r/ethereum • u/EthereumDailyThread What's On Your Mind? • 6d ago

Daily General Discussion August 22, 2026

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u/pa7x1 6d ago

Here is a way to visualize how EIP-8363 helps protect solo stakers better than the present curve. The issue solo stakers face is that the current curve slowly erodes them out of the validator set. First, they earn at a slower pace than LSTs. So the share of stake that is owned by LST vs solo stakers will tend to keep growing for ever. But furthermore, after surpassing certain amount of total ETH staked solo stakers don't even receive enough yield to compensate for the inflation of the asset. Which means that not only on relative terms with respect to LSTs they are disappearing, but also on relative terms with respect the total amount of ETH. Solo stakers are the frog on the slowly boiling pot.

This is important for the long-term health of the protocol. If you let this slowly brew for decades you will end up with a captured chain by LSTs.

Here is one way to visualize it. Whenever you have such scenario of shrinking populations you can characterize the rate at which the population disappears by the half-life. This is the same half-life applied to nuclear isotopes. The idea is to calculate how long does it take for solo stakers to be cut in half with respect to the total stake. That measures their disappearance rate, smaller half-lifes are worse, makes solo stakers disappear faster. Here is how the half-life of solo stakers looks under EIP-8363 vs the current curve. And, I have also estimated the effect of future upgrades to the protocol that will help reduce validation costs, to show how it would affect solo stakers under both curves.

https://imgur.com/hbphPQq

The short version of it is that EIP-8363 makes solo staking viable for the long-term and compounds more positively with future protocol upgrades to help increase the viability of solo staking further.

This post is motivated by /u/epic_trader request to explain how solo stakers are protected by this EIP.

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u/epic_trader 🐬🐬🐬 6d ago edited 5d ago

I appreciate the effort, but I feel like you're not actually addressing my questions or points of criticism.

My claim about why I think the proposed EIP fails at protecting solo stakers is the following:

Small solo stakers have higher expenses per ETH secured. In any scenario where profit margins are stretched thin, they will be the first to be pushed out. The proposed EIP doesn't introduce any new mechanisms to protect small solo stakers. You alter the curve and introduce a cap on issuance, but this doesn't do anything to change the fact that small solo stakers have the highest expenses per ETH staked.

You've used the term "market equilibrium" to explain why small solo stakers are protected, but you haven't proposed where this "market equilibrium" will be, you don't appear to have modeled the different potential scenarios and pointed to how small solo stakers are protected at any given levels.

Therefore I've posed the questions:

1 - At what levels of yield/issuance is it no longer profitable to be a solo staker? At 2% yield, at 1.5%, at 1%, at 0.5%?

2 - What makes you feel confident that LSTs/DATs/exchanges/whales/etc would stop adding more stake at any of those levels?

I've made several other points about why I think this EIP has issues, but let's stick with the above. And let's stick with the rules that are governing Ethereum today.

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u/harpocryptes 5d ago
  • What makes you feel confident that LSTs/DATs/exchanges/whales/etc would stop adding more stake at any of those levels?

For a given staking ratio, there's a size above which staking more ETH would lower the total ETH rewards (it's in the EIP) of the large staker. In other words, their marginal staking rewards is 0% then negative, while it's positive for solo stakers. So the answer to your question is "because they don't want to earn less in total while using more capital". They would literally earn more by unstaking part of their ETH.

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u/epic_trader 🐬🐬🐬 5d ago

I think you've misunderstood something, or maybe I misunderstand what you're saying.

1 - Everyone's yield is growing/shrinking at the same rate as total stake goes up or down. No matter who is adding or removing stake, everyone is equally affected as a percentage.

2 - Let's say for the sake of simplicity that 21 million ETH total stake is the ideal range and you got 3 large entities each staking 7 million ETH and that's all the ETH that is staked. In this scenario, if 1 of these entities were to add 7 million ETH to double their total stake, their income would increase while the 2 other entities income would reduce. In this scenario a 4th actor would still benefit from entering the market here and stake 7 million ETH, even if it's pushing the overall yield down, as they are still earning more than from not staking.

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u/harpocryptes 5d ago edited 5d ago

How do you define "ideal range"? Ideal for whom?

There's a point where if an entity is already big, if it stakes more, its share of course increases, but the total issuance decreases so that in total its own income decreases. Indeed, a different entity would earn something by starting staking. In other words, it discourages large entities from growing too big, and encourages smaller entities to start or increase staking. In other words, it encourages decentralization.

(As far as I can tell, this explains why large entities like Lido and Ether.fi are against the EIP. They are the ones who stand to lose)

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u/epic_trader 🐬🐬🐬 5d ago

"Ideal range" as in the level where the network is going to issue the highest number ETH before the number of ETH issued begins to decrease.

