BlackRock veterans criticize Ethereum's revenue plan

SharpLink CEO Joseph Chalom led the fight against EIP-8363

After strong community opposition, core developers removed the proposal from the Hegotá upgrade on August 6. Chalom believes that zero yields would destroy the $35 billion liquidity pledge market and erase Ethereum's appeal to institutions relative to Bitcoin.

Former BlackRock executives have publicly challenged proposals from core Ethereum researchers

A former BlackRock CEO who now runs one of the largest companies 'treasuries of Ethereum, publicly dismantled proposals written by Ethereum's most respected researchers this week. SharpLink (Nasdaq: SBET) CEO Joseph Chalom launched an opposition to EIP-8363 on August 7, 2026, after core developers had shelved it the day before. The inclusion window has closed, but the debate behind it is far from over.

EIP-8363, fully known as "Tapered Issue Burn", temporarily numbered EIP-8361, proposes to gradually reduce the rewards paid by Ethereum to verifiers until the rewards return to zero when the pledge rate reaches 50%. Justin Drake of the Ethereum Foundation and EthCC founder Jérôme de Tychey proposed the proposal on August 4. Two days later, during a conference call among core developers, the opposition was strong enough to remove it from the upcoming Hegotá upgrade. Chalom's lashing came early the next morning, with the goal not to kill a dead thing, but to ensure that it never came back.

Comparison of current data versus 50% target

Currently pledged ETH: approximately 34%(41.5 million pieces), yield: 2.67%-2.75%, revenue composition: 85% issuance rewards/ 15% fees, LST lockup value: approximately US$35 billion. Under the 50% target: Pledged ETH: approximately 50%(60.25 million pieces), yield: issue reward is 0%, income composition: 100% fees and MEV, LST value: face capital flight risk.

Ethereum overpays for security

The basic rewards Ethereum pays for each verifier are almost unchanged when capital surges in. Currently, approximately 41.5 million ETH are distributed among nearly 900,000 validators, and the agreement continues to pay a basic rate of return-close to 2.7% at current pledge levels. Drake and de Tychey's point is straightforward: Online purchases are far more secure than necessary, and pay for the excess by diluting unpledged ones. Their model shows that if there is no change, the pledged supply will exceed 70 million ETH by 2028, that is, more than half of all ETH will be locked in verifiers.

This mechanism does not touch the total issuance rate, but adds a layer of combustion on top of it. As the amount of pledges climbs, an increasing share of the newly cast rewards is burned rather than paid out, and when the pledge rate reaches approximately 50%, the burn rate reaches 100%. By then, issuance rewards will disappear, and verifiers will survive only on transaction tips and MEVs-two items that previously accounted for only 15% of their revenue. An 18-month buffer period (by doubling a variable called BASE_REWARD_FACTOR and decreasing every eight days) is designed to cushion the impact.

Chalom interprets yields from a bond trader's perspective

Chalom has worked at BlackRock for two decades, formed its digital assets division and helped launch the iShares Ethereum Trust. He views the pledge yield as the way bond trading desks view the benchmark interest rate-2.7% is in his view the de facto base interest rate for the entire chain economy, and all assets are priced on this basis. Reducing it to zero does not remove a benefit, but removes the foundation of DeFi's lending and mortgage markets, pushing up the true cost of capital across the network in ways no one can clearly model.

He expects the liquidity pledge layer to bear the brunt. More than $35 billion is locked in tokens such as Lido's stETH and Ether.fi's eETH, which are circulated as collateral in lending agreements. Stripping off primary earnings is stripping off their value base as collateral. A change at the quiet protocol level will turn into a competition at the application level. Funds derived for income will flow to places where the income remains.

Stani Kulechov (Aave) supports Chalom, arguing that it poses a danger to loans based on pledged ETH. Mike Silagadze (Ether.fi) said the move hit the entire re-pledge field. Greg Koumoutsos (Lido Labs) warns that zero yields can crowd out independent pledgers and lead to centralization. Steve Berryman (Bitwise) points out that institutions hate unpredictable monetary policy. Proposal authors Drake and de Tychey argued that the move would protect the chain from capture by leading pledgers.

BlackRock and Bank of New York Mellon just entered the venue

Chalom's second attack route is the time node. Institutions choose Ethereum over Bitcoin for only one reason: it provides native benefits in addition to price appreciation, converting speculative holdings into productive assets. If it is zeroed, Ethereum will lose its only differentiated advantage-just as big money enters the market. Robinhood is building Layer 2, BlackRock has tokenized money market funds on Ethereum, and Bank of New York Mellon provides pledge services through Galaxy Digital. Chalom believes that when monetary policy is rewritten in the middle of the wave, every risk committee will find a reason to suspend; while corporate treasuries that observe yields falling to zero will face real pressure to unpledge and sell.

Zero yields kill independent pledgers first

Researchers are not acting rashly, and their concerns are worth listening to. If an exchange or a cartel controls most of the pledged shares, they can control the chain. EIP-8363 eliminates the economic incentive to continue pledging after half of the pledge, with the bet that the market will stabilize itself at a safer equilibrium point.

The irony raised by the Lido research leader is that it can backfire. Greg Koumoutsos points out that issuing rewards isn't just about safe numbers: it also supports operator diversity, censorship resistance, and thousands of independent pledgers of validators running from home. Reduce yields to zero and these operators will exit first because they cannot survive on the meager fee margins of large exchanges. The network left behind will be run by a small number of participants big enough to make money on tips alone-the centralization that the plan was originally intended to prevent.

The direction of the debate

The proposal has been moved out of the Hegotá upgrade and removed from the next fork. But the mathematical logic that produced it has not disappeared. The supply of pledges continues to rise, and non-pledges continue to suffer dilution. The author of the proposal only admitted that the timing was wrong and did not deny the diagnosis results. A narrower, slower version will resurface-if the institutional capital flows that Chalom defends prove they can survive at lower yields. Because how Ethereum limits pledges without excessively emptying its own foundation, this problem will not disappear on its own.