A draft Ethereum Improvement Proposal (EIP) aimed at reshaping the network’s issuance policy has triggered one of the most contentious discussions in the protocol’s recent history.
Submitted on August 4, 2026, EIP-8361, also circulating as EIP-8363 due to a numbering conflict, proposes a “Tapered Issuance Burn” that would progressively reduce and eventually eliminate consensus-layer staking rewards once roughly half of all ETH is staked.
The plan, authored by a group of researchers including Ethereum Foundation contributor Justin Drake, has drawn sharp reactions from DeFi founders, liquid staking operators, solo stakers, and core developers, exposing deep divides over Ethereum’s monetary policy, security model, and priorities.
At current levels, approximately 33% of ETH supply, around 40 to 41 million ETH, is staked, generating consensus yields near 2.6%, as per Ethereum Validator Queue data. Proponents argue the existing issuance curve contains no natural off-switch, encouraging continuous stake growth that risks centralization and unnecessary dilution. Critics counter that forcing yields toward zero would undermine solo operators, destabilize DeFi strategies built around staking yields, and introduce damaging uncertainty for institutions.
For now, the proposal remains in Draft status and targets potential consideration for the Hegotá upgrade, though inclusion is far from assured.
The Proposal: A Market-Driven Fix to Unbounded Staking Growth
EIP-8361 seeks to address what its authors describe as a structural flaw in Ethereum’s post-Merge issuance design. Under the current curve, rewards decline only with the square root of total stake, leaving a residual yield floor even if nearly all ETH becomes staked. This, they contend, incentivizes perpetual growth in staking participation through liquid staking tokens, exchanges, ETFs, and custodial services, potentially concentrating control and eroding the network’s capture resistance.
The six authors—pintail, Jérôme de Tychey, dapplion, pa7x1, Ladislaus von Daniels, and Justin Drake—frame the change as a minimal, market-driven adjustment. By introducing a burn that rises with the staking ratio and reaches 100% at a fixed saturation balance of 60.25 million ETH (approximately 50% of supply at the time of a potential fork), the proposal would allow the staking market to settle where yields meet participants’ risk premia, expected to occur below the 50% threshold. Beyond that point, issuance would no longer subsidize further growth.
De Tychey, president of Ethereum France and a prominent public voice for the proposal, emphasized the urgency in his announcement. “The window is closing,” he wrote, noting that the validator entry queue remains saturated and that conservative projections put more than 70 million ETH staked—over 55% of supply—by January 2028 if no action is taken. Every month of delay, authors claim, adds roughly 1.5% points to the staking ratio. They position the EIP as building on years of research dating to 2023, much of it indexed at issuance.wtf, rather than a sudden invention.
Supporters within research circles, including some former Ethereum Foundation contributors, have argued that high staking ratios deliver diminishing marginal security while amplifying risks of social-layer capture and coercion. The burn, they say, strengthens ETH’s monetary properties by reducing dilution for non-stakers without touching execution-layer fees or maximal extractable value (MEV).
Mechanics of the Tapered Issuance Burn
The mechanism is deliberately confined to the consensus layer. Validators would continue receiving calculated rewards for duties such as attestations, block proposals, and sync committee participation. However, a deduction, sized as a fraction of the idealized reward for each duty, would be applied and the ETH burned.
The burn fraction scales with the staking ratio raised to the power of 1.5 (or equivalently described in related formulations), capped at 100% once the saturation balance is reached. At that point, a perfectly performing validator would earn zero net consensus-layer yield and rely solely on tips and MEV.
If activated at full strength immediately, the burn would roughly halve current net yields from about 2.6% to 1.2% at today’s staking ratio—potentially prompting significant exits. To avoid shock, the proposal includes an 18-month transition. It temporarily doubles the BASE_REWARD_FACTOR from 64 to 128 before gradually decaying it, so stakers begin near existing yields and experience the reduction progressively. Combined with typical hard-fork lead times, the ecosystem would have roughly two years to adapt.
A draft implementation already exists in the Prysm client, spanning approximately 300 lines of code. No changes to the execution layer or existing smart contracts are required, though the update would necessitate a hard fork.
Issuance under the permanent curve would peak near a 20% staking ratio at around 0.5% annual supply inflation before declining to zero at 50%. Authors note that consensus issuance currently accounts for at least 93% of total staking yield; even at a hypothetical 40% staking ratio under the new rules, it would still represent the large majority. MEV would grow in relative importance, a shift some view as concentrating advantages among sophisticated operators.
Proponents Make the Case for Urgency and Security
Authors and allies have defended both the substance and the timeline. De Tychey stressed that proposing the EIP for Hegotá opens formal discussion rather than closes it, providing months for feedback before any potential scheduling decision. “Being proposed for inclusion is what opens the floor for feedback, not what closes it,” he responded in the Ethereum Magicians thread. He and co-authors argue that waiting for a later fork effectively abandons the change, as stake continues accumulating and vested interests solidify.
Drake and the group maintain that the primary goals are security and capture-resistance. Beyond a certain staking threshold, additional stake contributes little to economic security while increasing risks that large custodians and providers dominate the validator set, undermining neutrality and censorship resistance.
