What the Ethereum Community's Staking Argument Is Really About

When is a discussion about the issuance curve of staking rewards in Ethereum not really a discussion about the issuance curve of staking rewards in Ethereum? When it’s really about Ethereum governance and Ethereum’s monetary policy.

The TL;DR on curve issuance (and why seemingly everyone is riled up about it) is as follows: on its current trajectory, it is conceivable all ETH will eventually be staked, whether directly or via restaking. Right now, almost 27% of all ETH is staked.

Paul Dylan-Ennis is a lecturer in the College of Business, University College Dublin and author of "Absolute Essentials of Ethereum."

Starting with a post in February on the Ethereum research forum, Ethereum protocol developers and researchers have started the discussion about how best to address it, with the key change centering on a new issuance reward formula that makes staking past a certain point unattractive.

See also: Ethereum Could Face 'Hidden Risks' From Ballooning Restaking Market

Exciting stuff! Except, the reaction on social media has tended to focus less on the technical details of this proposal and more on the idea that it involves changing Ethereum’s monetary policy. In other words, it’s not really issuance that is at stake, so much as people have a sense that the “Core Devs” (a somewhat ambiguous term in Ethereum), particularly those associated with the Ethereum Foundation, have not engaged in the appropriate level of “rough consensus” from the wider set of stakeholders.

The critics tend to be Ethereans associated with the “ultra sound money” subculture that hopes to establish ETH as sound money (in a similar way as people think of bitcoin as sound money). For them, changing the issuance curve is a red line because it’s reminiscent of central bankers constantly tweaking monetary policy.

Who are these wider stakeholders? In my reading, the Ethereum ecosystem encompasses everyday users, node operators, validators/stakers, niche Ethereum media and podcasts and dApp builders. In at least two recent media articles, these stakeholders are referred to as the community and the community is either “up in arms” or pushing back against the proposal.

The Core Devs are, of course, part of that community, but it’s also clear they have an outsized influence on the protocol relative to the other stakeholders. Further, what we are really talking about here are the various researchers who are paid by the Ethereum Foundation. — because, well, the Ethereum Foundation is one of the few organizations that pays people to focus on protocol research.

See also: Crypto Staking 101: What Is Staking?

Now, here is where nuance is important. Especially since we live in an era of actual conspiracy theories about the Ethereum Foundation, e.g. the ludicrous world of “ETHGate.” As a researcher of Ethereum governance, my view is the EF is not “in control” of Ethereum. It is also worth mentioning the Ethereum Foundation is engaged in a process it calls subtraction where it will phase itself out. In truth, there are large numbers of Core Devs who are completely independent of the Ethereum Foundation and this is especially true when we include the autonomous software client teams.

However, it’s also clear to me that while the influence of the foundation is overstated by critics, it’s also understated by its defenders. We know just 10 people are responsible for 68% of all implemented Ethereum Improvement Proposals (EIPs). And if you follow Ethereum protocol development at all you can probably guess the 10. Hard forks are announced via the EF blog. The logistics of the AllCoreDevs meetings are mostly handled by people associated with the Ethereum Foundation. So, it’s not hard to see why some people fall for the impression that the EF runs the show.

See also: What Happens if the SEC Classifies ETH a Security?

I would argue that this is really a problem of communication. As Ethereum developer Tim Beiko notes, most Core Devs see the Fellowship of Ethereum Magicians Forum and the Ethereum Research Forum as places to discuss and debate work-in-progress research, but many in the broader community misread it as the place where final research is shared — and everyone just has to accept it.

But as Beiko points out, there were efforts by the two authors at the Ethereum Foundation who suggested reducing the pace of ETH issuance – Casper and Ansgar – to spread their message, including an appearance on the Uncommon Core podcast. Unfortunately, people tend to focus on X as if it were the medium for Ethereum governance discussion.

Interestingly, in response to a post by Hasu, Ansgar notes that they could have done a better job, but also that he thinks the backlash is a sign of Ethereum’s robust decentralization at work. Which is true! The community does have its voice and the ability to contest research it does not like (at least in its current form).

How then to dispel the idea that Ethereum governance is the preserve of the Ethereum Foundation? One path is what we see with layer 2s starting to involve themselves more closely in governance, as with layer 2 RollCall’s attempts at creating common standards. Or dApp builders lobbying for EIPs.

What these stakeholders have grokked is that Ethereum governance is in principle open to anyone. There is nothing to stop you from writing your own research on the Fellowship of Ethereum Magicians Forum and the Ethereum Research Forum. There is nothing to stop you from championing your own EIPs. Or attending the AllCoreDevs meetings.

See also: How to Stake: 7 Strategies for Starting Out

Another overlooked angle is the importance of independent observers through specialist podcasts. Sassal’s The Daily Gwei and Christine Kim’s The Infinite Jungle both cover protocol governance closely and to my mind act as important independent advocates. A perfect recent example is Christine Kim at EthDenver asking Prysm developers why they don’t focus more on the user and developer experience.

Thinking bigger, it might be time to consider mechanisms for community feedback. Something I’ve proposed before is an annual Ethereum Assembly (at EthCC or so) where different stakeholders in the wider Ethereum ecosystem could voice their concerns about any EIPs. But people tend to think this could be a centralizing force, so perhaps it's a no-go.

Alternatively, it might be interesting to explore the idea of an online feedback mechanism. Perhaps a window of one month annually where everyone else can post their concerns or issues regarding new research directions, hard forks, the Roadmap, etc. which Core Devs could review, as a sanity check. I think this would address some issues that are not going to go away otherwise.

In the end, without such a mechanism for feedback Ethereum’s “social layer” is limited to X, which is an adversarial platform and tends to encourage our worst behaviors.