SharpLink CEO Joseph Chalom has raised concerns about a proposed Ethereum update that could eventually remove staking rewards created through new ETH issuance.
Chalom believes the change could reduce one of Ethereum’s biggest advantages for investors: its ability to generate native yield. He warned that removing these rewards could make Ethereum less attractive to institutions and increase costs across decentralized finance (DeFi).
The proposal, known as EIP-8361, suggests gradually burning more validator rewards as the amount of staked ETH increases. If around half of Ethereum’s supply is staked, the plan could reduce new ETH issuance rewards to zero.
Validators would still be able to earn transaction fees and other network-related income, but they would no longer receive newly created ETH as rewards.
Chalom said Ethereum’s current staking yield is around 2.75% and argued that most validator income still comes from issuance rather than transaction activity. He believes removing this reward system could put pressure on staking operators, especially smaller validators.
He also warned that lower staking returns could affect the wider DeFi ecosystem. Liquid staking platforms allow users to earn staking rewards while using their assets in lending and other applications. A major reduction in yield could increase the cost of capital and push investors toward other assets that continue generating returns.
The creators of the proposal disagree, saying Ethereum’s current reward system may continue encouraging too much staking even when additional staked ETH provides limited security benefits.
Chalom said Ethereum’s staking income is one reason institutions may choose ETH over Bitcoin. While Bitcoin is often viewed as a store of value, Ethereum offers the possibility of earning returns through network participation.
SharpLink itself has built a major Ethereum strategy, staking a large portion of its ETH holdings and earning more than 18,000 ETH in rewards.
Although Chalom supports controlling Ethereum’s issuance and maintaining scarcity, he believes the network should rely more on its existing base-fee burn mechanism instead of reducing staking rewards.
The proposal is still under discussion and has not been approved for a future Ethereum upgrade. The debate is expected to continue as developers and investors consider how Ethereum should balance security, scarcity, and long-term institutional demand.
