SharpLink CEO Joseph Chalom has opposed the draft proposal EIP-8361 on the Ethereum network. The proposal, named Tapered Issuance Burn, includes rules that would eliminate staking yields based on new coin issuance, a move that leaves $35 billion in liquid staking products vulnerable.
The EIP-8361 mechanism is designed to burn a percentage of validator yields as the amount of ETH locked in the network increases. This burn rate is set to reach 100% when the staked amount hits 60.25 million ETH, a figure equivalent to half of Ethereum’s total supply today. Once this threshold is crossed, validators will no longer receive new ETH coins. Their income sources will automatically shrink, relying solely on transaction priority fees and maximal extractable value (MEV).
The Ethereum network currently offers a variable staking yield of around 2.75% with the coin trading at $1,916. According to Chalom, transaction fees have only accounted for 15% of validators’ total yields so far. The remainder still relies entirely on new coin issuance from the network.
Threat of Negative Returns
Slashing primary yields will drive up the effective cost of capital across the Ethereum ecosystem. Chalom assesses that this situation would generate negative returns for validators after accounting for infrastructure and daily operational costs. This pressure risks triggering an exodus of collateral to other cryptocurrencies that continue to offer guaranteed yields.
The heaviest impact is projected to hit independent validators and small-scale staking operators with minimal capital buffers. The proposal’s authors have included an 18-month transition period to cushion any sudden drop in yields, but the ultimate direction of the rule still cuts off their primary revenue stream.
Institutional Capital Also Held Hostage
For asset managers like SharpLink, this built-in yield is Ethereum’s key advantage over Bitcoin, which lacks it. SharpLink is listed as a public company on the Nasdaq exchange and has locked nearly 900,000 ETH into the network. From this capital, they have accumulated more than 18,000 ETH in cumulative yields as of last April.
The institution’s maneuvers also extend through a $100 million capital commitment to a $125 million on-chain yield investment fund managed by Galaxy Digital to be routed to DeFi protocols. Other major players are also reaping rewards from the current system. Grayscale has distributed $9.4 million from staking yields through their Ethereum ETF product in the United States (ETHE) since January.
Why This Proposal Emerged
On the opposing side, the authors of EIP-8361 view the coin issuance curve as inefficient for securing the network. They note that the current system still provides a 1.5% yield even if nearly all circulating ETH is locked, a spending scheme deemed wasteful from a security standpoint. The proposal is currently in draft status and has not yet been approved for Ethereum’s upgrade schedule. For now, billions of dollars on the network remain waiting to see who wins this protocol debate.
As reported by crypto.news.
Read also: How Crypto Staking Works and Its Risks
Disclaimer: This article is for informational and educational purposes only, not financial advice. Cryptocurrency assets are highly volatile and carry significant risk. Always do your own research (DYOR) and never invest more than you can afford to lose.
