Aave Founder Warns EIP-8361 Would Undermine ETH’s Institutional Appeal By Rendering Staking Yields Unpredictable
In Brief
Aave founder Stani Kulechov warns EIP-8361 would make ETH staking yields unpredictable above 50% supply, threatening institutional and DeFi appeal.
Aave founder Stani Kulechov has publicly opposed the newly submitted Ethereum Improvement Proposal (EIP) 8361, titled “Tapered Issuance Burn,” arguing that the measure would undermine Ethereum’s competitiveness as an investment asset rather than achieve its intended objectives.
In a commentary on social media platform X, he explained that the proposal would cap Ethereum staking rewards at zero percent once the staked amount exceeds 50% of the total ETH supply. The Aave founder warned that this mechanism would render staking yields unpredictable and potentially unprofitable, creating uncertainty for market participants.
He emphasized that such unpredictability carries a substantial adoption cost, particularly for institutional investors evaluating ETH positions. “This uncertainty has a significant adoption cost,” he stated, noting that unpredictable returns place Ethereum at a disadvantage compared to networks offering more reliable cash flows. Solo stakers, who may be particularly sensitive to pricing fluctuations, would face similarly unpredictable yields.
Stani Kulechov further argued that the proposal would severely impact decentralized finance (DeFi) applications. With staking rewards potentially falling to zero, ETH borrowing strategies would become largely unviable, effectively eliminating yield-generating use cases for borrowed ETH. He observed that under such conditions, “the only reason to borrow ETH ironically would be to short it,” while the sole path to earning yield would involve locking assets into staking with no guarantee of returns.
Additionally, Stani Kulechov expressed concern that investors seeking yield might migrate away from ETH toward alternative yielding assets, such as stablecoins—a dynamic he likened to traditional finance flows, but in reverse. He concluded that the proposal “makes ETH less viable as an asset and restricts its potential,” adding: “Ethereum should not be punished for its growth.”
Ethereum Developers Propose Burning Validator Rewards To Zero As Staking Nears 50% Threshold
The newly released “Tapered Issuance Burn” proposal, drafted by six Ethereum researchers including Ethereum Foundation member Justin Drake, seeks to curb network inflation by progressively destroying validator rewards as staking participation grows. Under the mechanism, a fraction of newly created ETH would be burned at the close of each epoch—every 6.4 minutes—with the burn rate increasing linearly until reaching 100% once approximately 60.25 million ETH, or roughly half the total supply, is staked. At that saturation point, net issuance would fall to zero, a design proponents believe would strengthen long-term scarcity and protect existing holders from further dilution.
Validators would retain all transaction fees and tips earned from block production, with only the protocol-generated rewards subject to reduction. The adjustment would phase in over an 18-month transition period following an estimated six-month implementation window, giving participants approximately two years to adapt. The proposal was submitted ahead of the deadline for inclusion in Hegotá, Ethereum’s upcoming network upgrade.
Proponents argue that unchecked staking growth presents structural risks to the network. Because staking yields remain attractive even at high participation rates—projected to stay near 1.5% even if nearly all ETH were staked—authors including Jérôme de Tychey estimate that over 70 million ETH could be locked by January 2028 absent intervention. Beyond a certain threshold, they contend, additional staking concentration undermines security by shifting asset control toward exchanges and large staking providers while marginalizing individual operators.
Currently, approximately 41 million ETH is staked, representing nearly 34% of the total supply, with an additional 2.5 million awaiting activation in an entry queue that extends beyond six weeks. The network permits roughly 57,600 ETH in daily validator activations to prevent sudden influxes or exits from destabilizing consensus.
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About The Author
Alisa, a dedicated journalist at the MPost, specializes in crypto, AI, investments, and the expansive realm of Web3. With a keen eye for emerging trends and technologies, she delivers comprehensive coverage to inform and engage readers in the ever-evolving landscape of digital finance.
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Alisa, a dedicated journalist at the MPost, specializes in crypto, AI, investments, and the expansive realm of Web3. With a keen eye for emerging trends and technologies, she delivers comprehensive coverage to inform and engage readers in the ever-evolving landscape of digital finance.
