> Not disinflationary like Bitcoin, but actually deflationary, with token burn
It's possible there's some recent development I'm not aware of so please fill in any gap here, but my understanding: Token burn is already in place since EIP1559 (base gas fees get burned now, instead of getting paid out to miners/validators. There is a separate priority fee for incentivizing inclusion in times of congestion). It will work similarly on ETH2. As laid out in EIP1559, this means that the ETH supply may be inflationary or deflationary at different times, depending on if total base fees are greater or smaller than miner/validator rewards. So it's not a given. However I could agree that given continued growth of Ethereum adoption, the deflationary hypothesis is not unlikely.
> Staking that 1 ETH just got 10% more expensive because the opportunity cost of staking that ETH increased relative to spending it.
Can you explain how this follows?
Shouldn't it be the opposite; as long as you don't require the immediate liquidity, deflation should mean that it's actually preferable to hodl, and staking rewards compound with that.
Aside from that, due to MEV, being a validator means you get reserved slots where you can [extract MEV yourself/safely submit transactions of your own without being front-run]. This is something that is today primarily taken advantage of by bigger or more proficient actors - meaning yes, this is a force towards validator consolidation. On the other hand I believe the "flashbots market" will likely become more efficient and accessible to the point where commonly used validator clients will have built-in interfaces to exploit this through an open market for privately broadcasted transactions (as mentioned in references this already is the case for ETH1). This means that over time the playing field gets leveled as getting a cut from MEV gets accessible for smaller non-professional stakers as well.
Looking at the current direction, I would agree in the sense that we're on the track for consolidation of staking power and resulting compounding centralization of ETH wealth, but not for the reasons you're stating, and I would not agree that smaller stakers are driven out by design - it works out that way despite the small-staker-incentive situation, not because of it.
Future EIPs may change the dynamics further in either direction. I don't think it seems obvious either way.
Bitcoin's supply is better described as deflationary since it's capped and Bitcoin experiences ongoing losses. Eventually there will be fewer and fewer bitcoin in circulation. This will happen way before Bitcoin emission ends in 2140, since in 2061 for instance, only 320 BTC will be mined, and yearly losses will easily exceed that.
It's possible there's some recent development I'm not aware of so please fill in any gap here, but my understanding: Token burn is already in place since EIP1559 (base gas fees get burned now, instead of getting paid out to miners/validators. There is a separate priority fee for incentivizing inclusion in times of congestion). It will work similarly on ETH2. As laid out in EIP1559, this means that the ETH supply may be inflationary or deflationary at different times, depending on if total base fees are greater or smaller than miner/validator rewards. So it's not a given. However I could agree that given continued growth of Ethereum adoption, the deflationary hypothesis is not unlikely.
> Staking that 1 ETH just got 10% more expensive because the opportunity cost of staking that ETH increased relative to spending it.
Can you explain how this follows?
Shouldn't it be the opposite; as long as you don't require the immediate liquidity, deflation should mean that it's actually preferable to hodl, and staking rewards compound with that.
Aside from that, due to MEV, being a validator means you get reserved slots where you can [extract MEV yourself/safely submit transactions of your own without being front-run]. This is something that is today primarily taken advantage of by bigger or more proficient actors - meaning yes, this is a force towards validator consolidation. On the other hand I believe the "flashbots market" will likely become more efficient and accessible to the point where commonly used validator clients will have built-in interfaces to exploit this through an open market for privately broadcasted transactions (as mentioned in references this already is the case for ETH1). This means that over time the playing field gets leveled as getting a cut from MEV gets accessible for smaller non-professional stakers as well.
Looking at the current direction, I would agree in the sense that we're on the track for consolidation of staking power and resulting compounding centralization of ETH wealth, but not for the reasons you're stating, and I would not agree that smaller stakers are driven out by design - it works out that way despite the small-staker-incentive situation, not because of it.
Future EIPs may change the dynamics further in either direction. I don't think it seems obvious either way.