This talk explores the macroeconomic challenges facing Ethereum, with a focus on the dynamics of staking, inflation, and governance centralization. Leveraging a "stock and flow" macroeconomic model inspired by dynamical systems theory, we analyze the risk of excessive staking and its interaction with inflationary and deflationary forces. Our findings reveal that moderate inflation can serve as a mechanism to curb runaway staking, while overly aggressive deflationary strategies risk exacerbating governance centralization. This talk highlights the critical importance of balanced macroeconomic interventions, supported by quantitative modeling and simulations, to sustain Ethereum's decentralized architecture and ensure its long-term economic resilience.

This talk is based on research funded by the EF and available here: https://blog.20squares.xyz/issuance-dynamics/