Dima Gusakov, tech lead for Lido's community staking team, lit a fuse under Ethereum's simmering issuance debate on April 28. In a tweet, Gusakov argued that slashing staking rewards would strangle liquid staking tokens (LSTs), shrink DeFi, and eventually kill Ethereum itself. The post landed just as the network's staking ratio crept past the low-30% mark — well above the 20–30% range the original proof-of-stake reward curve was designed for.
Why the reward curve matters now
Ethereum's consensus-layer reward formula has been frozen since the Beacon Chain launched in 2020. The base reward calculation — effective_balance × 64 / (BASE_REWARDS_PER_EPOCH × √total_active_balance) — assumes a world where only about a quarter of ETH is staked. Today, actual staking participation is higher, and LSTs are a big reason why. Lido alone holds roughly $20.8 billion in ETH, Binance Staked ETH about $8.3 billion, ether.fi restaking $5.1 billion, and Rocket Pool $1.2 billion.
By removing the illiquidity penalty, LSTs have driven staking past the original design target. That overshoot is what has developers talking about a cut.
Scalar cut or curve reshape?
Two competing approaches are on the table. The simpler one is a scalar adjustment — lowering BASE_REWARD_FACTOR from 64 to 32 or somewhere in the 40–48 range. It's a one-line tweak to the consensus-layer preset. The more complex option is a curve reshape, which would impose a steeper drop-off at high staking ratios. Researcher Anders Elowsson proposed a functional form like c / (√D × (1 + kD)).
Both paths require a hard fork. The issue was discussed during the Pectra upgrade window (which went live in 2025) but got deferred. Fusaka is already locked around PeerDAS. So the earliest realistic opportunity is Glamsterdam — likely late 2026 or early 2027.
LSTs vs. ETH moneyness
Underneath the technical debate is a strategic one. Cutting issuance would reduce new supply, theoretically boosting ETH's long-term scarcity and its claim to being sound money. But the immediate effect would squeeze LST yields, making liquid staking less attractive and potentially pulling liquidity out of DeFi protocols that rely on those tokens. Gusakov's camp argues that wrecking LSTs would gut Ethereum's most vibrant ecosystem. The other side says prioritizing short-term DeFi composability over monetary premium is a recipe for stagnation.
There's no official proposal yet, and no EIP. But the conversation has moved from developer forums to public Twitter threads — and that usually means it's only a matter of time before something lands in the all-core-dev pipeline.
