Reasons Not to Reduce Ethereum Staking Rewards to Zero Now

The Ethereum community is heated over the EIP Tapered Issuance Burn (TIB), which aims to lower staking yields to as low as zero. With the changing Ethereum network and the reorganization of validator roles, the inflation model must eventually change. However, there are doubts about whether TIB is the best solution.

Summary

• A proposal called TIB (EIP-8363, Tapered Issuance Burn) has been submitted to burn part of the rewards so that the net yield for validators reaches zero when the staking ratio hits 50%. This comes just two days before the review schedule for the upcoming hard fork, Hegotá, and the community is criticizing both the content of the proposal and the lack of prior consultation.

• While the burning applies equally to everyone at the protocol level, it is not neutral in the real validator market. As yields decrease, solo stakers and independent operators are pushed out first, concentrating the validator set among a few large operators, which could disrupt the entire on-chain economy that uses staking yields as a benchmark interest rate.

• Nevertheless, Ethereum's issuance model must change at some point. This is because the role and cost structure of validators at the network level are being reorganized. However, the order of operations is incorrect. We should first reach a consensus on how the role of future validators will change and what security budget is needed for that role before designing the reward structure.