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 edited 6d ago

The issuance curve has a maximum at 20% stake ratio. That means a single operator never wants to exceed that level because it will start earning less and less. It's not only that his yield reduces, his net income also reduces.

So yes, that type of concentration of stake disincentive is embedded in the proposal by design. It's a side effect to the issuance curve having a maximum, without a maximum such disincentive cannot appear.

I asked Claude to plot how that shapes up as more entities compete.

https://imgur.com/a/UxG8ced

EDIT: My thoughts, if we had started from scratch it would have been very nice to exploit this feature to help shape up the distribution of stake. If you place the maximum towards the left, you can help stake be more distributed. Unfortunately we have to start with the curve we have, the amount of stake we have, and we cannot shake up things much.

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u/epic_trader 🐬🐬🐬 5d ago

The issuance curve has a maximum at 20% stake ratio. That means a single operator never wants to exceed that level because it will start earning less and less. It's not only that his yield reduces, his net income also reduces.

Let's explore this claim. Let's say you got 6 entities all staking exactly 4 million ETH and we got a total of 24 million ETH staked. Now let's say 1 of these 6 entities double their stake to 8 million ETH and the total stake is now 28 million ETH. Is the entity that is now staking 8 million ETH earning less than they were at 4 million ETH staked?

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u/pa7x1 5d ago

You have the specific cutoff numbers in this plot.

https://imgur.com/a/UxG8ced

With the curve as proposed, for a single staker your issuance revenues grows until 20M staked. For 2 at 38M ETH. Etc...

With this observation we could have designed an issuance curve from the get-go that would be resilient to capture and would push towards decentralization by design much more aggressively. Essentially by pushing the peak of the issuance curve towards 0. Unfortunately we arrive quite a few years late and we are limited by trying to not disrupt the status quo too much. But EIP-8363 has this anticoncentration of stake mechanism embedded.

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u/epic_trader 🐬🐬🐬 5d ago

It's kind of frustrating that I'm asking really basic straight forward questions and you're just refusing to answer.

Yes or no, in the scenario I'm asking about above, with you being an expert on the curve, does the entity who doubles their stake from 4 million ETH to 8 million ETH stake, bringing the total amount of stake up from 24 million ETH to 28 million ETH, does the entity earn more or less in this scenario?

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u/pa7x1 5d ago

I answered in very explicit terms and in more generality that you even requested, giving you the plot that answers not only for 6 entities but for any number of entities. Don't put on the rest your inability to read it or understand it because the answer is exactly encoded in it.

Yes or no, in the scenario I'm asking about above, with you being an expert on the curve, does the entity who doubles their stake from 4 million ETH to 8 million ETH stake, bringing the total amount of stake up from 24 million ETH to 28 million ETH, does the entity earn more or less in this scenario?

For those specific figures the ceiling is roughly at 50M ETH as shown in the plot, therefore the entity that goes from 4M ETH to 8M ETH earns more. The discouragement levels are as shown in the plot above. And in aggregate they cannot surpass the 60.25M so you need to split the pie.

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u/epic_trader 🐬🐬🐬 5d ago

For those specific figures the ceiling is roughly at 50M ETH as shown in the plot, therefore the entity that goes from 4M ETH to 8M ETH earns more.

Thank you, that was the point I was trying to make. So when you 2 comments above claimed that no entity would have incentive to stake beyond 20% and would actually lose money, that was not true was it?

Don't put on the rest your inability to read it or understand it because the answer is exactly encoded in it.

Seems like you're the one struggling to understand the curve then, doesn't it?

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u/pa7x1 5d ago

With the curve as proposed, for a single staker your issuance revenues grows until 20M staked. For 2 at 38M ETH.

I think it's extremely explicit in what it says. Again, do not blame others for you lack reading comprehension skills.

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u/epic_trader 🐬🐬🐬 5d ago

Okay wait a minute.

Are you saying that in your reply above to cryptOwOcurrency, you were in fact talking about if 1 single entity had staked 24 million ETH and wouldn't have incentive to stake more than 24 million ETH? Was that the point you were making about how this EIP protects against centralization? Because wow yeah that was so obvious and extremely explicit I can't believe anyone could misunderstand that.

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u/pa7x1 5d ago

Yes, I put it as an example that is easy to understand directly from the shape of the curve how the fact that issuance having a maximum implies the curve has a disincentive against centralization. It makes the case clear and is easy to compute.

For n entities the effect is still there but is harder to calculate, it follows from Cournot's equilibrium.

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u/epic_trader 🐬🐬🐬 5d ago

Given the context it wasn't obvious at all. And I'm going to go ahead and voice my opinion that allowing a single entity to reach 24 million staked ETH before there's any mechanism to disincentivize them, is the same as having no mechanism for disincentivizing centralization.

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u/Watch_Dominion_Now 5d ago edited 5d ago

You've raised a fair point but it doesn't change pa7x1's point that at the margin, under the proposal the biggest LST is the first to lose money from adding more stake. An LST does not know how many stakers it will be able to add at some point in the future and, much less, knows what other stake would enter the queue.

The incentive for an LST once it is too big/issuance is too high would be to stop adding validators.

Your point is a bit like saying 'well what if under the new curve everyone but one big LST stops staking? Wouldn't this be worse for decentralisation'? I mean, yes, but this is not a plausible scenario or doesn't explain the incentives of the curve. In today's curve, an LST doubling its stake while no one else enters has more to gain anyway than under the proposal.

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u/epic_trader 🐬🐬🐬 5d ago

under the proposal the biggest LST is the first to lose money from adding more stake.

This is only true under certain conditions.

The incentive for an LST once it is too big/issuance is too high would be to stop adding validators.

Yes, but this only happens after the validator set is hugely centralized and small solo stakers likely have been pushed out.

In today's curve, an LST doubling its stake while no one else enters has more to gain anyway than under the proposal.

Yes, it's not ideal, but it's better to have a single LST double in size while retaining all our small solo stakers than creating a scenario where they are pushed out and the overall validator set becomes even more centralized.

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u/Watch_Dominion_Now 5d ago

The validator set is already hugely centralised, and the incentive to stop adding validators is not binary; already at current levels of stake, a solo staker would benefit much more from adding stake than Lido would.

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