SharpLink CEO Joseph Chalom has opposed an Ethereum proposal that could eventually eliminate issuance-based staking rewards, warning that the change may weaken ETH’s appeal to institutions and raise capital costs across decentralized finance.
Summary
- SharpLink opposes tapered issuance burn, arguing that native yield helps distinguish Ethereum from Bitcoin.
- Validator issuance rewards would fall to zero near a 50% staking ratio under the proposal.
- SharpLink stakes nearly all its ETH and has earned more than 18,000 ETH in rewards.
- Chalom supports controlling issuance but wants Ethereum to rely on its existing base-fee burn.
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.
The SharpLink executive referred to the plan as EIP-8363. However, the mechanism he described matches EIP-8361, the Tapered Issuance Burn proposal previously covered by crypto.news.
EIP-8361 would burn a growing percentage of consensus-layer rewards as more ETH enters staking. The burn rate would reach 100% when approximately 60.25 million ETH, or about half of Ethereum’s current supply, is staked.
Validators would then stop receiving newly issued ETH but could continue earning transaction priority fees and maximal extractable value. The proposal includes an estimated 18-month transition intended to prevent an immediate decline in returns.
Chalom said Ethereum currently offers a variable staking yield of approximately 2.75%. According to his assessment, transaction-related earnings account for only about 15% of total validator rewards, leaving operators heavily dependent on issuance.
Zero ETH yield could pressure DeFi collateral
Chalom argued that Ethereum’s staking yield serves as a benchmark for interest rates across its on-chain economy. Liquid staking tokens use validator rewards to generate returns while allowing holders to deploy the underlying value across lending and other DeFi markets.
Around $35 billion is currently locked in liquid staking products, according to figures cited by Chalom. He warned that reducing issuance rewards to zero could increase the effective cost of capital and make returns negative after infrastructure expenses and other operational costs.
That pressure could cause collateral to move toward assets that continue producing yield. Independent validators and smaller staking operators may face the greatest impact because they lack the scale and additional revenue sources available to larger providers.
The proposal’s authors have taken a different view. They argue that Ethereum’s current issuance curve continues encouraging additional staking even after more deposits provide limited security benefits.
“The current issuance curve continues offering a yield of around 1.5% even if nearly all ETH is staked,” the authors wrote in the proposal.
EIP-8361 remains a draft and has not been approved for inclusion in an Ethereum network upgrade.
SharpLink says yield gives ETH an institutional edge
Chalom also argued that native yield is one reason institutions may choose Ethereum over Bitcoin. Bitcoin can provide price exposure and serve as a treasury reserve, but it does not produce protocol-native returns for holders.
That distinction is central to SharpLink’s own strategy. As reported by crypto.news, the Nasdaq-listed company had staked nearly 900,000 ETH and earned more than 18,000 ETH in cumulative rewards by April.
SharpLink has also expanded beyond basic validator returns. In May, it committed $100 million to a $125 million on-chain yield fund managed by Galaxy Digital. The fund plans to deploy capital across DeFi liquidity protocols while preserving SharpLink’s broader ETH exposure.
Chalom said issuance represents a transfer of value to validators that secure Ethereum rather than a cost paid to an outside party. Burning those rewards, in his view, would remove value from network participants instead of redistributing it within the ecosystem.
US Ethereum products have started distributing yield
The dispute comes as staking becomes more accessible to U.S. institutional investors. Grayscale completed the first staking-reward distribution by a U.S.-listed Ethereum exchange-traded product in January.
Its ETHE product distributed approximately $9.4 million in cash generated from staking activity. The structure allowed shareholders to receive Ethereum-linked income without operating validators or directly managing staked ETH.
Chalom said SharpLink agrees with the proposal authors’ goal of limiting excessive staking and supporting ETH scarcity. However, he argued that Ethereum should pursue that objective through its existing base-fee burn rather than changing the protocol’s issuance-based reward structure.
ETH traded near $1,916 at the time of writing, with no clear price reaction directly linked to SharpLink’s opposition. Debate over the proposal is expected to continue before developers consider whether it should advance toward a future network upgrade.
