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Key Takeaways
- The proposal would burn a rising share of validator rewards, hitting zero new issuance once staked ETH hits $112 billion.
- The change would phase in over about 18 months, with roughly 41 million ETH (34% of supply) already staked today.
- Developers and DeFi protocols are split, with critics warning it could destabilize ETH-borrowing strategies and push large amounts of ETH back into circulation.
Six Ethereum researchers, including Ethereum Foundation researcher Justin Drake, have published a draft proposal that would gradually burn a rising share of validator rewards as the amount of staked ETH increases.
Under the plan, new issuance would fall to zero once roughly 60.25 million ETH, about half the current supply and worth an estimated $112 billion, is staked. The draft was published days before the Aug. 6 deadline for inclusion in Ethereum’s next scheduled upgrade.
How the Burn Mechanism Would Work
Ethereum currently pays validators newly created ETH for staking, which secures the network by having holders lock up coins and run validating software. The draft, informally tracked as EIP-8361 in early discussion, would deduct and permanently destroy a portion of that reward at the close of each epoch, a roughly 6.4-minute settlement window.
The deducted share, or burn fraction, starts near zero and rises as the staking ratio climbs, reaching 100% once total staked ETH hits the proposal’s saturation point of 60.25 million ETH. Validators would continue to be paid the same way for the same work, and they would keep all transaction fees and tips. Only the newly issued portion of their reward is affected.
Why the Researchers Are Proposing It
The proposal’s authors argue that Ethereum’s current reward curve never fully stops incentivizing new stake. Even if all ETH were staked, the yield would still sit near 1.5%, according to the draft, meaning there is always a financial reason to add more.
The authors contend that pushing the staking ratio too high carries risks. As more ETH concentrates with exchanges and staking providers rather than individual holders, they argue, the network becomes more exposed to a small number of large operators and less resistant to capture.
Jérôme de Tychey, one of the proposal’s authors, projected that more than 70 million ETH could be staked by January 2028 if current incentives remain unchanged.
Roughly 41 million ETH, or close to 34% of total supply, is staked today, according to on-chain trackers. Another 2.5 million ETH sits in a queue waiting to activate, with wait times of six weeks or longer, while activation is currently capped at about 57,600 ETH a day.
A Two-Year Phase-In, Not an Immediate Cut
The proposal would not take effect all at once. The reduction would phase in over roughly 18 months following activation.
An additional six months is expected before the underlying upgrade ships, putting the full transition at close to two years from the point the change is confirmed.
Developers and DeFi Protocols Are Split
The draft has divided opinion among Ethereum developers and decentralized finance participants, largely over its effect on strategies built around staking yield.
Aave Labs chief executive Stani Kulechov argued in an X post that pushing staking rewards toward zero would make ETH borrowing strategies on the protocol largely unworkable, since a common trade involves borrowing ETH to buy more staked ETH, a strategy that depends on staking yields exceeding loan costs.
Mike Silagadze, founder of liquid staking protocol ether.fi, objected both to the substance of the proposal and the short window given for feedback. Founder, ether.fi:
“EIP released with 48 hours notice for comments…a major network economics change with far reaching implications for all of DeFi.”
He added that the change would self-evidently push out solo stakers who aren’t subsidized by the EF or others, leaving staking concentrated among large centralized entities with zero cost of capital. He also warned that seven of the top 10 DeFi protocols could face a capital exodus.
He further argued that people who stake ETH don’t sell it, and that the proposal could push tens of billions of dollars worth of ETH back into circulation if it halts new staking.
Whether the Proposal Makes the Next Upgrade
The more immediate question is whether the draft is included at all in Hegotá, Ethereum’s next planned network upgrade for the second half of 2026, which is focused on structural cleanup, censorship resistance, and reducing state size.
The proposal is arriving just before the Aug. 6 deadline for smaller changes to qualify for that upgrade. It currently exists only as a roughly 300-line draft implementation without consensus among the validators and stakers whose yields it would directly affect.
The short runway and the scale of disagreement leave the draft’s inclusion in Hegotá uncertain. The authors have noted that every month of delay allows the staking ratio to climb by roughly another 1.5 percentage points.
