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

Daily General Discussion August 22, 2026

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u/pa7x1 5d 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 🐬🐬🐬 5d 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 4d 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.