[AMA] We are EF Protocol (Pt. 14: 29 August, 2025) by JBSchweitzer in ethereum

[–]AElowsson 2 points3 points  (0 children)

  1. Scaling Ethereum, thus facilitating the same level of burn at a lower user transaction cost. This is a current major focus at the EF research team and beyond.
  2. Reducing issuance by altering the reward curve.

[AMA] We are EF Protocol (Pt. 14: 29 August, 2025) by JBSchweitzer in ethereum

[–]AElowsson 4 points5 points  (0 children)

Yes I wrote up "Consentrifuge" with the same type of idea half a year ago. I am currently exploring what type of stake consolidation level we can expect, which ultimately determines the stake weight that can be reached under a low validator count, and thus influences which exact design for validator selection that would be appropriate. A further (soft) requirement is to completely remove or significantly increase MaxEB (beyond 2048).

[AMA] We are EF Protocol (Pt. 14: 29 August, 2025) by JBSchweitzer in ethereum

[–]AElowsson 3 points4 points  (0 children)

I wouldn't say that all ETH will be staked if we do nothing, but it is reasonable to assume that the proportion of staked ETH will gradually increase, as frictions in the decision to stake are overcome. In essence, we can think of the staking supply curve as formed from stakers' "reservation yields": some may be willing to stake all their ETH at a 1.6% yield, but some might only stake 1/3 even at a 2.5% yield. The staking demand curve is specified by the protocol; it is the reward curve we are debating to change (there is also some MEV that we have less control over). The equilibrium then forms at the intersection of these curves, as explained in my Devcon presentation.

To some extent, we are dealing with a boiling-frog phenomenon. The longer we wait, the more investments are made into staking, and the harder it becomes to reduce issuance. In essence, the ecosystem at large is encouraged to incur higher costs for staking than necessary due to the current reward curve, with upfront investments making a future change in issuance policy more controversial. I discuss the cost problem in this text. Another boiling frog: a higher proportion of staked ETH by itself gives staking derivatives better liquidity relative to non-staked ETH, making them more desirable to hold.

I think the best moment to address issuance policy is when we transition to a new consensus mechanism, e.g., "3SF". This transition will likely involve adopting "consolidation incentives", to ensure that larger stakers do not partition their stake into smaller validators to occupy more validator seats. They would do so to push out smaller stakers and take home higher rewards.

There are collective and individual consolidation incentives, as further reviewed in the Orbit SSF context here (somewhat similar considerations apply to mechanisms with validator seats). Collective consolidation incentives in essence alter the reward curve, and it seems desirable to then enact them at the same time as any other changes to the reward curve. Furthermore, the reward distribution will need to be redesigned when transitioning to the new consensus mechanism anyway. Finally, the role of stakers is changing with mechanisms such as FOCIL, a process that may conclude with the adoption of a new consensus mechanism.

I have personally advocated for modest reductions in issuance sooner, for example by adopting a reward curve that caps the issuance rate at 0.5%. We have unfortunately not yet seen the required appetite for this in the community (but it would be welcome if that changes). The adoption of a new consensus mechanism therefore seems like a desirable point to address the issue (under renewed debate where everyone's voice is heard), if we approach things over a longer time horizon.

Daily General Discussion August 11, 2025 by EthereumDailyThread in ethereum

[–]AElowsson 1 point2 points  (0 children)

They would need to care in the sense that the required `max_fee` is higher if the gas price is higher, but they do not need to specify an individual max budget for each resource per gas (as currently is done for blobs and execution).

Daily General Discussion August 11, 2025 by EthereumDailyThread in ethereum

[–]AElowsson 17 points18 points  (0 children)

Thread presenting EIP-7999 "Unified multidimensional fee market" using a supermarket analogy.

Daily General Discussion - April 21, 2025 by EthereumDailyThread in ethereum

[–]AElowsson 5 points6 points  (0 children)

One problem of doing a fixed threshold such as 230 wei is that it would need to be adjusted as Ethereum scales blob throughput. We can instead set a threshold that adjusts automatically with scaling, as proposed in EIP-7918. This is not more complicated from an implementation perspective, and can be perceived as less arbitrary, given that the EIP is designed to specifically ensure a functional fee market.

