Ethereum: EIP-8361 targets inflation, yet 99.7% signal ‘No’ – Why?

The recently released proposal to cap Ethereum staking rewards, EIP-8361, continues to elicit unanimous pushback. According to ETHVA data, out of the 83K staked ETH amongst validators, 99.7% were signaling ‘No’ on the proposal.

Although this is a non-binding check, it’s a community sentiment gauge that tracks the proposal support amongst key stakeholders. The overwhelming 99.7% ‘No’ is a clear indication that the proposal may stall due to limited support. 

The proposal is currently at EIP (Ethereum Improvement Proposal) or draft phase. For it to be included in the upcoming Hegota network upgrade, it must clear the PFI (Proposal for Inclusion).

At the PFI level, community and developer evaluation must tick off everything, including economic impact, before approval. 

However, with massive opposition from a section of solo stakers and top developers, the proposal could stall. Notably, the proposal (tapered issuance reduction) seeks to cap staking rewards at zero if the staking ratio crosses 50%. 

Ethereum Foundation under fire for divisive proposal

For critics, led by Aave, the move would kill ETH credit markets and push DeFi to other chains. According to Aave CEO Stani Kulechov, the proposal will not make ETH a “less viable asset” or help solo stakers. These are the two main objectives the proposal sought to achieve. 

But the criticism has gone beyond the proposal to the Ethereum Foundation (EF), as two of the authors of the proposal are from the organization. Kulechov slammed the EF, adding that, 

 The EF’s ivory tower academic approach will not solve those challenges. It’s disconnected from the builders in the trenches who choose to build on Ethereum every day. We should not take them for granted.

Rhett Shipp, CEO of Avant Protocol, also echoed a similar stance, noting that the proposal showed EF’s “huge lack of focus on the things that will actually have impact.”

Amid the ongoing debate, Ethereum [ETH] market sentiment has slightly dropped into negative territory, and the price remained below $2K.  

Overall, the community sentiment is against the proposal as some urge the EF to find new ways to deal with inflation without touching staking rewards.

This may be a setback for the proposal’s likely progress into the next network upgrade. But ETH is currently not deflationary to be considered a store of value (SoV).

Final Summary

• EIP-8861 proposal critics now shift the blame to the Ethereum Foundation for disconnecting from the community. 
• ETH market sentiment has briefly turned negative in the past two days amid intense debate over the inflation proposal