Ethereum's Controversial Tapering Proposal Sparks Fierce Opposition

The Ethereum Foundation recently published a proposal to burn validator rewards as more ETH gets staked, driving yields toward zero. The goal is to protect 'vanilla ETH' from being displaced by staking derivatives.

However, the reaction from builders who use Ethereum's financial layer has been brutal. Aave founder Stani Kulechov and Ether.fi CEO Mike Silagadze argue that this proposal would destroy decentralization, collapse the DeFi yield layer, and push institutional capital elsewhere at the worst possible moment.

Kulechov conceded that the proposal is built on a legitimate question: 'Are we overpaying for security?' However, he believes the deeper intent is to increase the ETH price. The EIP diagnoses a structural problem: roughly 34% of all ETH is staked today, and each marginal unit of staked ETH mints more issuance.

Silagadze called this framing 'the most frustrating part' of the episode. He believes that solo stakers will be the first casualties of this plan. At current yields of roughly 2-2.5%, they are approximately at break-even once hardware and bandwidth are counted. Reduce issuance, and they go negative.