Aave founder Stani Kulechov has publicly opposed Ethereum Improvement Proposal (EIP) 8361, titled “Tapered Issuance Burn,” saying the measure would weaken Ethereum’s appeal as an investment asset rather than deliver its intended benefits. Aave is one of the largest decentralized lending protocols on Ethereum, with billions of dollars in total value locked, which places Kulechov’s critique squarely within the DeFi ecosystem most exposed to changes in ETH staking dynamics.

In comments posted on X, Kulechov said the proposal would cap Ethereum staking rewards at zero percent once the staked amount exceeds 50% of total ETH supply. He warned that this would make staking yields unpredictable and potentially unprofitable, adding uncertainty for market participants.

He said that such uncertainty carries a meaningful adoption cost, especially for institutional investors assessing ETH exposure. “This uncertainty has a significant adoption cost,” he said, arguing that unpredictable returns put Ethereum at a disadvantage versus networks that offer more stable cash flows. He added that solo stakers, who can be especially sensitive to price swings, would also face unpredictable yields.

Kulechov also said the proposal would have a serious impact on decentralized finance (DeFi) use cases. If staking rewards fall to zero, he said, ETH borrowing strategies would become largely impractical and could remove yield-generating uses for borrowed ETH. He wrote that under those conditions, “the only reason to borrow ETH ironically would be to short it,” while the only way to earn yield would be to lock assets into staking without any guarantee of returns.

Unfortunately this proposal doesn't achieve the outcome it tries to achieve and is actually hurtful for Ethereum. It caps Ethereum staking rewards to 0% when over 50% of supply staked. What this mean is that Ethereum staking yield becomes unpredictable and even fully… — Stani (@StaniKulechov) August 4, 2026

Kulechov also said investors seeking yield could move away from ETH and toward other yield-bearing assets, including stablecoins, describing the shift as similar to traditional finance flows but in reverse. He concluded that the proposal “makes ETH less viable as an asset and restricts its potential,” adding: “Ethereum should not be punished for its growth.”

Ethereum Developers Propose Burning Validator Rewards To Zero As Staking Nears 50% Threshold

The “Tapered Issuance Burn” proposal was drafted by six Ethereum researchers, including Ethereum Foundation member Justin Drake. It is designed to reduce network inflation by gradually burning validator rewards as staking participation rises. EIPs are formal proposals for changes to the Ethereum protocol; not all submitted EIPs are adopted, and those that move forward require broad developer and validator coordination across testnets before activation on mainnet.

Under the proposal, a portion of newly created ETH would be burned at the end of each epoch, which occurs every 6.4 minutes. The burn rate would increase linearly until it reaches 100% once about 60.25 million ETH, or roughly half of the total supply, is staked. At that point, net issuance would fall to zero. Supporters say this would strengthen long-term scarcity and help protect existing holders from further dilution.

Validators would continue to receive all transaction fees and tips earned from block production, while only protocol-generated rewards would be reduced. The change would be introduced over an 18-month transition period after an estimated six-month implementation window, giving participants about two years to adjust. The proposal was submitted before the deadline for inclusion in Hegotá, Ethereum’s upcoming network upgrade.

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 \u0026… pic.twitter.com/g1uzWPycQ4 — Jerome de Tychey (@jdetychey) August 4, 2026

Proponents say unchecked staking growth creates structural risks for the network. They argue that staking yields remain attractive even at high participation levels, and are projected to stay near 1.5% even if nearly all ETH were staked. Authors including Jérôme de Tychey estimate that, without intervention, more than 70 million ETH could be locked by January 2028.

They also argue that beyond a certain threshold, greater staking concentration could weaken security by concentrating asset control among exchanges and large staking providers while reducing the role of individual operators.

At present, about 41 million ETH is staked, representing nearly 34% of total supply. Another 2.5 million ETH is waiting in the activation queue, which currently extends beyond six weeks. The network allows roughly 57,600 ETH in daily validator activations to avoid destabilizing consensus through sudden inflows or exits.

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