Grayscale will begin converting staking rewards from its Ethereum and Solana ETFs into quarterly cash distributions to shareholders starting around August 7, according to SEC filings released July 17. The move coincides with parallel protocol proposals on both networks designed to reduce native staking yield at the source.
Solana developers are advancing SIMD-0550, a proposal that would accelerate the network’s disinflation schedule, cutting modeled staking yield from 5.84% today to 2.25% within three years. The change would double Solana’s annual disinflation rate from 15% to 30%, reaching the network’s 1.5% terminal inflation target in approximately 2.8 years, compared to the current 5.7-year timeline.
Under the proposal, 18.9 million SOL would enter circulation more slowly over six years, representing $1.47 billion in value at the current price of $77.97 per token. Solana’s analysis models 738 validators under the proposal, with 2 pushed into unprofitable territory in year one, 13 in year two, and 30 by year three.
Ethereum researchers filed EIP-8363, a draft proposal that would burn an expanding percentage of validator rewards as staking participation rises. Once approximately half of Ethereum’s total supply is staked, the mechanism would burn 100% of consensus rewards. Current modeling suggests Ethereum staking could reach 70 million ETH by January 2028 without reform, representing 55% of the network’s total supply.
Both proposals frame lower native staking yield as a mechanism to redirect capital toward decentralized finance activity and other uses. Supporters argue that reduced issuance strengthens the investment case around scarcity, pulling Ethereum and Solana’s narratives closer to Bitcoin’s supply story. The changes would require 3% additional SOL price appreciation to offset the lower compound yield, which is projected at 9.89% over three years under the proposal versus 13.15% under the current schedule.
Ethereum’s debate has surfaced concerns about smaller solo validators. Large custodians and staking companies can distribute fixed operational costs across larger ETH positions, potentially leaving independent operators at a disadvantage. Ethereum developers have acknowledged that monetary-policy changes become harder to pass once businesses build revenue models around staking yield.
The Grayscale cash distribution model sidesteps the question of whether ETF holders will benefit from reduced protocol yields. By converting staking rewards to quarterly distributions rather than reinvesting them, Grayscale isolates ETF shareholders from both the upside of compounding and the downside of protocol yield compression.
Critics of the yield-reduction proposals warn that validators, ETF products, and DeFi protocols dependent on staking income face material revenue loss. Ethereum participants continue to debate whether staking truly functions as a risk-free rate, given exposure to slashing penalties and other validator risks. Neither proposal has been formally voted on or approved as of the filing date.
