Wall Street finally turned staking into a dividend, now Ethereum and Solana want to shrink it

Grayscale’s July 17 SEC filings say its Ethereum and Solana staking ETFs will convert rewards into cash distributions at least quarterly, beginning around Aug. 7. Lower protocol rewards would therefore reduce ETF payouts. Solana’s SIMD-0550 would double annual disinflation from 15% to 30%, reaching the 1.5% terminal inflation rate in about 2.8 years instead of 5.7. Assuming 68% staking, modeled yield would fall from 5.84% today to 4.34% in year one, 3.00% in year two and 2.25% in year three. The proposal would result in 18.9 million fewer SOL entering circulation over six years, worth approximately $1.47 billion at SOL’s current $77.97 price, versus the authors’ $1.51 billion reference. Three-year simple yield would decline from 13.15% to 9.89%, requiring roughly 3% additional price appreciation to offset the difference. Modeling places two, 13 and 30 of 738 validators into unprofitability in years one, two and three. Ethereum’s EIP-8363 would burn an increasing share of validator issuance as staking rises, reaching 100% once roughly half of ETH supply is staked. One author warned that more than 70 million ETH, or over 55% of supply, could be staked by January 2028 without reform. Smaller solo validators may face greater pressure than custodians and staking companies. The economic case is that native staking yield acts as a risk-free-like hurdle for lending, liquidity provision and other DeFi activity. Lower yields could redirect capital, but slashing and validator risks weaken that comparison. Non-staking holders benefit from reduced dilution, while passive stakers, ETF shareholders and marginal validators lose income. The bull case is stronger scarcity and token appreciation; the bear case is that investors treat lower rewards as a pay cut while cash and short-term Treasuries offer competitive yields. Governance could delay, dilute or reject both proposals. Ethereum is up 0.31% over 24 hours, with a $227.9 billion market capitalization and $3.14 billion in volume.