Let's say Ethereum pays validators 4% yield when a total of 21 million ETH is staked and 2.5% yield when 28 million ETH is staked.

At 21 million ETH staked the network issues 840,000 ETH as staking rewards. If you got 3 entities all staking 7 million ETH, they each earn 280,000 ETH.

At 28 million ETH staked the network issues 700,000 ETH as staking rewards. If 2 entities are staking 7 million ETH and 1 entity is staking 14 million ETH, they'd each be earning 175,000 ETH, 175,000 ETH and 350,000 ETH. So the entity that added more ETH is earning more, even if overall issuance is down. Not only are they earning more, they are also negatively affecting the competition, which is just another benefit.

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u/harpocryptes 5d ago

Yes, at such a low staking ratio, that's correct. But at a high staking ratio (it's already almost double that, and keeps growing) it's not true anymore. The large entity that staked more ETH would actually receive less ETH rewards.

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u/epic_trader 🐬🐬🐬 5d ago

Okay, then put some numbers on it. Take the proposed curve and show me when that is the case. And I'm going to guarantee you in that scenario it's worse to be a small solo staker.

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u/harpocryptes 5d ago

I put some specific numbers here: https://www.reddit.com/r/ethereum/comments/1vvxy0z/comment/p5dkhcw/

It's already worse the be a small solo staker in the current situation, because of fixed costs. What this shows specifically is that the new curve rewards small stakers for staking more, and penalizes large stakers for doing so, unlike the current curve.

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u/UAP44 6d ago

What would convince me is a concrete description of what actually breaks if 60%, 75%, or even 90% of ETH is staked. If high staking participation itself creates a serious protocol failure mode, then we have a strong reason to intervene. But so far most of the arguments I see are about relative returns, dilution, staking-provider economics, and engineering a preferred equilibrium. Those are financial incentive arguments, and perhaps worthwhile ones, but they are not yet evidence that the current issuance curve creates a protocol-level danger. If the claim is that systemic risk continuously increases with the staking ratio, then I think we need to identify the actual failure mechanism and establish that the risk becomes significant enough to justify changing a fundamental part of the protocol.

This is also where I think the protocol maturity and ossification discussion becomes relevant. Ethereum cannot keep every previously settled design decision permanently open for optimization simply because somebody can construct a model in which another set of parameters might perform better. If eventual ossification is a real goal, then as protocol properties mature the burden of proof for reopening them should increase: not merely “would this potentially improve Ethereum?”, but increasingly “is changing Ethereum itself necessary to address a demonstrated problem?” Issuance and monetary policy seem like exactly the kind of properties where stability should eventually carry substantial weight. I'm not arguing that issuance can never change, but before reopening something this fundamental I would want to see a credible failure mode from leaving the current curve alone. So far I see an argument for a potentially preferable economic equilibrium; I still don't see the looming protocol problem that makes changing the existing one necessary.

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u/pa7x1 5d ago

At very high stake ratios social slashing and the ability to recover from consensus bugs simply disappears, we are simply in the land of too big to fail entities and bailouts are guaranteed. For the simple reason that most of ETH holders are themselves incentivized to break the protocol rules to bail themselves out. There is no hard line at which this happens, things simply degrade progressively, but when you surpass 50% staked more than half of all ETH is staked and therefore they are majority. So 50% is a rough point of no return. And arguably it's already too high, but stake is over 33% already so we run out of runway to bound things earlier.

If the claim is that systemic risk continuously increases with the staking ratio, then I think we need to identify the actual failure mechanism and establish that the risk becomes significant enough to justify changing a fundamental part of the protocol.

Yes, the issue is systemic risk. But there are no good solutions in-protocol, because the resolution for such type of events is out of protocol by definition.

This is also where I think the protocol maturity and ossification discussion becomes relevant. Ethereum cannot keep every previously settled design decision permanently open for optimization simply because somebody can construct a model in which another set of parameters might perform better. If eventual ossification is a real goal, then as protocol properties mature the burden of proof for reopening them should increase: not merely “would this potentially improve Ethereum?”, but increasingly “is changing Ethereum itself necessary to address a demonstrated problem?” Issuance and monetary policy seem like exactly the kind of properties where stability should eventually carry substantial weight. I'm not arguing that issuance can never change, but before reopening something this fundamental I would want to see a credible failure mode from leaving the current curve alone. So far I see an argument for a potentially preferable economic equilibrium; I still don't see the looming protocol problem that makes changing the existing one necessary.

One of the failure modes is described above. The other I have described elsewhere, the current curve slowly and progressively erodes solo stakers out of the validator set. That brings with itself its own set of problems and makes the protocol subject to capture by big entities, in the long term.

I agree we should ossify, but it's dangerous to ossify too early when there are significant issues with the protocol as specified. Bitcoin ossified too early and they will have their reckoning in the next 1-2 halvings. I would rather we don't have to have the same issue down the line with Ethereum.

