Ethereum developers and researchers have proposed a major change to the network’s monetary policy that would gradually burn more validator rewards as the amount of staked ETH increases.
The proposal, EIP-8361, would increase the share of staking rewards removed from circulation as staking participation grows. If roughly 60.25 million ETH—around half of Ethereum’s total supply—is staked, the burn rate would reach 100%, effectively reducing net ETH issuance to zero. Supporters argue the change could strengthen ETH’s scarcity and reduce long-term dilution for holders.
Ethereum’s proof-of-stake system depends on validators who lock up ETH and help process transactions. In return, they receive newly issued ETH as rewards. Under EIP-8361, a growing portion of those rewards would be permanently destroyed instead of entering circulation.
The burn mechanism would activate at the end of each Ethereum epoch, which occurs approximately every 6.4 minutes. The percentage of rewards burned would increase gradually in a straight-line progression until reaching full elimination of new issuance at the proposed staking threshold.
Validators would not lose their earnings from transaction fees and priority tips, and their responsibilities would remain unchanged. The adjustment would only affect newly created ETH rewards. The transition would be gradual, taking around 18 months to fully implement after an estimated six-month preparation period, giving the ecosystem roughly two years to adapt.
Six Ethereum researchers signed the proposal, including Ethereum Foundation researcher Justin Drake. The draft arrived shortly before the deadline for smaller updates to be considered for Hegotá, Ethereum’s next planned network upgrade.
The authors argue that Ethereum’s current staking model creates a constant incentive for more ETH to be locked. Even if the entire supply were staked, the network would still generate an estimated 1.5% yield, encouraging further deposits.
Jérôme de Tychey, one of the proposal’s authors, estimates that more than 70 million ETH could be staked by January 2028 if the current system remains unchanged. Beyond a certain point, the proposal suggests that additional staking could weaken decentralization, as more ETH becomes concentrated among exchanges and large staking providers while smaller individual validators face greater pressure.
Currently, about 41 million ETH is staked, representing nearly 34% of the total supply. Another 2.5 million ETH is waiting in the activation queue, with delays lasting six weeks or longer. Ethereum limits validator entry and exits to prevent sudden changes that could destabilize the network, with roughly 57,600 ETH able to enter staking each day.
The proposal has triggered debate among Ethereum developers and market participants.
Stani Kulechov, CEO of Aave Labs, warned that reducing staking returns could disrupt ETH borrowing strategies. Many users borrow ETH on Aave to increase their staked ETH positions, a trade that depends on staking yields remaining above borrowing costs.
Mike Silagadze, founder of liquid staking platform ether.fi, criticized both the timing and potential consequences of the proposal. He argued that such a significant change to Ethereum’s economics requires broader discussion and could have major effects across decentralized finance.
Silagadze said lower staking rewards could disadvantage independent validators and push more staking activity toward large centralized providers with lower costs. He also warned that several major DeFi protocols could see capital leave the ecosystem.
He further argued that weaker staking incentives could stop new ETH from being locked and potentially return billions of dollars worth of ETH back into circulation.
The key question is whether EIP-8361 will make it into Hegotá, Ethereum’s planned 2026 upgrade focused on network efficiency, censorship resistance, and reducing state growth.
The proposal represents a fundamental shift by potentially eliminating staking-based ETH issuance once half of all ETH is staked. However, it faces tight timing, limited implementation progress, and a lack of agreement among validators and stakeholders.
As a result, the change may be more likely to appear in a future Ethereum upgrade rather than Hegotá. The proposal’s authors note that every month of delay could push the staking ratio higher by approximately 1.5 percentage points.
