SharpLink CEO Joseph Shalom has opposed an Ethereum proposal that could ultimately eliminate token-issuance-based staking rewards, warning that this change could diminish the appeal of $ETH to institutional investors and raise the cost of capital in decentralized finance.
SharpLink Challenges Ethereum Staking Proposal.
Shalom stated that the proposed issuance model would harm one of Ethereum's key economic advantages, gradually eliminating a portion of the rewards paid to validators.
The SharpLink representative referred to this plan as EIP-8363. However, the mechanism he described aligns with EIP-8361, a proposal for the phased burning of issuance rewards.
Under EIP-8361, a percentage of consensus-layer rewards would be burned as the amount of $ETH being staked increases. The burn rate would reach 100% when approximately 60.25 million $ETH, or about half of Ethereum's current supply, is staked.
In this case, validators would cease receiving newly issued $ETH but could continue earning transaction priority fees and maximal extractable value. The proposal includes a transition period of roughly 18 months, designed to prevent an immediate drop in yields.
Shalom said Ethereum currently offers a variable staking yield of approximately 2.75%. He estimates that transaction-related earnings constitute only about 15% of total validator rewards, making operators heavily dependent on issuance.
Zero $ETH Yield Could Pressure DeFi Collateral.
Shalom argued that Ethereum's staking yield serves as a benchmark for interest rates throughout its blockchain economy. Liquid staking tokens utilize validator rewards to generate returns, allowing holders to deploy the underlying value in lending and other DeFi markets.
According to data cited by Shalom, about $35 billion is currently locked in liquid staking products. He warned that reducing issuance rewards to zero could increase the effective cost of capital and lead to negative yields after infrastructure expenses and other operational costs are deducted.
This pressure could cause collateral to shift toward assets that continue to generate yield. The impact would likely be greatest on independent validators and smaller staking operators, as they lack the scale and additional revenue streams available to larger providers.
The proposal's authors hold a different view. They argue that Ethereum's current issuance curve continues to incentivize additional staking even after increased deposits provide only marginal security benefits.
“The current issuance curve continues to offer yields around 1.5% even if nearly all $ETH is staked,” the authors wrote in their proposal.
EIP-8361 remains in draft form and has not been approved for inclusion in an Ethereum network upgrade.
SharpLink Claims Yield Gives $ETH an Institutional Edge.
Shalom also contended that the protocol's inherent yield is a reason why institutional investors might prefer Ethereum over Bitcoin. Bitcoin can offer price exposure and serve as a treasury reserve but does not provide holders with a protocol-native yield.
This distinction is a key element of SharpLink's own strategy. By April, the Nasdaq-listed company had staked nearly 900,000 $ETH and earned over 18,000 $ETH in cumulative rewards.
SharpLink has also expanded its operations beyond basic validator yield. In May, the company invested $100 million in a $125 million blockchain yield fund managed by Galaxy Digital. The fund plans to deploy capital across various DeFi liquidity protocols while maintaining SharpLink's broader $ETH exposure.
Shalom stated that issuing rewards represents a value transfer to the validators securing Ethereum, not a payment to a third-party service. In his view, burning these rewards would destroy value for network participants instead of redistributing it within the ecosystem.
Ethereum Yield Products Begin Distribution in the US.
The conflict emerges as staking becomes more accessible to US institutional investors. In January, Grayscale completed the first staking reward distribution via an Ethereum-based exchange-traded product listed on a US exchange.
Under the ETHE product structure, approximately $9.4 million in cash generated from staking was distributed. This structure allows shareholders to receive Ethereum-related income without operating validators or directly managing staked $ETH.
Shalom said SharpLink agrees with the proposal authors' goal of limiting excessive staking and supporting $ETH scarcity. However, he argued that Ethereum should achieve this goal through the existing base fee burn mechanism rather than by changing the issuance-based reward structure.
At the time of writing, $ETH traded around $1,916, with no clear price reaction directly linked to SharpLink's opposition. The debate over this proposal is expected to continue before developers consider its viability for inclusion in a future network upgrade.
Investment Warning: The content reflects the author's personal views and current market conditions. Please conduct your own research before investing in cryptocurrencies, as neither the author nor the publication is responsible for any financial losses.
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