The taper removes the protocol’s implicit subsidy for unbounded growth, letting markets discover an equilibrium. Some independent voices have echoed this, noting that opposition volume partly reflects revenue exposure among liquid staking and DeFi participants. One researcher observed that plenty of people support the direction but that critics are louder.
The design draws on prior analytical work, including insights from Anders Elowsson on per-duty burns and earlier issuance discussions. Proponents highlight the gradual transition as evidence of caution, preserving micro-incentives and allowing rollback if unintended effects emerge. They reject claims that the proposal punishes growth, insisting instead that the current curve creates a stealth tax on non-stakers through perpetual dilution with no exit ramp.
DeFi Leaders Lead the Charge Against the Change
Opposition has been swift, public, and forceful, led by prominent application-layer figures. Aave founder Stani Kulechov emerged as one of the most vocal critics. In detailed posts and a lengthy Ethereum Magicians contribution, he argued the proposal fails its stated goals and actively harms Ethereum.
“Unfortunately this proposal doesn’t achieve the outcome it tries to achieve and is actually hurtful for Ethereum,” Kulechov wrote. Capping rewards at zero above 50%5 staked, he said, renders yields unpredictable and potentially uneconomical, carrying “a significant adoption cost” that institutions will avoid in favor of assets with more reliable cash flows.
Kulechov further warned that zero or near-zero consensus yields would accelerate the very centralization the EIP claims to prevent: solo and home stakers, sensitive to fixed costs and yield changes, would exit first, leaving the field to large entities with structural reasons to stake—ETFs, exchanges, and corporate treasuries. He calculated that all-in yields could fall sharply even at current stake levels and flagged secondary risks, including tax complications during the transition (where gross rewards temporarily double while half is burned) and an expanded role for MEV that could favor operators comfortable with certain relays.
On the DeFi side, he noted that borrowing ETH would lose most of its economic rationale beyond shorting, potentially shrinking lending markets and related strategies. “Ethereum should not be punished for its growth,” he concluded, urging focus instead on privacy, scalability, stablecoins, DeFi, and real-world assets.
Mike Silagadze, CEO of ether.fi, delivered an equally pointed critique within hours of the announcement. “This is so disappointing on every level,” he posted. The short notice—48 hours before a relevant deadline—left inadequate time for comment on a major economic change with far-reaching DeFi implications.
“Every builder on Ethereum opposes this. Why is this a focus?” Silagadze argued the plan would push out unsubsidized solo stakers, concentrate staking among centralized entities with near-zero cost of capital, and trigger capital flight from protocols reliant on the staking ecosystem. He predicted tens of billions of dollars in ETH could unstake and enter circulating supply, with little benefit to price.
Isidoros Passadis, Chief of Staking at Lido, added that the EIP “tries to do too many things at once” and rests on research that is “too theoretical.” He warned it lays “Ethereum’s hard-fought uniqueness at the sacrificial altar of ETH as money” and could produce a sustained near 50% equilibrium with zero nominal yield—a “death-knell” for network security as expert operators are priced out.
Timing objections also came from Greg Koumoutsos, who noted the proposal landed just before the Hegotá proposal-for-inclusion deadline and contradicted earlier roadmap expectations that issuance changes would target a later fork. Marc Zeller of the Aave Chan Initiative went further, suggesting affected protocols consider outright refusal.
ARK Invest’s Lorenzo Valente offered a more measured take, arguing the EIP addresses issuance incentives rather than Ethereum’s deeper revenue challenges around Layer 2 economics and value capture, treating the two debates as largely separate.
Timing Controversies and the Road Ahead for Hegotá
Process concerns have proven nearly as heated as the economic arguments. Critics across Magicians and X have called the short runway inadequate for a monetary-policy shift affecting a multi-hundred-billion-dollar asset. Authors counter that the topic has been under discussion for years and that formal proposal status simply begins structured review.
As of early August 2026, the draft has no definitive final number assignment in all sources, lacks complete test vectors in some descriptions, and has no open inclusion pull request for Hegotá. A Prysm implementation exists, but broader client and community scrutiny continues.
Governance observers note that proposal-for-inclusion status is non-binding; the more consequential decisions on considered-for-inclusion or scheduled-for-inclusion arrive later, potentially in October. Hegotá itself is expected in 2027, with FOCIL already positioned as a headliner. This leaves months for debate, modeling of second-order effects, and possible refinements—or for the EIP to be deferred or declined for the current upgrade cycle.
Some community members have called for clearer stakeholder engagement processes, echoing broader conversations about including application-layer and solo-staker voices earlier in contentious changes, referencing decisions taken at All Core Devs meetings.
The debate underscores unresolved tensions in Ethereum’s evolution: how much security is enough, whether issuance should remain a permanent subsidy, the relative weight of decentralization versus monetary “hardness,” and the proper balance between research-driven proposals and ecosystem-wide consultation.
For now, EIP-8361 stands as a draft that has forced the community to confront these questions more directly than any recent issuance discussion. Whether it advances, evolves, or stalls will depend on the quality of analysis and rough consensus that emerges in the coming months.
Also read: Nothing Is 100% Safe in Crypto: Bitcoin’s Coldcard Exploit and Growing Security Crisis
