Key Highlights
- Lido contributors urged the Ethereum community to conduct a broader review of EIP-8363 before considering it for CFI in the Hegota upgrade.
- The contributors said they are not opposed to changes in Ethereum’s staking or issuance model but want the second- and third-order effects to be better understood.
- EIP-8363 proposes reducing staking rewards to zero once staking participation reaches 50% of total ETH supply.
A group of Lido contributors published their view on EIP-8363 and the broader Ethereum issuance discussion on August 14, 2026. The post addresses the process surrounding the proposal, the mechanism itself, ecosystem effects, and a suggested path forward.
According to the official update, Lido contributors stated that Lido DAO has a direct economic interest in Ethereum staking. They noted that contributors do not speak for the DAO and that their predominant interest as users of Ethereum and holders of ETH is the long-term security and viability of the network.
The contributors stated they are not opposed to supporting potential Ethereum staking and/or issuance changes. Their concern centers on moving toward concrete monetary policy update proposals before the broad consequences and second- and third-order effects have been sufficiently explored, especially the impact on validator-set composition, resulting stake distribution, DeFi, and the long-term security and value of the network.
Concerns regarding process
Lido contributors described efforts to engage constructively in the issuance discussion. They stated that any issuance change would first go through an effort to build broader alignment around the main properties of the proposed update, including the problem being solved, the objectives being optimized for, acceptable trade-offs, and assessment of impacts on validators, DeFi, solo stakers, and staking-market structure.
According to the contributors, a specific EIP with a concrete and novel issuance curve was published and then proposed for Hegota shortly before the PFI (Proposed for Inclusion) deadline. This occurred without sufficient feedback from a wide range of relevant stakeholders or enough time for the ecosystem to review the proposed changes and their effects. The public engagement so far has not produced a clear, usable review record. Material concerns have been raised across different venues, but the process has not consistently collected them, summarized them fairly, or shown which ones have been resolved and which remain open.
For these reasons, the contributors hold that EIP-8363 should not be seriously considered for CFI (Consider for Inclusion) in Hegota. They stated it should be re-approached from a broader base with clear objectives, explicit trade-offs, and well-understood consequences.
Mechanism and incentive review
EIP-8363 proposes an issuance curve under which staking rewards drop and reach zero when total staking participation reaches 50 percent of all ETH supply.
The contributors stated that the proposal has not yet shown how this curve affects validator composition, capture resistance, network resilience, and ETH’s long-term value under realistic staking-market costs and stakeholder preferences.
They noted that real returns for operators after costs and taxes could fall close to or below zero, affecting higher-cost participants. The post states that any candidate issuance curve should preserve a meaningful incentive for additional participants to stake in response to concentration risk and should be reviewed against academic and empirical work on incentives, market structure, and strategic staking behavior.
The contributors stated that reducing the staking ratio is not itself a decentralization or recovery strategy. What matters is the medium- and long-term composition of the validator set and the intermediation level of ETH in the market. Large custodians, institutions, and professional staking platforms may continue staking at lower reward levels. Lower staking participation does not automatically reduce intermediation.
Ecosystem effects and suggested path forward
Monetary policy change shapes the staking market. If issuance is reduced aggressively without taking into account the sustainability of participants in fiat terms, the staking market becomes oriented toward scale.
This favors the largest, cheapest, and best-capitalized operators. The current issuance rate supports a diverse ecosystem that includes public goods funding, independent node operators, security researchers, and on-chain staking protocols.
The contributors stated that issuance reform should be based on clear, broadly agreed objectives, serious risk review, and a process that takes all major consequences into account. EIP-8363 does not yet meet that standard, and the time allotted for deliberation between now and Hegota CFI is not sufficient.
If the concern is excessive staking participation, a narrower high-staking safeguard could be studied. This would define the dangerous staking range, model acceptable validator and operator composition, and evaluate targeted mechanisms. Broader monetary-policy questions should be discussed separately with input from economists, financial modeling experts, DeFi stakeholders, staking operators, and solo stakers.
Community responses on the proposal
The Ethereum proposal referenced in the related discussion is known as the Tapered Issuance Burn, publicly released for discussion on August 4 by Ethereum contributors Jerome de Tychey, Pintail, Dapplion, pa7x1, Ladislaus, and Justin Drake. It seeks to slow the growth of Ethereum staking once it reaches 50 percent of the total ETH supply by gradually reducing staking rewards.
Sharplink stated its opposition to Ethereum Improvement Proposal 8363, describing the measure as the wrong proposal at the wrong time. Aave founder and CEO Stani Kulechov argued that capping rewards at zero once staking exceeds 50 percent of supply would make staking yields unpredictable and, in some cases, uneconomical.
Isidoros Passadis, chief of staking at Lido Finance, stated that a similar proposal attempts to address multiple objectives simultaneously and is likely to produce outcomes opposite to those intended. ARK Invest Director of Research Lorenzo Valente has taken a more neutral position in the EIP-8363 debate, arguing that Ethereum’s broader revenue and value-capture questions should be considered separately from changes to validator issuance
Also Read: Grayscale: ETH and SOL Could Get Scarcer if Proposals Implemented
