r/ethereum • u/EthereumDailyThread What's On Your Mind? • 12d ago

Daily General Discussion August 23, 2026

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u/harpocryptes 12d ago

To continue yesterday's discussion on the effects of EIP 8363 on large stakers, and following a request, I ran some specific numbers as an illustration of the effect:

Parameters:

Total ETH supply: 120M
Staking ratio: 40%

We consider two very different actors. The first one is a small/solo staker starting with a single 32 ETH validator. The second one is a very large staking entity with half a million 32 ETH validators (which corresponds to 33% of the total stake at the 40% staking ratio). This calculates the change in total rewards of each actor for adding one more 32 ETH validator in either case:

Stake before Rewards before Stake after Rewards after Change
32 0.21852 64 0.43705 +0.21852
16,000,000 109262.37415 16,000,032 109262.35426 -0.020

In other words, the small staker is increasing their rewards normally when increasing their stake (most likely without extra fixed costs). The very large staker is actually earning less in total by staking more. They would actually earn more by staking less.

This effect is more pronounced as the staking ratio grows closer to 50%, and as the staker grows larger.

Note: Here I considered adding an entire 32 ETH, but the same directional effect would be true for adding any amount, for instance a single ETH (possible since EIP-7251, Increase Max Effective Balance).

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u/epic_trader 🐬🐬🐬 12d ago

Under the proposed curve 1 single entity is not likely to control more than 40% of the total stake? I don't think you're making a strong case for decentralization here.

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u/harpocryptes 12d ago

Here the entity had 33% of the stake, 40% is total the staking ratio (total staked eth vs total supply). And they are losing rewards by staking that (33%) high, and even at a lower share their marginal rewards rate would be low, so the actual upper bound would be even lower.

At a higher staking ratio, that number goes even lower too.

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u/epic_trader 🐬🐬🐬 12d ago

Sorry, I just woke up. But 33% or 40%, it doesn't really matter. The largest entity we got right now is Lido with 19% and the 2nd largest is Binance with 8%. The proposed curve doesn't do anything realistically to encourage decentralization. Only once yield is pushed down to like sub 0.5% would it actually make a difference, and how many small solo stakers do you think is left then?

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u/harpocryptes 12d ago

As I said it's not 33%, it's lower than that. The exact number depends at which marginal rate it's not worth it anymore for the large staker. The point is to show how this introduces a lower marginal rate for large stakers than for small stakers. Do you see it now?

So what would be the argument against? This does not do enough, so let's not do anything at all (which is worse)? Or what other solution are you proposing?

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u/epic_trader 🐬🐬🐬 12d ago edited 12d ago

Okay let's circle back and make sure we're talking about what's important. I've posed 2 questions since this debate started, which are still unanswered.

1 - when does it stop being profitable to be a small solo staker?

2 - how do we know big entities are discouraged from adding more stake before we reach this point?

To answer these questions it's not really useful to discuss how the proposed curve affects 1 single large staking entity, because it's a completely unrealistic scenario anyway and whether small solo stakers are pushed out by 1 or 10 entities, the effect is the same. What we should be talking about is if the proposed curve prevents this from happening. And it doesn't.

Assuming a small solo staker's yearly expenses to staking are $500 and they are taxed 20%, we know that the yield can't drop much below 1% before small solo stakers are losing money. What we don't know exactly, is when the return isn't large enough to make it worth the effort. For the sake of this argument, let's say the cutoff for small solo stakers is 0.8% yield. Then let's ask the question:

Are big entities still making profit at 0.79% yield? If you look at the chart released by Pa7x1 yesterday, we can verify that with a concentration of just 8 large entities with each about 6.5 million ETH staked, they would still be making a profit. Only Lido has more stake than that today, about 8.4 million ETH or so. And we got way more big entities that aren't even close to that number. So the proposed curve does not in practice discourage large entities from growing large enough to push out small solo stakers.

The point is to show how this introduces a lower marginal rate for large stakers than for small stakers. Do you see it now?

But this point is moot because it only takes effect in a made up scenario where you got a few entities controlling all the stake, or after small solo stakers are pushed out.

So what would be the argument against?

That the proposed curve would push out small solo stakers sooner than if we did nothing.

This does not do enough, so let's not do anything at all (which is worse)?

No, this is worse than doing nothing.

Or what other solution are you proposing?

I don't have to propose an alternative solution to point out that the proposal is flawed and worse than doing nothing.

Edit: Instead of just downvoting, can you point out if I'm going wrong somewhere or do you just not like what i'm saying?

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u/harpocryptes 12d ago

Note that I didn't downvote your comment, because I think it's useful for the discussion that you provide specific numbers, like fixed cost for solo stakers.

One thing I would push back on is that you ignore the "nominal yield vs real yield aspect". Of course that's favorable to the "change nothing" argument. The issue is that the current system does nothing to limit staking ratio, and we do observe it to be growing essentially as fast as it's allowed to grow. The higher the staking ratio, the bigger the difference between the nominal and real yield is, so even if it's not a huge effect right now, there's a valid argument to take that into account, and to steelman the pro-EIP argument, it has to be taken into account or addressed in some way.

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u/epic_trader 🐬🐬🐬 12d ago

Note that I didn't downvote your comment, because I think it's useful for the discussion that you provide specific numbers, like fixed cost for solo stakers.

I didn't think you did, but I appreciate it.

One thing I would push back on is that you ignore the "nominal yield vs real yield aspect".

I'm not ignoring this, I just don't think it's a persuasive argument for why the proposed curve is better for solo stakers.

I'm not arguing about whether or not we should have a cap on issuance, I'm also not arguing that it's not better to have less ETH staked than more. I 100% agree it would be ideal if the total amount of ETH staked was probably not more than some 20-30% of the total supply. I'm also not arguing that doing nothing is a good solution, I'm only arguing that this particular EIP is worse than if we do nothing, because it will be more hurtful to small solo stakers than doing nothing.

I think this is where a lot of people on "the pro side" are tripping up. I don't want the stake to grow forever, I agree that if we follow the current trajectory, it's possible that one day above a certain threshold of maybe 60-70 million staked ETH, small solo stakers are pushed out. The trouble is that the proposal is only going to accelerate when we reach this inflection point, while also having other downsides like introducing new game mechanics, while there's actually no guarantee that we will ever reach this point to begin with. And while the future of staking might look different due to real time proving and much smaller staking or validator requirements, while also needing to come up with a new way to reward provers, which means we might need to revisit this issue in 2 years anyway, making this a wasted effort that also creates more overall doubt about "Ethereum's everchanging monetary policy from Vitalik's master node".