Is Ethereum staking about to start being taxed? Former insiders warn of a funding crisis: EthLabs lets large investors directly sponsor development

Former Ethereum insiders warn that core development may face a "slow-burning funding crisis." Kleros co-founder proposes a "Validator Transfer Tax" that levies up to 10% on staking rewards, while the newly established EthLabs allows large token holders to directly sponsor development, shifting the discussion from "how to tax" to "whether taxes are really necessary."
(Background summary: Ethereum Foundation completes major restructuring with 20% layoffs! New "Five Core Clusters" vow to defend anti-censorship principles)
(Additional background: Vitalik confirms Ethereum Foundation cuts budget by about 40%! Ethereum to launch "Straw Map" third-generation upgrade, ultimately following Bitcoin's simplification)

Table of Contents

Toggle

• Staking Tax Proposal: Treat Validators as Tax Authorities
• Staking Rewards Have Dropped from 4.6% to 2.7%
• EthLabs Debuts: Major Holders Directly Fund Development
• From "How to Tax" to "Is Taxation Really Needed"

Recently, a former Ethereum insider warned that Ethereum’s core development ecosystem might face a "slow-burning funding crisis" within the next 3 to 9 months. Following the Ethereum Foundation’s 20% layoffs and approximately 40% cut in annual budget, a seemingly simple question—who will pay to sustain protocol development—has sparked one of the most intense governance debates recently.

Staking Tax Proposal: Treat Validators as Tax Authorities

Kleros co-founder Clément Lesaege proposed a "Validator Transfer Income" scheme on Eth Research, suggesting a protocol-level mechanism to direct up to 10% of validator staking rewards toward an ecosystem fund. He estimates that, with current staking scales, a 5% to 10% transfer rate could generate about 50k to 70k ETH annually, equivalent to roughly $82.5 million to $116 million.

However, this proposal is more than just a "tip jar." Lesaege pointed out that Ethereum is experiencing "coordination failure": everyone benefits from shared infrastructure, but no one is willing to pay.

Figment spokesperson said that compressing staking profits "tends to concentrate validators among large integrated operators," which would come at the expense of "operator diversity." Twinstake co-founder Andrew Gibb noted that the most sensitive capital groups might "reduce or exit" staking allocations.

Staking Rewards Have Dropped from 4.6% to 2.7%

Max Shannon, senior researcher at Bitwise, noted that Ethereum’s staking APR has fallen from about 4.6% in June 2023 to the current 2.7%, even though staking supply and staking ratio have roughly doubled during this period. He added that further compression of returns would make "reducing risk and queueing for exit liquidity more relatively attractive," and could also lead validators to rely more on MEV to compensate for losses, potentially impacting censorship resistance.

Shannon did some calculations: an annual funding gap of about $30 million, with staking annual rewards around $1.9 billion, could be filled with just 1.6% of staking rewards. This makes Lesaege’s proposal economically reasonable, but governance-wise, it’s seen as crossing into "tax authority" territory for validators.

EthLabs Debuts: Major Holders Directly Fund Development

Amid intense community debate, five former Ethereum Foundation researchers announced on Monday the launch of EthLabs, a new non-profit research organization backed by major ecosystem supporters including Joseph Lubin, founder of BitMine, Sharplink, and ConsenSys.

Unlike protocol-level "forced taxation," EthLabs adopts a "voluntary sponsorship" approach, with large ETH-aligned institutions directly funding development. Joe Lubin stated on X that the Ethereum Foundation remains focused on "core cryptopunk components," while other research teams will explore additional dimensions.

Tom Lee on X commented that "zero chance" of a funding crisis and that funds are "in place," which actually foreshadowed the establishment of EthLabs a few days later.

From "How to Tax" to "Is Taxation Really Needed"

The emergence of EthLabs shifts the debate from "how should Ethereum tax itself" to "is taxation really necessary." The Ethereum Foundation’s treasury policy has already set multi-year operational buffers and a plan to gradually reduce expenditures. Vitalik Buterin confirmed that the foundation’s budget has been cut by about 40%, decreasing from roughly 15% of annual expenses before 2026 to about 5% after 2030.

This model hints that Ethereum’s next phase may move toward a "decentralized funding structure," with EF maintaining core protocol development, while other labs and well-funded institutions share peripheral work. For Taiwanese investors, this means Ethereum’s R&D will no longer rely solely on a single foundation but will adopt a hybrid model similar to "open source + corporate sponsorship," akin to R&D centers common in Taiwan’s tech industry.