Ethereum and Solana Staking Yields Shrink as Wall Street Turns Rewards Into Cash

FOMO DAILY | CRYPTO | ETHEREUM | SOLANA | STAKING

Wall Street has spent years trying to package crypto into products traditional investors understand. Now staking rewards are starting to look remarkably familiar: hold an investment product, the underlying crypto earns yield, and cash can land in the shareholder’s account.

But just as staking income becomes easier for mainstream investors to receive, Ethereum and Solana are debating whether their networks should produce less of it.

That creates one of the more interesting tokenomics battles in crypto right now: is it better to receive a higher staking yield, or own an asset with lower future issuance and potentially less dilution?

Quick Answer

Ethereum and Solana are considering changes that could reduce staking rewards while also reducing future token issuance. At the same time, Grayscale has formalised mechanisms allowing staking rewards from its Ethereum and Solana investment products to be converted into cash and distributed to shareholders.

The result is a growing tension between income and scarcity: investors may receive less staking yield, but potentially hold assets whose supplies grow more slowly.

The proposals are not guaranteed to become permanent network policy. Ethereum’s EIP-8363 remains under debate, while Solana’s SGP-0002/SIMD-0550 process is still moving through governance.

Crypto Staking Is Starting to Look More Like Traditional Income

Staking has traditionally required crypto investors to understand validators, delegations, wallets, lockups and protocol mechanics.

ETF-style products change the experience.

Rather than personally staking ETH or SOL, an investor can own shares in an investment vehicle whose underlying assets participate in staking. Rewards generated from those activities can then be converted into cash and distributed to shareholders.

Grayscale’s amended Ethereum staking trust agreement provides for regular distributions of net cash proceeds generated from staking rewards. The trust has said it currently intends distributions on a monthly basis, but no less frequently than quarterly.

Grayscale’s amended Solana Staking ETF agreement similarly states that, when its staking conditions are satisfied, native SOL staking consideration must be converted to cash no less often than quarterly and the net proceeds distributed to shareholders.

That makes staking income considerably easier to understand for traditional investors.

Own shares.

The underlying crypto participates in staking.

Rewards are generated.

Some expenses and staking fees are deducted.

Cash can then be distributed to shareholders.

It is not technically the same thing as a corporate dividend funded from company profits, but from an investor’s perspective it can begin to behave like dividend-style income.

And Ethereum cash distributions aren’t entirely new

There is an important detail here.

Grayscale’s Ethereum staking product had already reported cash distributions derived from staking rewards earlier in 2026.

SEC filings show ETHE reported approximately $14.39 million of aggregate staking-derived cash distributions during the first three months of 2026, followed by additional distributions in April and May.

What changed in August is therefore better described as the formalisation of a regular distribution framework, rather than Wall Street discovering staking income for the first time.

And that distinction matters.

Because staking income is becoming an increasingly established part of investment products at exactly the moment the networks themselves are asking whether staking is paying too much.

Solana Wants to Reach Lower Inflation Faster

Solana’s current monetary system is designed so token inflation gradually declines toward a long-term terminal inflation rate.

The new proposal, SGP-0002, supports implementing the changes associated with SIMD-0550, effectively doubling Solana’s annual disinflation rate from approximately 15% to 30%.

The terminal inflation target would remain 1.5%, but Solana would reach it much faster.

Under modelling attached to the proposal, the network could reach that terminal rate in roughly 2.8 years rather than around 5.7 years, resulting in approximately 18.9 million fewer SOL being emitted over six years.

That’s potentially attractive for long-term SOL holders.

Fewer newly issued coins mean less additional supply entering the ecosystem.

But there is a trade-off.

Lower inflation also means lower staking rewards.

Under modelling cited for a scenario where roughly 68% of SOL participates in staking, nominal staking yield could move from approximately:

5.84% currently
4.34% after year one
3.00% after year two
2.25% after year three

Those figures exclude factors such as commissions, MEV and some other sources of validator revenue.

So the proposal essentially asks SOL holders:

Would you rather receive more SOL through staking, or have fewer new SOL created in the first place?

Ethereum Is Asking a Similar Question

Ethereum is considering a different mechanism with a surprisingly similar economic objective.

Ethereum’s draft EIP-8363, Tapered Issuance Burn, proposes modifying ETH issuance by burning a portion of validator rewards.

As the percentage of ETH being staked increases, a larger portion of validator issuance would effectively be removed.

The underlying concern is straightforward.

Ethereum needs enough ETH staked to secure the network.

But once sufficient economic security exists, does Ethereum need to continue issuing ever-increasing quantities of ETH simply to convince additional holders to stake?

Supporters of issuance reform argue that it may not.

At sufficiently high staking participation, the proposal would progressively reduce the economic incentive for additional ETH to enter staking.

Critics, however, have raised concerns about validator profitability, decentralisation and whether smaller independent staking operators could be disproportionately affected as margins become thinner. Those concerns are actively being debated within the Ethereum community.

This is therefore not an approved Ethereum monetary-policy change.

It remains a proposal.

The Real Battle: Yield Versus Dilution

This is where the story becomes much bigger than staking.

Imagine two hypothetical versions of the same token.

Token A

You receive a 6% staking reward.

But the network is also producing substantial quantities of new tokens every year.

Token B

You receive a 3% staking reward.

But the supply expands much more slowly.

Which investment is actually better?

The answer isn’t automatically Token A.

A high nominal staking yield can look attractive while simultaneously being partially offset by the dilution caused by new token issuance.

