leo @leo_is_simple - Twitter Profile

@puffer_finance @AmirOnchain I like that this isn't just "trust the validator." If you can actually verify what happened instead of taking someone's word for it, that's a much stronger security model.

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amiru.eth ��️🐡

@AmirOnchain

8 days ago

The issuance reduction EIP, in simple terms: The more ETH is staked, the lower the staking APR goes. This EIP makes it drop faster; validators get paid less net ETH, holders eat less inflation, and ETH can become “better money.” The direct cost: LST/LRT yields compress, and the loop trade gets thinner. (If borrow rates stay the same.) The hope: ETH price does the work that yield used to do, and ETH becomes more pristine collateral. How to think about the value of ETH P: P(ETH) = PV(cash flows to holders) + λ λ is the monetary premium. It is a coordination-game equilibrium, not an intrinsic property. For a nation state, the cash flow is the bond yield and λ is reserve status, FX strength, “my country strong.” For ETH, λ is fed by: - collateral demand across DeFi (the deepest use) - gas balances and credible monetary policy - store-of-value mindshare (the Schelling point) And λ is drained by: - dilution: issuance taxes every non-staked ETH ~0.8%/yr, pushing everyone into staking - centralized staking (we are already there) - DeFi TVL exiting to other chains The EIP bets that shrinking the drains grows λ, and that this is worth paying for with lower staking yield and less total ETH staked. Three walls the bet has to clear: Wall 1: Transmission. Open DeFiLlama: the top protocols are ETH and ETH-staking adjacent. The LST/LRT loop is a massive market (stake at 2.6%, borrow at 2.1%, lever the spread). Cut the yield and you cut the input to most of onchain finance. Wall 2: No scarcity crutch. Less issuance does not equal more value. ETH was outright deflationary in 2022-23. Price did not care. Wall 3: The failure mode. If the loop unwinds: ETH gets sold, DeFi disassembles, activity leaves, and the 1559 burn stops meaning anything. So the real question the EIP asks: was DeFi’s demand for ETH collateral-elastic, or yield-elastic? If collateral, the carry TVL exits, the collateral use stays, λ strengthens. If yield, see Wall 3. Solo staker myth: We can't say for certain Solo stakers make less money; the APR does go down, but if the price of ETH goes up, they arguably should be in more profit. On the security myths: I doubt this moves security in either direction. Post-Pectra solo stakers are already squeezed out; Strawmap creates a vision where ZK replaces the solo staker trust, two builders build most blocks, and a handful of operators run nodes across every LST/LRT. No Nakamoto coefficient describes where we already are. LSTs survive this EIP either way. And “ETH sitting in ETFs and custodians is bad”. They issue their products regardless of what issuance does. They will make money either way. Conclusion: there is no conclusion. This is a bet that strong money beats inflationary money, and that chain activity survives the transition (I,E DeFi survives). An urgent reaction, perhaps, to the drop in chain activity.