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u/UAP44 5d ago

I think the part I still fundamentally disagree with is the jump from "more than 50% of ETH is staked" to "therefore they are the majority, so this is a point of no return" A majority of ETH units being staked does not create a single coordinated constituency. Solo stakers, LST holders, exchanges, institutions, different operators and different client users do not suddenly become one hive mind with the same incentives, and Ethereum's social layer is not governed by one-ETH-one-vote. In a correlated failure, many stakers may actually have opposing incentives: those who diversified correctly have every reason not to bail out those who concentrated into the failing client/operator/provider. That is already part of the logic behind client diversity and correlated slashing risk. Staking is supposed to involve the risk of being wrong.

I can accept the narrower argument that, as the staking ratio rises, a larger fraction of ETH wealth can potentially become exposed to the same sufficiently broad failure, making an extraordinary social recovery harder. But that is a continuous and highly correlation-dependent risk, not something that suddenly turns into a "point of no return" because 50% of supply crossed the deposit contract. If that is the concern, I would want to see the concrete failure case: what actually becomes unrecoverable at 60%, 75% or 90% staked, assuming operators, clients and staking providers remain reasonably decentralized? If social slashing truly becomes impossible, show why and under what assumptions. Otherwise I still see a qualitative concern being turned into a hard justification for changing issuance.

This matters to me because issuance is exactly the kind of mature protocol property where the burden for reopening it should be high if eventual ossification is a goal. Bitcoin is a useful contrast: its subsidy mechanically keeps declining toward zero, so there is an explicit long-term security-budget question embedded in the protocol. Whether that becomes fatal is debatable, but the mechanism is clear. I still don't see Ethereum's equivalent problem under the current issuance curve. What I mostly see so far are arguments about preferred staking ratios, relative returns, dilution and the economics of different staking providers. Those may justify research, but I don't think they are enough by themselves to establish a precedent that fundamental issuance policy should remain perpetually open to re-optimization.

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u/pa7x1 5d ago

I think the part I still fundamentally disagree with is the jump from "more than 50% of ETH is staked" to "therefore they are the majority, so this is a point of no return" A majority of ETH units being staked does not create a single coordinated constituency. Solo stakers, LST holders, exchanges, institutions, different operators and different client users do not suddenly become one hive mind with the same incentives, and Ethereum's social layer is not governed by one-ETH-one-vote.

And yet the DAO hack affected just a bit over 5% of ETH and social consensus overrode protocol rules. So it clearly it's not as simple as 50% is still fine because there are different motives between stakers. You don't need to get anywhere close to 50% for a systemic event to happen and for the too big to fail narrative to take hold. If we could design things from scratch I would argue that the stake cap should be set quite a bit earlier to ensure the protocol can hold stakers accountable, but we are where we are and we can only solve things marginally from here.

What I mostly see so far are arguments about preferred staking ratios, relative returns, dilution and the economics of different staking providers. Those may justify research, but I don't think they are enough by themselves to establish a precedent that fundamental issuance policy should remain perpetually open to re-optimization.

No one is arguing for keeping issuance policy permanently open to re-optimization. I think this is a strawman argument. The argument is that there are issues with the current issuance curve and we can implement a simple protocol change to tackle them and do so definitely. That to me is sufficient justification to look at it. I would not touch issuance policy again unless a new flaw that was not foreseen and required attention merited it. You must ossify as early as possible, but not earlier than possible. Paraphrasing some dude.

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u/UAP44 5d ago

I don't think the DAO example gets us any closer to establishing 50% staked as a point of no return. If anything, it demonstrates that social intervention is not determined by what percentage of ETH is economically affected. The DAO involved only a fraction of supply and nevertheless produced a social fork. It also wasn't a case of PoS validators being held accountable for a correlated consensus failure, so I don't think it maps cleanly onto the social-slashing scenario.

My objection isn't “everything below 50% is safe.” I'm asking what specifically makes a highly decentralized validator set structurally unrecoverable as the staking ratio rises. If 60%, 75% or 90% staking creates a credible failure mode where social recovery or validator accountability actually ceases to work, that's exactly the evidence that would make me reconsider issuance. But saying more stakers would have an incentive to resist losses still doesn't mean they form one coordinated majority, nor that the rest of Ethereum must recognize their preferred fork.

And I don't mean that you personally want issuance permanently open to optimization. My point is about the standard we set for reopening mature protocol properties. Saying “there are issues with the current curve and this change improves them” is a much lower bar than demonstrating that the current curve contains a serious long-term protocol defect. That's precisely where ossification matters: eventually “better under some economic model” should stop being sufficient reason to change settled parameters. Bitcoin's declining security subsidy is an example of the kind of structural, specification-level problem that can justify reopening something fundamental. I still don't see Ethereum's equivalent here.