Conversely, lower issuance does not automatically make Token B more valuable either.

There still needs to be demand.

That is the experiment Ethereum and Solana are effectively considering.

Reduce the amount paid to stakers while strengthening the scarcity side of the asset’s economic story.

Why DeFi Could Actually Benefit From Lower Staking Yields

There is another part of the equation that is easy to overlook.

Native staking yield acts as something resembling a baseline rate of return inside a proof-of-stake ecosystem.

If somebody can earn around 5% simply by staking SOL, why would they lend that SOL, provide liquidity or enter a complicated DeFi strategy offering 5.5% while accepting considerably more risk?

That higher staking baseline forces other financial applications to offer increasingly attractive returns.

Reducing native staking yield lowers that hurdle.

CryptoSlate highlighted this argument in relation to Solana’s proposal: lower passive staking returns could potentially make lending, liquidity provision and other productive uses of capital comparatively more attractive.

That means lower staking rewards are not necessarily negative for every corner of the ecosystem.

Who Could Win From Lower Staking Rewards?
Long-term ETH and SOL holders

Holders who do not stake could potentially benefit from slower dilution because fewer new tokens are being created.

DeFi applications

Lower native staking yields may make lending, liquidity provision and other strategies more competitive.

Investors focused on scarcity

A declining issuance narrative makes Ethereum and Solana easier to compare with scarce digital assets such as Bitcoin, although ETH and SOL continue to have very different monetary systems from Bitcoin.

Who Could Lose?
Passive stakers

This is the obvious one.

If protocol rewards decline, the amount generated simply by staking tokens falls.

ETF shareholders seeking income

If a staking ETF earns less from the protocol, there is ultimately less staking income available to distribute.

Smaller validators

Operators with thin margins and relatively high fixed costs could be more vulnerable to reduced protocol rewards.

Staking businesses

Large staking providers, liquid-staking protocols and other businesses built around validator revenue have an obvious financial interest in how Ethereum and Solana set future reward levels.

Wall Street Has Now Entered Crypto’s Monetary-Policy Debate

This may ultimately be the most important part of the story.

Crypto monetary policy used to feel like something discussed mainly by developers, validators and token holders.

That world is changing.

When investment products earn staking rewards and distribute that money to shareholders, protocol monetary policy begins affecting traditional investment income.

A change to Ethereum issuance can potentially influence an investment product sitting inside someone’s brokerage account.

A Solana governance decision can ultimately influence how much staking-derived cash a SOL investment product has available to distribute.

That creates a new economic constituency.

Asset managers.

ETF investors.

Custodians.

Staking providers.

DeFi protocols.

Validators.

Institutional investors.

And ordinary token holders.

All of them can have different opinions about the ideal level of crypto issuance.

The FOMO Daily Take

The biggest mistake would be looking at this story and simply concluding:

“Ethereum and Solana want to cut staking rewards.”

There is much more going on.

Both networks are confronting one of the fundamental questions facing mature proof-of-stake cryptocurrencies:

How much should a blockchain pay people to secure it once the network already has enough economic security?

Pay too little and validators may leave.

Pay too much and the network may continuously dilute non-staking holders while directing enormous amounts of newly created tokens toward validators and staking businesses.

Meanwhile, Wall Street has now turned staking into something ordinary investors can increasingly understand: an asset capable of generating distributable income.

That makes reducing staking rewards politically and economically harder than it once was.

Solana’s proposal tries to reach lower inflation sooner.

Ethereum’s proposal attempts to reduce issuance as staking participation climbs.

Both effectively ask investors to accept less immediate yield in return for potentially better long-term monetary characteristics.

Whether the market prefers that trade remains unknown.

Because eventually Ethereum and Solana aren’t just competing on transaction speed, DeFi, applications or institutional adoption.

They’re competing on monetary credibility.

And the next phase of that competition may come down to one simple question:

Would investors rather be paid more tokensor own tokens that become harder to create?

Frequently Asked Questions

Are Ethereum staking rewards being removed?

No. Ethereum staking rewards have not been removed. EIP-8363 is a draft proposal that would change issuance economics and progressively burn part of validator rewards as staking participation increases.

Is Solana cutting staking rewards?

Not yet. Solana is considering a governance proposal linked to SIMD-0550 that would accelerate its existing disinflation schedule. If implemented, lower token issuance would also reduce the inflation-funded component of staking rewards.

Does the Solana proposal change the 1.5% terminal inflation rate?

No. The proposal keeps the long-term 1.5% terminal rate but attempts to reach it significantly sooner.

Do Grayscale Ethereum and Solana staking ETFs pay staking rewards as cash?

Their amended structures allow staking-generated proceeds to be converted into cash and distributed to shareholders. Grayscale’s Ethereum product says it currently intends monthly distributions while requiring distributions no less often than quarterly, and the amended GSOL trust framework requires staking consideration to be converted to cash at least quarterly when the applicable staking conditions are satisfied.

Are staking distributions the same as company dividends?

No. A conventional stock dividend generally represents a distribution made by a company to shareholders. These crypto investment-product distributions originate from staking rewards generated by blockchain assets. Calling them dividend-like income describes the investor experience, but they are not the same economic mechanism as a traditional corporate dividend.

Disclaimer: This article is for news, educational and informational purposes only and does not constitute financial, investment, legal or tax advice. Cryptocurrency and crypto-linked investment products are high-risk assets. Always conduct your own research and consider professional advice before making financial decisions.