Overview

  • The EIP-8361 proposal suggests gradually increasing deductions from validator rewards, ultimately burning ETH if 50% of the total supply is staked.
  • Its creators assert that the validator queue is currently adding 1.75 million ETH monthly, and each month of delay costs approximately 1.5 points in the staking ratio.
  • Isidoros Passadis from Lido cautioned that the proposal is overly complex and could deter skilled node operators from participating.

Developers within the Ethereum community have introduced a new proposal that aims to impose a deduction on each validator's tasks, with the deducted ETH being burned. This deduction would increase as more ETH is staked, eventually eliminating staking rewards altogether.

The proposal, known as EIP-8361, establishes a saturation threshold of 60.25 million ETH, which is about half of the total supply at the time of the Ethereum fork. The amount burned would be calculated based on the staking ratio raised to the power of 1.5, reaching a 100% burn rate at that threshold. At this point, validators performing their duties flawlessly would earn no net consensus yield. This adjustment only affects the consensus layer, with a draft implementation by Prysm comprising roughly 300 lines of code.

Currently, the yield decreases only with the square root of the staking ratio, maintaining a minimum yield of around 1.5% regardless of how much ETH is staked. By removing this structure, the market would find an equilibrium where yield aligns with the risk premium expected by stakers, which the authors believe is below 50%.

Timeliness of the Proposal

As of April, Ethereum's staking ratio surpassed one-third of the total supply, and the validator entry queue is at maximum capacity, according to co-author Jérôme de Tychey. He noted that under conservative estimates, over 70 million ETH could be staked by January 2028, exceeding 55% of the total supply. He emphasized that the opportunity to act is diminishing, stating, "The window is closing."

🚨 New EIP: Tapered Issuance Burn
We just submitted an EIP to ethereum/EIPs: a minimal, market-driven fix to Ethereum's issuance policy removing the incentive for stake growth beyond 50% of ETH supply.
EIP-8361 by @pintail_xyz, @jdetychey, @dapplion, @pa7x1, @ladislaus0x &… pic.twitter.com/g1uzWPycQ4

— Jerome de Tychey 🦇🔊 (@jdetychey) August 4, 2026

Currently, about 33% of ETH is staked, yielding around 2.6%. If implemented immediately, the burn would reduce this yield to 1.2%. However, the proposal includes an 18-month transition period during which the base reward factor temporarily doubles before gradually decreasing, allowing for approximately two years of adjustment. The shape of the taper would take effect from the first epoch after activation, with issuance peaking at around 20% when approximately 0.5% of the supply is staked and declining to zero once 50% is reached.

The draft claims that excessive staking can undermine security by consolidating supply among custodians and staking services, which could diminish the reliability of social slashing and push out solo stakers who are taxed on nominal yields. Furthermore, it suggests that dilution taxes negatively impact unstaked holders and allow liquid staking tokens to replace raw ETH as the primary currency in the ecosystem.

Large operators would face direct consequences as the issuance would decrease after reaching its peak. An operator that continues to expand would claim a larger portion of a diminishing reward pool, and one holding half of the staked supply would cease to see benefits once around 31% of the total supply is staked.

Criticism from Lido

Isidoros Passadis, Chief of Staking at Lido, criticized the proposal for being too ambitious, arguing that the research supporting it is "too theoretical" and that it jeopardizes Ethereum's unique qualities by treating ETH as merely a currency. He also raised concerns about the timing, noting that changes to issuance had been planned for a later fork.

I think that EIP 8361 tries to do too many things (increasing the moneyness of ETH, pre-empting remotely possible future decreases security due to overstake, protecting solo stakers, etc) at once and in my estimation will mostly do the opposite. I honestly believe that issuance… https://t.co/4qZPrPJy8s

— Izzy (@IsdrsP) August 4, 2026

Passadis warned that the proposed curve could lead to a prolonged state where 50% of ETH is staked but yields are zero, which he described as detrimental to network security. He contended that this would force out operators who prioritize expertise and decentralization in favor of larger, low-cost entities capable of operating at break-even. He argued that simply capping staking would merely shift the issue of large operators becoming too dominant.

In response, De Tychey preemptively addressed this critique, stating, "Nobody needs to protect solo stakers from this EIP," asserting that they need safeguarding from a model that continuously increases dilution without an exit strategy.

According to the proposal, consensus issuance currently constitutes at least 93% of staking yield and is still subject to the EIP inclusion process.