Ethereum Devs Propose Burning Validator Rewards Until Stakers Yawn 🪙

Six Ethereum researchers and developers have submitted a draft Core EIP introducing a "Tapered Issuance Burn" mechanism that would progressively destroy a portion of validator consensus rewards as the share of staked $ETH rises, with the deduction reaching 100% once approximately 60.25 million ETH — about half of the current supply — is actively staked. The authors of the proposal, which has been assigned the provisional number EIP-8361, are Jérôme de Tychey, Justin Drake, dapplion, pintail, pa7x1, and Ladislaus von Daniels. Under the model, validator yields on attestations, block proposals, and sync committee participation would taper as the staking ratio grows, and issuance would peak at 0.5% of $ETH supply per year near 20% staked before declining to zero at the 60.25 million ETH threshold.

The draft argues that Ethereum's current issuance curve keeps offering roughly 1.5% yield even if nearly all ETH were staked, creating what de Tychey described as a permanent dilution tax on holders. "Ever-growing issuance is a dilution tax on every holder: stake, or be diluted," de Tychey said, adding that at high staking ratios liquid staking tokens and other derivatives could displace raw $ETH as the ecosystem's working money. The authors also wrote that "the current issuance curve continues offering a yield of around 1.5% even if nearly all ETH is staked" and that "the remaining yield floor provides no point at which issuance stops encouraging additional staking." De Tychey warned that without changes, more than 55% of $ETH supply could be locked in staking by 2028, noting that Ethereum's staked share passed 33% in April.

The proposal has drawn criticism from developers, stakers, and DeFi founders, who argue the reward cuts could push out solo validators before affecting larger institutions, weaken institutional demand for $ETH, and disrupt DeFi markets built around staking yield. Publication of the draft came two days before the deadline for proposals targeting Ethereum's Hegotá upgrade, raising concerns about the timeline for evaluating its tokenomics impact. Implementation would be phased in over an 18-month transition, with Ethereum's base reward factor initially rising from 64 to 128 before the tapered burn schedule takes effect.

The EIP is now open for community review, and no decision has been made on inclusion in any upcoming network upgrade.