SharpLink CEO Joseph Chalom has pushed back against an Ethereum proposal that would gradually burn away validator issuance rewards. He warns the change could weaken ETH's appeal to institutions and raise the cost of capital across DeFi. ETH traded near $1,916 at the time of writing, with no clear price reaction tied to the dispute.
SharpLink challenges Ethereum staking proposal
Chalom said the proposed issuance model would damage one of Ethereum's main economic advantages by gradually destroying part of the rewards paid to validators. He referred to the plan as EIP-8363, though the mechanism he described matches EIP-8361, the Tapered Issuance Burn proposal.
That proposal would burn a growing share of consensus-layer rewards as more ETH enters staking, reaching a 100% burn rate once about 60.25 million ETH, roughly half of Ethereum's current supply, is staked. Validators would then stop receiving newly issued ETH but could still earn transaction priority fees and maximal extractable value, under an estimated 18-month transition. Chalom said Ethereum currently offers a variable staking yield of approximately 2.75%, with transaction-related earnings accounting for only about 15% of total validator rewards.
Zero yield could pressure DeFi collateral
Chalom argued that Ethereum's staking yield serves as a benchmark for interest rates across its on-chain economy, since liquid staking tokens use validator rewards to generate returns while letting holders deploy the underlying value across lending markets. Around $35 billion is currently locked in liquid staking products, according to figures he cited, and he warned that cutting issuance rewards to zero could push returns negative after infrastructure and operational costs. Independent validators and smaller operators may face the greatest impact, since they lack the scale and side revenue larger providers have.
The proposal's authors take a different view, arguing the current issuance curve still encourages staking beyond the point of added security benefit. According to the authors, the curve continues offering "a yield of around 1.5% even if nearly all ETH is staked". EIP-8361 remains a draft and has not been approved for any network upgrade.
Yield as an institutional edge
Chalom also argued that native yield is one reason institutions may pick Ethereum over Bitcoin, since Bitcoin provides price exposure and a treasury reserve but no protocol-native return. That distinction underpins SharpLink's own strategy: the Nasdaq-listed company had staked nearly 900,000 ETH and earned more than 18,000 ETH in cumulative rewards by April. In May, it also committed $100 million to a $125 million on-chain yield fund managed by Galaxy Digital, which deploys capital across DeFi liquidity protocols while preserving its broader ETH exposure.
The dispute comes as staking grows more accessible to U.S. institutional investors. Grayscale completed the first staking-reward distribution by a U.S.-listed Ethereum ETF in January, with its ETHE product distributing approximately $9.4 million in cash generated from staking activity. Chalom said SharpLink agrees with the proposal authors' goal of limiting excessive staking, but argues Ethereum should pursue that through its existing base-fee burn rather than changing the issuance-based reward structure.
Source: crypto.news
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