Aptos Proposes 44% Cut in Staking Rewards to Boost Economic Activity

The Aptos community is currently evaluating a new governance proposal, AIP-119, which aims to halve staking rewards over the next three months. This proposal seeks to reduce the current annual staking yield from around 7% to 3.79%. The proposal was introduced by Aptos Labs senior engineer Sherry Xiao and network core developer Moon Shiesty on April 18.

AIP-119 describes staking rewards as a “risk-free” benchmark, similar to the role of interest rates in traditional finance. According to the proposal, the current yield rate of 7% is too high and discourages productive use of capital within the ecosystem. The authors aim to lower the yield to around 3.79%, hoping this change will encourage network users to pursue more dynamic economic activities beyond passive staking. This could stimulate demand for more active strategies, such as restaking, MEV extraction, and participation in DeFi.

Shiesty added that any lowered staking demand would be offset by the reduction in inflation from this AIP and new reward-generating opportunities launching in the next six months, as well as other sources of DeFi rewards. A portion of the saved emissions could support initiatives like liquidity incentives and gas fee subsidies. Stablecoin-related programs may also benefit, especially in early-stage Layer 1 experiments.

Despite the proposal’s broader ambitions, AIP-119 raises concerns about validator sustainability. Under the proposed changes, smaller operators with lower stake volumes could face financial strain. Operating a validator node in a cloud environment can cost anywhere from $15,000 to $35,000 per year. Currently, over 50 validators manage under 3 million APT each, accounting for around 9% of the total network stake. To address this, the proposal introduces a validator delegation program to support these smaller players. The initiative would allocate funds and delegate tokens to help maintain decentralization, geographic diversity, and community involvement.

The community’s reaction to the proposal has been divided. Yui, COO of Aptos-based Telegram game Slime Revolution, warned that smaller validators might be pushed out. The executive emphasized the importance of finding a balance that encourages innovation without sacrificing decentralization. Kevin, a researcher at BlockBooster, argued that the shift could benefit Aptos in the long run. He noted that high inflation often masks weak product-market fit. Lower inflation, on the other hand, forces developers to build real demand. Kevin also suggested that reduced token emissions might improve APT’s scarcity and boost its price, potentially balancing out the lower staking yield.

In summary, the Aptos community is considering a significant change to its staking rewards system through AIP-119. This proposal aims to reduce the annual staking yield from 7% to 3.79% over the next three months, encouraging more dynamic economic activities within the ecosystem. While the proposal has its merits, it also raises concerns about validator sustainability, particularly for smaller operators. The community’s reaction has been mixed, with some expressing concerns about decentralization and others seeing potential long-term benefits. The outcome of this proposal will be closely watched as it could have significant implications for the Aptos network and its stakeholders.