Ethereum Validator Reward Burn Proposal Sparks Centralization Fears
A proposal to burn part of Ethereum validator rewards has sparked controversy in the community. Stani Kulechov, founder of Aave, has publicly voiced opposition to the plan. He argues that cutting rewards could deepen centralization by pushing individual stakers out of the market.
The proposal, EIP-8361, would gradually burn part of issuance rewards paid to validators to slow the pace of growth in new Ethereum supply. Currently, validators' annual total yield is about 2.862 percent, combining issuance rewards and maximal extractable value (MEV). If the proposal is fully applied, the yield would fall to 1.476 percent, a drop of about 48 percent.
Kulechov also raised concerns about tax issues, citing an example of an individually operated 32 ETH validator. He explained that under the proposal, validators would first recognize all rewards and then burn a portion. In this case, the taxable amount would remain unchanged while the rewards actually received could fall. If tax authorities in each country do not recognize burned rewards as losses, even a properly run validator could effectively incur losses.