Six Ethereum researchers, including Ethereum Foundation researcher Justin Drake, have published a draft proposal that would permanently destroy a growing share of validator rewards as more ETH gets staked, cutting new issuance to zero once roughly 60.25 million ETH is locked up. That threshold sits at about half of ETH’s supply, worth close to $113 billion at Wednesday’s price of $1,876. The draft, catalogued as EIP-8361 and titled “Tapered Issuance Burn,” opened for formal discussion on the Ethereum Magicians forum on Tuesday, one day before the Aug. 6 cutoff for smaller changes to be considered for Hegotá, Ethereum’s next network upgrade.
Staking is how Ethereum secures itself: holders lock ETH, run validation software, and get paid in newly created ETH. Burning means destroying those coins permanently instead of paying them out.
Key takeaways
- EIP-8361 would burn a rising fraction of validator rewards, reaching 100% at a saturation balance of 60.25 million ETH, or roughly 50% of supply.
- About 41 million ETH is staked today across roughly 900,000 validators, near 34% of supply, with 2.48 million ETH queued to join and no validators queued to leave.
- Transaction fees and tips stay untouched. Only newly issued consensus-layer ETH would be burned, phased in over 18 months.
- Aave Labs CEO Stani Kulechov and ether.fi founder Mike Silagadze have both objected, arguing the change would break ETH borrowing strategies and squeeze out solo stakers.
Published: Aug. 5, 2026, 16:15 UTC
Why the researchers want a ceiling on staking
The authors argue that Ethereum’s current reward curve never switches off, so there is always a financial reason to stake more. Even if every ETH were staked, the yield would still sit near 1.5%.
Their concern is what happens past a certain point. The proposal states that beyond a certain level, “additional stake makes Ethereum less secure, not more,” because the marginal security contribution of new stake falls while custodial risk compounds. As more of the supply moves to exchanges and staking providers rather than the people who own it, the proposal says, “the social layer is deprived of its ability to hold large operators to account, while solo stakers are forced out.” The full text sits in a draft EIP on GitHub, with community discussion running in the Ethereum Magicians forum.
The numbers back the urgency. Roughly 41 million ETH is staked, close to 34% of supply, with another 2.48 million ETH sitting in the entry queue behind a wait of six weeks or more. The exit queue is empty, according to validator queue trackers. Co-author Jérôme de Tychey projects more than 70 million ETH staked by January 2028 if the curve stays as it is. Large operators have been consolidating, with Lido moving $16.5 billion in staked ether to cut its validator count last week, and the Ethereum Foundation itself hitting a 70,000 ETH staking target.
What the burn would do to validator yields
The mechanism runs at the close of every epoch, the roughly 6.4-minute period Ethereum uses to finalize validator duties. A fraction of each validator’s idealized reward is deducted and destroyed rather than redirected, and that fraction climbs linearly toward 100% as staking approaches the saturation balance.
Validators would keep doing the same work and keep every transaction fee and priority tip they earn from building blocks. Only the freshly minted ETH is at risk. The deduction phases in over 18 months, with roughly six months before that while the upgrade ships, giving participants about two years to adjust.
Ethereum has changed its monetary policy before. EIP-1559, shipped in the 2021 London hardfork, introduced a base-fee burn that can push the network deflationary when demand runs hot. Unlike Bitcoin’s fixed 21 million cap, Ethereum has no supply ceiling, which is why issuance stays a recurring fight.
DeFi pushback and the Hegotá deadline
The proposal has split the people whose yields it would cut. Aave Labs CEO Stani Kulechov said the plan “doesn’t achieve the outcome it tries to achieve and is actually hurtful for Ethereum,” warning that a move toward 0% rewards “essentially makes ETH borrowing strategies mostly unviable.” Much of the ETH borrowed on Aave is used to buy more staked ETH, a trade that only clears while staking pays more than the loan costs.
Mike Silagadze, founder of liquid staking protocol ether.fi, objected to the timeline as much as the design. “EIP released with 48 hours notice for comments,” he wrote on X, calling it “a major network economics change with far reaching implications for all of DeFi” that would leave staking to “large centralized entities with zero cost of capital.” He estimated seven of the top 10 DeFi protocols would face a capital exodus.
Not everyone is against it. Grayscale Head of Research Zach Pandl argued the supply reduction is “a first-order implication for ETH price,” noting that ETH cash flows are paid through inflation at a yield low relative to the asset’s volatility.
Whether any of this lands in Hegotá is a separate question. The draft arrived days before the Aug. 6 non-headliner inclusion deadline, carries roughly 300 lines of implementation code, and has no consensus among validators. Those conditions point toward a later fork. The authors note that every month of delay lets the staking ratio climb about another 1.5 percentage points, which is the argument they are making for moving now.
Frequently asked questions
Would EIP-8361 stop validators from earning anything?
No. Validators would keep all transaction fees and priority tips from building blocks. The burn applies only to newly issued consensus-layer ETH, and it reaches 100% only if staking climbs to roughly 60.25 million ETH, about half of supply. At today’s 34% staking ratio, the deduction would be partial.
What is a liquid staking token and why does this matter to DeFi?
A liquid staking token is a tradable receipt, such as stETH, that represents ETH locked in staking and accrues the staking yield. Those tokens are collateral across lending markets, so cutting the underlying yield reduces returns on strategies built on top of them.
When would the change take effect?
Not soon, if at all. The proposal specifies an 18-month phase-in after roughly six months of shipping work. It also has to clear the Aug. 6 deadline for inclusion in Hegotá, which is planned for the second half of 2026, and developers remain divided.
