SharpLink CEO warns EIP-8363 could harm Ethereum staking and DeFi

SharpLink CEO Joseph Chalom has expressed opposition to Ethereum proposal EIP-8363, warning that the mechanism could negatively impact the decentralized finance (DeFi) ecosystem and institutional interest in ETH.

The proposal suggests burning a portion of validator rewards associated with assigned duties, with the burn rate increasing as the staking ratio rises. If staked ETH reaches 60.25 million—approximately half the total supply—the affected rewards would face a 100% burn. The change would be phased in over an 18-month period while maintaining existing consensus-layer rewards and penalties.

Chalom, a former BlackRock executive, argued that reduced staking yields could decrease liquidity, increase borrowing costs in DeFi, and diminish Ethereum's native yield advantage over Bitcoin. He further noted that rewards support essential infrastructure, developers, and validators, and warned that lower returns might lead institutions to sell ETH after unstaking.

In contrast, Messari analysts expressed skepticism regarding the necessity of the proposal, noting that Ethereum's annual issuance is already low at approximately 0.85%. While supporters suggest the burn could curb dilution and resist staking centralization among large institutions, analysts suggest the proposal may be "a solution in search of a problem."