EtherFi splits weETH from restaking as 50% staking cap debate grows

EtherFi's weETH token now separates plain Ethereum staking from higher-risk restaking, a structural shift that lands as a proposal to cap validator rewards at 50 percent of supply splits the staking sector.

EtherFi split weETH into pure-staking and restaking components on Aug. 7, separating ordinary staking from higher-risk exposure as a validator-reward cap proposal divides the sector.

"Staking yields have become the benchmark rate for ETH, with on-chain lending, liquid staking tokens, and other products all pricing off this rate," Stani Kulechov, founder of Aave, said, warning the cap could make it hard for institutional buyers to predict staking yields.

The proposal, EIP-8361 or "Tapered Issuance Burn," would burn a growing share of validator rewards as more ETH enters staking, reaching 100 percent once roughly 60.25 million ETH — about half the circulating supply of 120.7 million — is locked. Currently 41.1 million ETH, or 33.7 percent of supply, is staked, and the validator entry queue is adding about 1.75 million ETH per month at maximum churn, per the proposal's authors.

If implemented, the mechanism would cut annual validator yields from 2.6 percent to about 1.1 percent, per BeInCrypto estimates, reshaping the economics of liquid staking tokens like weETH and stETH that underpin much of Ethereum DeFi.

What the weETH split changes

Ether.fi's move separates the yield weETH holders earn from consensus-layer issuance from the additional premium tied to restaking services such as EigenLayer. The restaking leg carries higher risk — slashing exposure and operator risk — while the pure-staking component tracks base Ethereum rewards. The split gives users a choice between the two exposures and lets Ether.fi market each yield stream separately as the rewards debate intensifies.

A cap that divides the sector

The proposal, authored by six researchers including Ethereum Foundation's Justin Drake, Jérôme de Tychey, and the pseudonymous pintail, aims to stop staking from concentrating among large custodians and staking services. Lido holds about 9.41 million ETH, or 22.9 percent of staked supply. The mechanism includes an 18-month transition period during which the base reward factor temporarily doubles from 64 to 128.

Critics warn the cap would damage DeFi borrowing strategies and hurt solo stakers, whose hardware costs do not fall with lower rewards. Gabriel Shapiro, a lawyer, called the proposal "a huge distraction" from efforts to increase demand for ETH. Ether.fi's Mike Silagadze opposed it on the grounds that lower rewards could reduce activity across DeFi applications built on staking-based strategies.

Supporters argue lower issuance protects non-stakers from dilution and supports the price. Zach Pandl, head of research at Grayscale, said "Ethereum's yield is paid through inflation, and supply reduction is a key variable that directly impacts ETH price."

The proposal remains a draft under community review and has not been approved for any network upgrade. The deadline for non-major EIP submissions for the next planned upgrade, Hegotá, has passed without approval, and any implementation would trigger the 18-month transition period. ETH traded near $1,878, up about 0.5 percent over 24 hours, with roughly $7.86 billion in volume, per CoinMarketCap.

This article is for informational purposes only and does not constitute investment advice.