Aptos Eyes 3% Staking Rewards Cut Over 90 Days to Boost Development

• MoonSheisty, a member of the Aptos community, proposed a slashing of staking rewards for the network’s native token, Aptos, by almost 50%.
• According to MoonSheisty, high-stakes rewards on Aptos can incentivize token locking but may limit user interest in high-reward options like restaking.

The Aptos community is debating a new governance proposal, AIP-119, which will cut staking rewards in half. Introduced on April 18 by Aptos Labs’ head of production engineering, Sherry Xiao, and developer Moon Shiesty, the proposal will reduce the annual percentage yield (APY) of staking Aptos (APT) tokens from 7% to 3.79% within three months.

To set context, staking reward percentages differ significantly across blockchains. For example, BNB Smart Chain possesses one of the highest effective returns at 7.43%, while Cardano has only 0.55%. Aptos is already at a competitive level of 7%, which the advocates of the proposal deem unsustainable.

Rationale Behind the Proposal

AIP-119’s proponents claim that reducing staking rewards will make Aptos competitive with other Layer-1 blockchains and enhance capital efficiency. They assume the existing high-stakes returns can unwittingly deter users from pursuing higher-risk, higher-reward strategies in the Aptos ecosystem, including restaking, Decentralized Physical Infrastructure Networks (DePIN), Maximal Extractable Value (MEV), and Decentralized Finance (DeFi) applications.

Staking is used to secure the network, reward validators, and incentivize users to lock up their tokens. But it’s not without its flaws; one of the issues is that smaller validator pools get acquired by larger ones, which can be bad for decentralization and weaken the network in the long term.

The proposal has also generated controversy within the Aptos ecosystem. ElagabalxNode cautioned that penalizing staking rewards without installing compensatory measures such as a strong delegation mechanism or grant program could kick out smaller validators from the network. “I support the idea of rethinking Aptos tokenomics for sustainable growth,” ElagabalxNode added, “but I believe this process should carefully balance ecosystem incentives with the long-term viability of validators.” According to DeFiLlama, Aptos’ TVL was $974 million on April 18, with approximately $320 million being held by Aries Markets. 

AIP-119 notes that “53 validators currently hold less than 3 million APT each, with a combined stake of around 78.4 million APT, just 0.09% of the total 865 million APT actively staked”. The proposal mandates that this community would be affected the most and suggests having a community validator program that will grant grants and additional stake to smaller donors.

The proposal is currently undergoing community review with ongoing active discussion on GitHub, Reddit, and X. Its trajectory will be decided through on-chain governance, where the members of the community will vote for suggested changes to accept or reject.

In the meantime, market activity around Aptos has grown over the last day. APT’s trading volume has surged by 6.47% in the last 24 hours to $94 million, with the token’s price growing to $4.07, but still down 11% over the last month.