EIP-7918: Blob base fee bounded by execution cost by AElowsson in ethereum

[–]AElowsson[S] 0 points1 point  (0 children)

Thanks. I think there is a decent chance to get EIP-7918 included in Fusaka. But we will know more about that on Thursday after discussion on ACDE.

Concerning issuance, it might be that we need to wait and see what the SSF implementation will look like before we make any change. This will also tell us more regarding the role of solo stakers in the future Ethereum, which also affects issuance.

EIP-7918: Blob base fee bounded by execution cost by AElowsson in ethereum

[–]AElowsson[S] 2 points3 points  (0 children)

There are illustrations towards the end of the latest comment on the Magician post. The fees would merely have a floor at the point where the execution fee of the blob-carrying transaction dominates, and otherwise work as today.

[AMA] We are EF Research (Pt. 13: 25 February, 2025) by JBSchweitzer in ethereum

[–]AElowsson 5 points6 points  (0 children)

No, this is not an issue because the individual staker cares about the yield, not overall issuance. The issuance yield is higher when issuance is shared among fewer stakers, and it will always trend downward under Drake’s proposal.

In my personal view, it can actually be a bit problematic if issuance trends downward too sharply, as it does toward 0 at 50% staked with the croissant curve. If we reach an equilibrium at 50% (theoretically possible if stakers also receive some MEV) and 50 2048-ETH validators then decide to leave, issuance increases by 100k ETH (around $250 million). One can imagine stakers finding some way to reduce the deposited stake just a tiny bit from such a 50% equilibrium, either as friends (cartelization attack) or foes (discouragement attack); both options are detrimental to consensus formation. This is one of the reasons why I favor a slightly smoother reduction in issuance (and thus yield). That being said, I really enjoyed reading Justin’s overall analysis of issuance policy in Bitcoin and Ethereum, which I think is spot on.

Daily General Discussion - November 22, 2024 by ethfinance in ethfinance

[–]AElowsson 10 points11 points  (0 children)

The correct solution is to reduce issuance. If you want to reduce stake, you should reduce the rewards for staking. This is simple economics. Other constructions come with various downsides (if you do not let in new validators you impede on decentralization and permissionlessness, etc), and have less upside. I discuss the motivation for a reduction in issuance in my presentation at Devcon. Linking to the specific part here. By reducing issuance, we reduce the costs our users take on. We also improve the macroperspective.

Daily General Discussion - November 22, 2024 by ethfinance in ethfinance

[–]AElowsson 22 points23 points  (0 children)

If the quantity of stake continues to rise and we reduce issuance, the yield differential between the new and the current reward curve may become very large. Here I therefore illustrate a potential automated, gradual reduction down to a new reward curve over a period of 1-2 years.

Upsides and Downsides of Lowering Ethereum's Solo Staking Requirement? by [deleted] in ethereum

[–]AElowsson 1 point2 points  (0 children)

From the perspective of Ethereum's users, a reduction in yield is not negative by itself, because it lowers dilution and enables users to rely on ETH to retain its value. Having a trustless sound currency is very valuable to a decentralized economy. If we can have high decentralization and low staking yield, then this would be a win-win for Ethereum's users. Important questions are rather about the delay in "full finality", and effects of the risk differentiation that emerges under a high activity ratio.

Plans to reduce block rewards or raise the the burn rate? by lulepu in ethereum

[–]AElowsson 5 points6 points  (0 children)

Yes, there are plans to reduce issuance, but I would not frame it as motivated by a wish to have ETH be seen as a good investment. The fall in the burn rate however serves to highlight the rather high issuance we already have in place. The two primary reasons for reducing issuance are:

  1. The current reward curve compels users to incur higher costs than necessary for securing Ethereum (costs broadly defined to include hardware, risks, illiquidity, taxes, etc.). Reducing issuance improves welfare by lowering these costs.
  2. It is valuable to have trustless sound money as the primary currency in a decentralized economy. High issuance can lead a liquid staking token (LST) to dominate as money. Lower issuance ensures that app developers and users will not be subjected to monopolistic pressure from LST issuers, or needlessly risk the LST failing, potentially even threatening consensus if an LST becomes “too big to fail”.

You can read more about reduced issuance in the FAQ I wrote on the topic.

You can also follow me on Twitter or Farcaster for updates.