long-term challenge is developing sustainable revenue sources, including Layer 2 economics, Layer 1 execution, and broader value capture.
- The proposal continues to divide the ecosystem, with Aave and Lido criticizing EIP-8361 for creating staking uncertainty, while ARK views it as a separate debate.
ARK Invest’s Director of Research Lorenzo Valente has pushed back against recent criticism of Ethereum Improvement Proposal 8361. He argued that the proposed change to staking issuance addresses neither Ethereum’s revenue challenges nor the core issues raised by its opponents.
In an X post on Wednesday, Valente disagreed with much of the criticism surrounding the proposal. Addressing claims that ETF issuers seek yield even if inflationary, he said issuers primarily care about assets under management and overall take rates.
Valente pushes back on EIP-8361 criticism
Valente said the proposal has no bearing on Ethereum’s revenue problem. Priority fees and maximal extractable value remain untouched; the EIP only reduces the staking subsidy. Ethereum should focus on growing revenue, Valente said, but this proposal neither advances nor hinders that objective.
He further argued that a 2.8% yield is of limited value if the underlying asset declines substantially in price. Yield generated through dilution represents a weaker long-term product than yield derived from actual cash flows.
Valente acknowledged questions surrounding Ethereum’s security budget but said ETH currently maintains sufficient security. On broader strategy, he argued that Ethereum’s central challenge is defining its business model and monetization strategy, whether through providing security and data availability to Layer 2 networks, prioritizing Layer 1 execution, or developing native rollups.
According to Valente, that discussion carries greater weight than adjustments to the issuance curve and should be treated as a separate debate. Regarding decentralized finance, he observed that the majority of ETH yield strategies involve recursive looping through liquid staking tokens, restaking, or similar wrappers. He questioned how much real economic value such structures create.
On the governance process, he accepted that credible neutrality requires thorough review and time, while rejecting the notion that issuance parameters must remain permanently fixed.
What does EIP 8361 propose
The comments come amid growing debate over the tapered issuance burn proposal, which seeks to alter how new ETH is distributed to validators once staking participation exceeds certain thresholds.
EIP-8361, submitted by a group of contributors, would modify Ethereum’s issuance curve by gradually reducing staking rewards once more than 50% of the total ETH supply is staked. Under the current system, annual yields do not fall below approximately 1.5% even if the entire supply were staked. Authors of the proposal note that the existing curve provides no natural limit on staking growth.
Ethereum’s staking ratio already passed one-third of total supply in April 2026 and has continued rising. Based on validator entry rates of roughly 1.75 million ETH per month, the proposal estimates that more than 70 million ETH could be staked by January 1, 2028—more than 55% of supply.
The EIP cites two main concerns: potential security risks from excessive staking concentration and the dilutive effect of continuous issuance on non-staking holders. The proposed taper would reduce the base reward factor linearly from 128 to 64 over 18 months, with about six months of additional lead time before activation. Issuance would peak near 0.5% of supply per year around a 20% staking ratio and fall to zero once the staking ratio reaches 50%.
Criticism from industry participants
Meanwhile, Aave founder and CEO Stani Kulechov has argued that the proposal could weaken the network rather than achieve its stated goals. He contended that capping rewards at zero once staking exceeds 50% of supply would make staking yields unpredictable and, in some cases, uneconomical.
According to Kulechov, this uncertainty could deter institutional participants who prefer assets with more stable cash-flow characteristics available on other networks. Solo stakers, who may be more sensitive to pricing changes, would also face greater uncertainty.
Additionally, Isidoros Passadis, Chief of Staking at Lido Finance, offered a similar assessment, stating that EIP-8361 attempts to address too many objectives at once, increasing the moneyness of ETH, preempting possible future security declines from overstaking, and protecting solo stakers. In this view, the proposal is likely to produce the opposite of its intended effects.
The Lido executive described issuance changes as too complex for urgent treatment, argued that far-future concerns are overstated, and called the timing of the divisive proposal particularly poor.
Unresolved tension for Ethereum
The debate over EIP-8361 highlights broader disagreements about Ethereum’s economic design. Supporters of the taper argue that unchecked staking growth poses long-term risks to both network security distribution and ETH’s monetary properties.
Critics, including representatives from Aave and Lido, view the mechanism as likely to introduce instability that could discourage participation.
ARK Invest’s intervention frames EIP-8361 as a limited adjustment to subsidies rather than a solution, or a threat, to revenue generation, redirecting attention toward more fundamental questions about how the network should capture and distribute value. The debate remains open, with the technical and governance process still unfolding.
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