A newly submitted Ethereum Improvement Proposal would impose a deduction on every validator duty and burn the corresponding ETH, with the burn fraction rising alongside the staking ratio until it cancels consensus issuance entirely at roughly half of total supply staked. Since Ethereum completed its transition from proof-of-work to proof-of-stake in September 2022, the consensus layer has been the network's sole source of new ETH issuance, making any change to validator rewards a direct adjustment to Ethereum's monetary policy.

EIP-8361, described as a tapered issuance burn, was submitted to the ethereum/EIPs repository by co-authors @pintail_xyz, @jdetychey, @dapplion, @pa7x1, @ladislaus0x, and others. The proposal sets a fixed saturation balance of 60.25 million ETH—approximately half the circulating supply at the time of a potential fork. The burn fraction scales with the staking ratio raised to the power of 1.5 and reaches 100% at that saturation balance, meaning a validator performing all duties perfectly would earn zero net consensus yield.

The change affects only the consensus layer. Prysm, one of Ethereum's major consensus clients, already has a draft implementation comprising roughly 300 lines of code.

Under Ethereum's current issuance curve, validator yield declines with the square root of the staking ratio and maintains a floor near 1.5% regardless of how much ETH is staked. Because that floor clears the risk premium stakers demand, stake continues to flow in. Removing the floor would allow the market to settle at the point where yield meets that premium, which the authors argue is strictly below 50%.

Why Now

According to co-author Jérôme de Tychey, Ethereum's staking ratio surpassed one-third of total supply in April, and the validator entry queue is saturated at maximum churn. He argued that under conservative worst-case assumptions, more than 70 million ETH—over 55% of supply—could be at stake by January 2028, with each month of delay costing approximately 1.5 percentage points of staking ratio.

"The window is closing," de Tychey wrote.

🚨 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

https://x.com/jdetychey/status/2084638778677751889

Currently, around 33% of ETH supply is staked, earning validators approximately 2.6% annual yield. If the burn mechanism were imposed all at once, it would cut that yield to roughly 1.2%. To avoid such a shock, the proposal includes an 18-month transition period that temporarily doubles the base reward factor before decaying it back. Combined with fork lead time, this gives stakeholders approximately two years to adjust. The taper's mathematical shape would apply from the first epoch after activation.

Under the proposed curve, total issuance would peak near a 20% staking ratio at approximately 0.5% of supply per year, then decline to zero as staking reaches 50%.

Security and Economic Arguments

The draft proposal contends that staking beyond a certain threshold actually reduces network security. Excessive staking concentrates supply among custodians and staking providers, weakens the credibility of social slashing as a deterrent, and pushes out solo stakers who must pay income tax on nominal yields. The authors also argue that ongoing dilution functions as a tax on unstaked holders and enables liquid staking tokens to displace raw ETH as the ecosystem's primary medium of exchange. Ethereum already burns ETH through EIP-1559's transaction-fee mechanism, introduced in 2021, which has at periods made the network deflationary on a net basis; EIP-8361 would extend burn dynamics to the issuance side for the first time.

Large staking operators would be directly affected. Because issuance would decline past its peak, an operator that continues growing would claim a larger share of a shrinking pool. According to the proposal, an operator controlling half the total stake would find that growth stops being profitable once approximately 31% of supply is staked.

The validator entry queue is currently adding 1.75 million ETH per month, according to the authors.

Lido Pushes Back

Isidoros Passadis, Chief of Staking at Lido—the largest liquid staking protocol on Ethereum by total staked assets—pushed back against the proposal, arguing it attempts to accomplish too many objectives simultaneously—enhancing the "moneyness" of ETH, preempting potential security decreases from over-staking, and protecting solo stakers. He characterized the supporting research as "too theoretical" and said the proposal "lays Ethereum's hard-fought uniqueness at the sacrificial altar of ETH as money." He also objected to the timing, noting that issuance changes had previously been scheduled 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… — Izzy (@IsdrsP) August 4, 2026

https://x.com/IsdrsP/status/2084720737907310646

Passadis warned that the proposed curve could produce a sustained equilibrium near 50% of supply staked with zero nominal yield, which he described as "a death-knell for the security of the network." At that equilibrium, he argued, operators prioritizing expertise and decentralization would be priced out by large, low-cost parties capable of operating at break-even. He also said that capping staking merely displaces the too-big-to-fail problem, as yield-seeking ETH migrates to riskier custodial venues.

De Tychey addressed that criticism pre-emptively. "Nobody needs to protect solo stakers from this EIP," he wrote, arguing that solo stakers need protection from a curve that increases dilution indefinitely with no mechanism to stop it.

According to the proposal, consensus-layer issuance accounts for at least 93% of total staking yield today. The proposal remains subject to the standard EIP inclusion process—review by EIP editors, technical discussion among client teams, and rough consensus among core developers—before it could be considered for adoption in a future network upgrade. The draft is available on GitHub.