Aave Founder Stani Kulechov Warns New Ethereum Proposal Could Punish Growth
Aave founder Stani Kulechov has publicly pushed back against a new Ethereum improvement proposal that would gradually cut staking rewards to zero, arguing the plan could undermine demand for ETH and weaken DeFi lending markets. The draft, submitted by developer Jerome de Tychey as EIP-8361, proposes a “Tapered Issuance Burn” that would reduce new ETH issuance as the percentage of staked supply climbs toward 50%.
What EIP-8361 Would Actually Change
Under the proposal, staking rewards would not disappear overnight. The plan calls for a six-month lead time before the network fork activates, followed by an 18-month phase-in period. Issuance would peak at roughly 0.5% of supply annually when around 20% of ETH is staked, then taper down to zero as the 50% threshold approaches.
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De Tychey argues the current system lacks a built-in limit on dilution and offers no natural mechanism to slow rewards as more ETH gets staked. He has said the proposal builds on years of research and public debate among core Ethereum contributors, including input from Vitalik Buterin and other long-time researchers.
Kulechov’s Core Objections: Predictability and Adoption
Kulechov’s main criticism centers on uncertainty. In a lengthy post, he argued that capping rewards to zero above a certain staking ratio introduces exactly the kind of unpredictability that scares off serious capital. “This uncertainty has a significant adoption cost,” he wrote, noting that institutions generally prefer assets with predictable yields over ones where returns could vanish based on a supply threshold.
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He also flagged concerns for solo stakers, who he said tend to be more sensitive to pricing changes than large institutional players. The sharpest criticism, however, was aimed at DeFi lending markets. If staking rewards fall to zero, Kulechov argued, most reasons to borrow ETH within DeFi would effectively disappear, since there would be little upside left to justify the cost of borrowing it. “The only reason to borrow ETH ironically would be to short it,” he wrote.
Broader Market Implications
Kulechov also warned that investors holding ETH purely for its yield exposure might rotate into other yield-bearing assets, including stablecoins. He compared the potential shift to capital moving between asset classes in traditional finance when interest rates change — just running in the opposite direction from what’s typically expected.
Supporters of the proposal argue that combined with existing fee burns, tapering issuance could help ETH’s total supply shrink further, moving Ethereum’s monetary policy toward the kind of predictability large investors have been asking for. But not everyone is convinced. Some community members have questioned whether the proposal should move forward before a separate mechanism exists to reward solo and home stakers more generously, potentially scaling rewards based on how small a staker’s share of the network is.
What to Watch Next
For now, EIP-8361 remains a draft without an assigned final EIP number. Discussion continues on Ethereum’s public forums as the community weighs whether tapering issuance protects the network’s long-term health or undercuts the very asset it’s meant to secure. The outcome could have significant implications for ETH’s yield dynamics, DeFi lending activity, and the broader staking economy.
Kulechov, for his part, remains unconvinced. “Ethereum should not be punished for its growth,” he wrote.
Disclaimer: This article is for informational purposes only and does not constitute financial advice. Cryptocurrency markets are volatile and uncertain; readers should conduct their own research before making any investment decisions.
