Key Highlights
- Ethereum developers have proposed EIP-8361 to gradually reduce staking rewards once 50% of ETH’s supply is staked.
- The proposal aims to slow staking growth and prevent excessive concentration among large staking providers.
- If approved, net staking rewards would gradually fall to zero at a 50% staking ratio while making ETH supply growth more predictable.
Ethereum developers have introduced a proposal that could change how staking rewards work on the network.
Known as EIP-8361: Tapered Issuance Burn, the proposal was submitted on Aug. 4 by Ethereum contributors Jerome de Tychey, Pintail, Dapplion, pa7x1, Ladislaus, and Justin Drake, according to a post on X.
The proposal aims to slow the growth of Ethereum staking once it reaches 50% of the total ETH supply by gradually reducing staking rewards rather than allowing them to continue increasing.
Why developers want to change staking rewards
The proposal comes as more people continue to lock up their ETH to help secure the Ethereum network and earn rewards. According to the authors, Ethereum crossed an important point in April 2026 when more than one-third of its total ETH supply became staked. Since then, the amount of staked ETH has continued to rise every month.
The developers argue that the current reward model encourages continued staking because it always provides an incentive for additional participation. They noted that under Ethereum’s existing design, staking rewards never disappear entirely. Even if every ETH in circulation were staked, validators would still earn approximately 1.5% in annual rewards.
According to the proposal, this creates a system where staking continues to expand because there is no natural point at which financial incentives diminish enough to discourage additional participation.
If the current model remains unchanged, the developers estimate staking could accelerate over the next two years. They said Ethereum’s validator entry queue is already full, adding approximately 1.75 million ETH each month. Based on their projections, more than 70 million ETH could be staked by Jan. 1, 2028, representing over 55% of Ethereum’s total supply.
Why the growing staking ratio is raising concerns
The proposal argues that excessive staking could create new problems for the network. While staking helps secure Ethereum, the authors contended that too much staking may eventually have the opposite effect. They said solo stakers could be affected first because taxes on staking income and continued issuance reduce their real returns.
At the same time, larger staking companies and custodians could continue gaining a bigger share of the network, making staking more concentrated over time.
The authors also said the current system affects people who simply hold ETH without staking it. As new ETH continues to be issued as staking rewards, holders who do not stake see their share of the total supply become smaller over time. The proposal describes this as a form of dilution. It also warns that if staking keeps expanding, liquid staking tokens and other staking products could become more common than holding regular ETH itself across the Ethereum ecosystem.
How EIP-8361 plans to reduce staking rewards
To solve this, the developers are proposing a different approach instead of removing staking rewards completely. Under EIP-8361, a small part of validators’ rewards would be burned during every epoch.
The amount burned would increase as more ETH is staked. At lower staking levels, the burn would be small. But as staking moves closer to half of Ethereum’s total supply, the burn would become larger until net staking rewards gradually fall to zero at a 50% staking ratio.
What the proposal means for validators and ETH holders
According to the authors, the proposal would remove what they describe as the network’s current “artificial yield floor.”
“The staking market finally settles where yield = the risk premium stakers demand — an equilibrium strictly below 50% staked, priced by the market, not by a curve chosen in 2020,” the developers wrote. In short, they believe staking rewards should be decided naturally by market demand instead of being supported by an old reward formula.
The developers stressed that the proposal is designed to make only a few changes to Ethereum’s existing system. It introduces one new permanent value that marks the point where staking becomes saturated. Instead of sending reduced rewards somewhere else, those rewards would simply be burned.
The proposal also keeps validators’ daily duties the same, meaning they would still be rewarded for doing their jobs correctly.
Validators are computers or groups of computers that help process transactions, create new blocks, and keep the Ethereum network secure. Earlier this year, Ethereum co-founder Vitalik Buterin also issued a proposal that explored ways to make validators safer and more decentralized by allowing them to run across multiple machines instead of relying on a single device.
Ethereum community sees things differently
However, not everyone agrees with this proposal. Oisin Kyne, co-founder of Obol, argued in the comment that Ethereum’s security is not simply determined by how much ETH is staked, but by how difficult it is for anyone to control the network’s fork choice.
Kyne said the current staking reward curve was designed to keep the network open to more participants by increasing issuance as the staking ratio grows. In his view, reducing rewards to zero at a reachable staking level could allow the largest and least price-sensitive organizations to continue staking while pushing out smaller participants who depend more on rewards.
He argued that this could leave a small number of large players with greater influence over who helps secure Ethereum.
“The original curve deliberately prevents this, by increasing issuance as staking ratio goes up, making it impossible to price people out,” Kyne wrote. He added that Ethereum should continue to prioritize decentralization over making ETH’s monetary policy more restrictive, saying, “decentralisation > hard money.”
A slow rollout instead of a sudden change
The proposal outlines a phased implementation rather than an immediate change.
According to the proposal, the reduction in rewards would be introduced gradually over 18 months, followed by about six months of preparation before the network upgrade takes place. This gives validators and the wider Ethereum community about two years to adjust. However, the proposal says that once the upgrade becomes active, the system would no longer encourage staking to grow beyond 50% of Ethereum’s supply.
The authors also estimate that Ethereum’s yearly issuance would reach its highest point when about 20% of the supply is staked before falling as staking increases. By the time staking reaches 50%, new issuance would drop to zero.
They said this would make Ethereum’s supply easier to predict and, together with existing burn mechanisms such as EIP-1559 and the blob burn, could lead to ETH supply shrinking more often over time.
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